Ashworth College Management Questions

Lecture Notes

Welcome to Lesson 8. As you have learned, sales managers are responsible for planning, implementing, and controlling a firm’s sales activities. To control the sales effort so that the firm’s goals are accomplished, sales managers must continually monitor and evaluate the performance levels of both the individuals who comprise the salesforce and the salesforce as a whole. A sales analysis must be conducted on a regular basis, looking at the sales by region, territory, salesperson, or product and breaking them down into total volume, profit, and percent achieved toward goal. A cost analysis is another tool, which looks at how much it costs to sell the total volume for each salesperson or product. They’re both important, and together as a profitability analysis, they give a good idea of the true value of a salesperson to the firm.

I’m sure you’re aware of times when a salesperson worked hard and yet was criticized by a manager who didn’t understand how hard he or she worked even though things didn’t go well. The question is: Should evaluations focus on how hard someone works or on what he or she is able to accomplish? For the hard-working yet nonproductive salesperson, should the boss try to figure out why he or she worked hard but was unable to accomplish the goal? The sales manager’s challenge is to evaluate the salesforce based on how hard the salesperson works (inputs), what he or she accomplishes (results) and, even more important, how much profitability he or she generates.

If salespeople don’t hit their goals, it’s probably due to a combination of factors. A manager has to consider that the salesperson may need more training to develop skills, that the sales forecast might be bad, that the pricing isn’t competitive, that a competitor has entered the market, that the products are having quality or delivery problems, and other factors. For example, managers can tell by looking at input measures what the salesperson’s strategy is, based on where the salesperson is doing more activity. A manager can tell whether salespeople are focusing on making deeper relationships with a few customers or on talking to as many as possible.

The use of behavior-based criteria will facilitate the development of a professional, customer oriented, committed, and motivated salesforce. By emphasizing to salespeople that behavior associated with ancillary activities, such as setting up advertising displays or handling customer complaints, will be included in the performance evaluation, the sales organization is signaling that these activities are important to them. Salespeople have the most control over what they do, so evaluations of their performance should include some assessment of these types of behavior.

Different types of quotas used in performance evaluation are also referred to as objectives or goals; one example of their use is the popular management by objective (MBO) method. The use of quotas is a very good way of setting performance standards for individual salespeople. Quotas can be set for behavioral, professional development, results, and profitability criteria. Benchmark quotas can be established for each salesperson and can provide a way to control for differences in the territorial situations for each salesperson. Each type of quota represents a specific objective for a salesperson to achieve during a given time period.

By using quotas for many different types of behavior, the sales manager can measure individual effort characterized by total achievement and level of improvement in many categories. The manager may also develop a performance index for each criterion being evaluated. The individual performance indices can then be weighted to reflect their relative importance and combined to produce an overall performance index for each salesperson. This overall performance index for each salesperson is then comparable to that of other salespeople. The use of quotas provides an extremely useful method for evaluating salesperson performance and highlighting specific areas where performance is especially good or especially poor.

So why is it important to evaluate salespeople? Evaluation of salespeople tells management whether all of their planning efforts (in hiring, training, making forecasts, and setting goals) were valuable. Without evaluation, there’s no way to know if the planning was beneficial or a waste of time.

Culture and Sales Performance

Culture—both internal and external to the firm?impacts the way salesforces operate and how people’s cultural beliefs and practices influence their alliances, customer relationships, and management practices. External to the firm are low-performance and high-performance cultures. Low-performance cultures are characterized by insular thinking, resistance to change, politicized internal environment, and unhealthy promotion practices. High-performance cultures are characterized by people orientation, results orientation, stressing achievement and excellence, and reinforcing cultural beliefs. Different cultures also see actions in different lights and as different parts of a system. In Japan for example, a seller gives a buyer a gift to establish a relationship and this is thought of as polite and well-mannered. For Americans, giving a gift to establish a relationship is a bribe and is unethical.

Corporate culture is internal to the firm and refers to the beliefs, attitudes, values, assumptions, and ways of doing things that the company’s members share and communicate to new members. If strategy and culture aren’t in alignment, one or the other must change. For example, sales and marketing departments may be misaligned by economics and culture. They compete over budgetary money, they have different job cultures, their performances are judged differently from each other, and each group may feel that its contributions are more significant than the contributions of the other group. A manager can help to change a culture that doesn’t support a good strategy by making substantive change and promoting change in the salesforce.

“The sales culture that develops in your organization cannot be controlled, but you can influence it dramatically. Your culture will be known for a theme, for its character, for its composure, for its courage and yes … for its care for people. You must deliver results, but how you go about delivering those results will define your culture.” (Deming, 2016)

From Salesperson to Sales Manager

Making the transition from the responsibilities of a salesperson to the responsibilities of a sales manager is one of the most difficult challenges in the sales arena. The myth is that a manager gets to control followers and exert his or her own vision of how things should go. The reality is that managing requires compromise, keeping employees happy, and mediating between conflicting needs. Salespeople feel that sales managers should be flexible, good at communicating, dedicated to the good of the team, trustworthy, and a good motivator and leader. More so than in the past, the ability to work with a sales team in different physical locations is also becoming a critical skill.

A salesforce that’s evaluated according to an outcome-based perspective would be likely to focus on the short-term outcomes that are being evaluated. There would be more time spent on sales-generating activities and much less emphasis on customer service aspects of the job. This salesforce will tend to perform well on traditional output measures of individual performance, such as meeting sales quotas. This salesforce is unlikely to feel any strong commitment to the sales organization, and many salespeople may dislike accepting both the authority of the sales manager and the evaluation procedure. This salesforce is more likely to be motivated by extrinsic rewards and may lack adequate product knowledge, company knowledge, and integrated sales expertise. Risk-averse salespeople won’t last long in this type of salesforce as sales managers won’t be likely to nurture these individuals and build their confidence. Additionally, sales managers won’t spend much time actively monitoring and providing managerial direction to their salespeople.

In recent years, marketing research and practice have (also) recognized the importance of managing frontline employees’ identification. However, investigations so far have focused on identification at the collective level of the self, such as organizational identification, thereby largely neglecting important interpersonal identification processes at the relational level. Using a large-scale dataset comprising information from sales managers and salespeople as well as company data on customer satisfaction and sales performance, Ahearne, M., Haumann, Kraus, & Wieseke (2013) make a first attempt to address this neglect by exploring important phenomena of interpersonal identification in the sales manager-salesperson dyad. Results show that initial increases in the level of identification congruence between sales managers and their respective salespeople yield positive incremental effects on sales performance and customer satisfaction. (p. 625)

These changes in the salesforce have resulted in a shift in thought about roles of managers and leaders in recent years. Businesses have migrated from a transactional style of leadership, in which leaders exchange things to followers for good performance, to a transformational style of leadership, in which leaders focus on their followers as people and try to help them reach their potential. Today’s leaders must have emotional intelligence, the capacity for recognizing our own feelings and those of others, to get along well with and inspire people. A sales manager also needs to be a good coach and mentor. To coach means discussing performance, offering feedback and advice, helping with practice, and setting goals. Salespeople who are coached have someone dedicated to helping them improve their performance. Mentoring is a long-term relationship in which a senior person helps the personal and professional development of a junior person. Coaching is active and task-specific, while mentoring is general and may include nonspecific support. Both are critical success factors.

References

Ahearne, M., Haumann, T. Kraus, F. and Wieseke, J. (Nov 2013). It’s a Matter of Congruence: How Interpersonal Identification Between Sales Managers and Salespersons Shapes Sales Success. Academy of Marketing Science. Journal, 41.6, 625-648.

Deming, G. (2016). Sales Cultures, Is Yours Heart Healthy? Peak Sales Performance. http://peaksalesperformance.wordpress.com/2009/05/…

Ingram, T., LaForge, R., Avila, R., Schwepker, Jr., C., and Williams, M. (2020). Sales Management: Analysis and Decision Making (10th ed.). Routledge