How to Evaluate and Compensate Your Sales Team Performance

One of your problems as an owner-manager is how to  motivate and measure the performance of each of your sales force. Your task is complicated because of the many criteria that can be used.

This chapter presents a method that is workable and effective. It discusses the development of yardsticks that will allow a sales representative's performance to be measured in numbers that are profit-orientated.

Some owner-managers find it difficult to motivate and measure the performance of sales representatives because representatives vary, customers vary, and business conditions vary. This chapter is a conversation between a consultant who specializes in sales representative incentives (C) and an owner-manager (M). As their discussion opens, the consultant is pointing out:

C: Fortunately, your competitors face the same variables you face. But tell me, why do you want to measure the performance of your sales force?

M: I heard recently that industrial sales can average as much as $175 a visit. I don't want to spend that kind of money unless it's a good investment.

Sales Force Measurement Problem

C: Here's a list that I call "Sound Criteria for Measuring Performance"

Sound Criteria For Measuring Sales Force Performance?

Which of the following are sound criteria for measuring the performance of sales representatives?

1. Volume of sales in dollars.

2. Amount of time spent in office.

3. Personal appearance: for example, clothes, hair, cleanliness, and neatness.

4. Number of calls made on existing accounts.

5. Number of new accounts opened.

6. Completeness and accuracy of sales orders.

7. Promptness in submitting reports.

8. Dollars spent in entertaining customers.

9. Extent to which the sales representative sells the company.

10. Accuracy in quoting prices and deliveries to customers.

11. Knowledge of the business.

12. Planning and routing of calls.

M: From the question mark at the end of the title I gather that not all of the 12 are sound criteria?

C: Right. First let's look at some of the common errors that owner-managers make in measuring the performance of their sales representatives.

M: I'm willing to listen.

C: You probably aren't. Usually owner-managers make one of the five following errors: They evaluate their sales representatives primarily on the basis of sales volume. They rely too much on the number of sales call made by each of their sales representatives. They compare each sales representative's present sales results with past sales for a corresponding period - for instance, May of the current year against May of last year. They expect their sales representatives to follow explicitly the selling methods that worked for them when they were selling. Or they give their sales representatives too much freedom.

M: That's interesting, but not clear. What do you mean? Would you explain each point? For example, what's wrong with evaluating my sales force in term of their sales volume?

C: Usually, sales volume by itself won't tell you how much profit or loss you're making on each sales representative. Unless you know this fact, a sales representative can cost you money without your realizing it. For example, one small manufacturer was losing money until he analyzed the profitability of the sales volume brought in by each member of the sales force. He found that one of them created a loss on almost every order. This representative was concentrating on a market that had to become so competitive that markups had to be drastically reduced to make sales.

M: Assume that I have an adequate markup on my sales. Isn't performance then largely a matter of how many calls each of my sales representatives makes to get the business?

C: Of course making calls on customers and prospects is important, but a sales representative should make calls on accounts in relation to their sales and profit potential.

M: It sounds to me as though you're questioning if sales representatives should get in the habit of making regular call on their accounts.

C: If your sales force is more responsible for servicing their accounts than selling their accounts, than a regular routine of calls may be okay. But paying sales representatives to do routine pick-up and delivery, for example, can be expensive.

M: How about comparing a sales representative's current performance with the past?

C:That can be very misleading, Some months have more working days than others. Changes in products, prices, competition, and assignments make comparisons with the past unfair, sometimes to the sales representative, sometimes to you. It's much better to measure cumulative progress - quarterly, semi-annual, or annual results - toward goals.

M: Why not evaluate a sales representative's selling methods?

C: You should if a sales representative violates company policy or doesn't accomplish goals. But why criticize a sales representative for spending too much time in the office if that brings in profitable orders by telephone or by mail?

M: I suppose owner-managers who've had sales experience themselves expect their sales representatives to use the same selling methods that worked for them - even if they don't realize it.

C: It's natural that they would. But it's often unfortunate. Market conditions change or the sales representative faces different problems. I know of one good sales representative who's basically an introvert - avoids socializing whenever possible. This rep's boss is an extrovert and can't understand this.

M: What about owner-managers without sales experience? Do they face any special problems in measuring the performance of their sales forces?

C: They surely do. They often give their sales representatives too much freedom. Their knowledge of selling is limited. Often they don't know what they should really expect from their sales representatives.

This article offers managing your business tips and manage business advice. But you are not prepared to start your own business
till you have given any thought to managing it. A company is a continuous activity that does not run itself. As the supervisor
you'll need to set goals, decide how to achieve those goals and also make all the required decisions. You'll have to purchase or
create your product, price it, advertise it and sell it.

You'll have to keep records, and determine prices. You will have to Control inventory, make the right buying decisions and keep
prices down. You will have to hire, train and motivate employees today or as you grow.

Setting Business Management Goals. Good small business management Is the key to success and good management begins with
establishing goals. Establish goals for yourself for the achievement of the many tasks necessary in establishing and managing your
company successfully. Be specific. Write down the goals in measurable terms and conditions of performance. Break big goals down
into sub-goals, showing exactly what you expect to attain in the next two to three months, the next six months, another year, and
the subsequent five decades. Beside each target and sub-goal set a particular date showing when it is to be attained.

Plan the action you need to take to achieve the goals. While the attempt Required to reach each sub-goal should be great enough to
challenge one, it should not be so great or unreasonable as to dissuade you. Do not plan to achieve too many targets all too.
Establish priorities.

Plan in advance how to measure results so you can know exactly the way Well you are doing. This is what's meant by"measurable"
goals. If you can't keep score as you go along you are very likely to eliminate motivation. Re-work your plan of action to permit
for obstacles which may stand on your way. Attempt to foresee obstacles and plan ways to avert or minimize them.

Buying. Skillful purchasing is an important essential of Managing a business enterprise. This is true whether you are a wholesaler
or retailer of merchandise, a producer or a service company proprietor. Some retailers say it is the most significant single
element. Product that's carefully purchased is easy to sell.

Deciding what to buy means finding out the type, kind, quality, Brand, size, colour, style -whatever applies to a specific
inventory - that will sell the best. This requires close attention to salespeople, trade journals, catalogs, and especially the
likes and dislikes of your regular customers. Assess your earnings documents. Even the producer should view the issue through the
eyes of clients before determining what materials, components, and supplies to buy.

Know your regular customers, and make a good evaluation of this People you expect will become your clients. Just what
socioeconomic category are they? Are they homeowners or tenants? Are you currently looking for price, style or quality? What's the
predominant age category?

The age of your clients can be a prime consideration in Establishing a buying pattern. Young people purchase more frequently than
most older people. They want more, have fewer duties, and invest more on themselves. They're more aware of fashion trends whether
in wearing apparel, cars or electronic equipment. If you choose to appeal to the young trade because they appear dominate in your
town, your buying pattern will be completely different than when the more conservative middle-aged customers appear to be in most.

Study trade journals, newspaper advertisements, catalogs, window Displays of companies similar to yours. Request advice of
salespeople offering you product, but buy sparingly from several suppliers rather than one, testing the water, so to speak, until
you know what your best lines will be.

Locating suitable merchandise sources isn't easy. You may buy Directly from manufacturers or manufacturers, from wholesalers,
distributors or jobbers. Select the providers who sell what you want and can provide it if you want it. (Distributors and jobbers
are used by the majority of business people for quick fill-ins involving factory shipments.)

You may distribute purchases one of many providers to gain more Favorable rates and promotional material. Or you may concentrate
your purchases one of a few providers to simplify your credit problems. This will also allow you to become known as the vendor of
a particular brand or line of merchandise, and to maintain a fixed benchmark in your goods, if you're shopping for stuff for
manufacturing purposes.

When to buy is important if your company will have seasonal Variations in sales volume. More inventory will be needed prior to the
seasonal upturn in sales volume. As sales decline, less product is necessary. This means purchases of goods for resale and
materials for processing should vary accordingly.

At the start, how much to buy is insecure. The best policy is To be frugal until you've had sufficient experience to judge your
needs. On the flip side, you can't sell product in case you don't have it.

To help solve purchasing problems, you should Start to keep stock Control records at once. This will allow you to maintain the
stock in equilibrium - neither too large nor too little - with a suitable proportion and adequate range of merchandise, sizes,
colors, styles and attributes.

Basically there are two Kinds of stock control - control in Bucks and control in physical units. Dollar controls reveal the amount
of money invested in every merchandise category. Unit controllers indicate the amount of individual items when and from whom
purchased by class. A good inventory control system is able to help you decide everything, from whom, when, and how much to buy.

Pricing. A lot of your success manage a business will depend on How you price your services. If your prices are too low, then You
Won't cover Costs; too high and you will lose sales quantity. In both cases, you will not Make a profit.

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