Performance appraisals are used to evaluate salespeople and are important for compensation, development, feedback, goal-setting, and other purposes. They involve evaluating salespeople periodically based on quantitative metrics like sales volume as well as qualitative criteria. The evaluations are most accurate when an immediate supervisor does them, criteria are appropriate, forms gather relevant information, and potential biases are mitigated. It is important to evaluate the entire performance appraisal system to ensure it meets the goals of both the company and salesforce.

2. C HAPTER 16 E VALUATION OF S ALESPEOPLE’S P ERFORMANCE

3. L EARNING O BJECTIVES Performance appraisals are excellent methods for building a strong and effective sales program. This chapter should help you understand: What a performance appraisal involves. The uses of performance appraisals. Who does the evaluation and how often salespeople should be evaluated. How performance criteria are developed. The accuracy of performance appraisals and what can influence that accuracy. The importance of evaluating the evaluation system.

4. P ERFORMANCE A PPRAISALS – W HAT A RE T HEY? T HE PURPOSE AND I MPORTANCE OF P ERFORMANCE A PPRAISALS

5. Numerous specific reasons for performance appraisals exist: Compensation Development Feedback Goals Legal compliance Motivation Penalties Personnel Planning Promotion Training

6. TABLE 16.1 COMPARISON OF EVALUATIVE AND DEVELOPMENTAL ASPECTS OF PERFORMANCE APPRAISAL Active involvement in developing future career and performance plans Explain past perfor- mance; react to evaluation Salesperson’s role Encourage and help salesperson Evaluate performance Manager’s role Management by objective (MBO) approach to goal setting, career planning Use of evaluation forms Method Improve performance through self-learning, e.g., taking selling courses Improve performance by rewarding based on performance Objective Future performance Past sales performance Time D EVELOPMENTAL R OLE E VALUATIVE R OLE C OMPARISON F ACTORS

7. FIGURE 16.1 THE PERFORMANCE APPRAISAL’S INFLUENCE ON SALES PERSONNEL MOTIVATION, BEHAVIOR, AND PERFORMANCE

8. The performance level a salesperson attains results from a combination of the individual’s effort and ability. Ability, in turn, reflects the individual’s skills, training, information, and talents.

9. After determining the equity of – and satisfaction from – the rewards resulting from the appraisal, the individual again asks these four questions: What is the probability of success? Will I be rewarded for success? Are the rewards worth it? Are the rewards fair?

10. FIGURE 16.2 THE SALESPERSON PERFORMANCE APPRAISAL SYSTEM WITH ITS NUMEROUS PARTS, PROCESSES, AND PROCEDURES Purpose of Performance Evaluation Evaluative Compensation Legal Penalties Personnel Promotion Developmental Development Feedback Goals Motivation Planning Training

11. Planning, implementing, and evaluating the performance appraisal system involves: Who should evaluate salespeople? When should salespeople be evaluated? Are the criteria appropriate? What forms should be used for gathering information? What may influence the appraisal’s accuracy? How should the appraisal be conducted? How can the appraisal process be evaluated?

12. W HO S HOULD E VALUATE S ALESPEOPLE? The primary evaluator should be the salesperson’s immediate supervisor because this person has direct knowledge, having actually worked with the salesperson.

13. W HEN S HOULD S ALESPEOPLE B E E VALUATED? Salespeople should be evaluated at the end of each performance cycle. A performance cycle is a period related to specific product goals or job activities.

14. FIGURE 16.3 POSSIBLE MANAGEMENT INPUT INTO THE SALESPERSON’S PERFORMANCE EVALUATION Regional Manager

15. A RE THE P ERFORMANCE C RITERIA A PPROPRIATE? A criterion is a standard on which a judgment or decision may be based.

16. Guidelines for Performance Criteria Measurable Practical Relevant Discriminating Stable

17. Quantitative Performance Criteria Sales volume Percentage of increase Market share Quotas obtained Average sales calls per day New customers obtained Gross profit by product, customer, and order size Ratio of selling costs to sales Sales orders Daily number of orders Total By size, customer classification, and product Order to sales-call ratio Goods returned

18. Qualitative Performance Criteria Sales Skills Finding selling points Product knowledge Listening skills Obtaining participation Overcoming objections Closing the sale Territorial management Planning Utilization Records Customer service Collections Follow-up Personal traits Attitude Empathy Human relations Team spirit Appearance Motivation Care of car Self-improvement

19. Graphic appraisal scales Descriptive statements Management by objectives Behaviorally anchored rating scales 360 degree feedback P ERFORMANCE E VALUATION F ORMS FOR G ATHERING I NFORMATION

20. New Sales Managers False Performance Results Personalities Enter In Central Tendency Errors Managers may tend to rate all salespeople average on all performance criteria. Different Evaluation Standards The Halo Effect A positive or negative “aura” may be associated with an individual. I NFLUENCES ON A P ERFORMANCE A PPRAISAL’S A CCURACY

21. The Manager’s Attitudes Salespeople’s Expectations I NFLUENCES ON A P ERFORMANCE A PPRAISAL’S A CCURACY continued

22. R ULES FOR P ERFOMANCE A PPRAISALS Be Objective Set Goals and Standards Be Honest Be Consistent Use Proper Documentation Follow Company Policy

23. C ONDUCTING THE A PPRAISAL S ESSION Possibly the most challenging part of a manager’s job is effectively conducting the performance appraisal session. Both manager and salesperson should be prepared for the interview. Be positive. Actually review performance.

24. Possibly the most challenging part of a manager’s job is effectively conducting the performance appraisal session. continued Finalize the performance evaluation. Summarize the total performance evaluation. Develop mutually agreed upon objectives. Formalize the evaluation and objectives.

25. The following are important when reviewing performance: An open discussion of each performance criterion. The salesperson’s discussion of performance. The salesperson’s evaluation of his or her own performance. The manager’s view of performance. Mutual agreement on the performance level that must be established. If disagreement occurs, the manager’s careful explanation of why a low evaluation was given.

26. TABLE 16.5 DO’S AND DON’TS ON TERMINATION Don’t leave room for confusion about the firing. Tell the individual in the first sentence that he or she is terminated. Don’t allow time for debate during the termination session. Don’t make personal comments when firing someone; keep the conversation professional. Don’t rush a fired employee offsite unless security is an issue. Don’t fire people on significant dates, like the 25 th anniversary of their employment or the day their mother died. Don’t fire employees when they are on vacation or have just returned. Put everything in writing. Leave a paper trail. Use a witness to the discussions on unacceptable performance. Sit down one-on-one with the indi- vidual in a private office. Complete a termination session within 15 minutes. Provide a written explanation of severance benefits. Provide outplacement services away from company headquarters. Be sure the employee hears about his or her termination from a man- ager, not a colleague. Express appreciation for what the employee has contributed, if appropriate. D ON’TS D O’S

27. The specific evaluation of a sales force’s appraisal system requires the examination of several aspects of the entire system. E VALUATE THE E VALUATION S YSTEM

28. The following questions can provide an assessment of the specific components: What does the sales force want its performance appraisal system to do? Does the firm have goals and objectives for the system? Do procedures exist for gathering data to measure how well the goals and objectives are being met? Do the appraisal forms really elicit the information to serve these goals and objectives? Are the appraisal interviews done effectively?

29. FIGURE 16.6 THE RELATIONSHIP OF MARKETING TO SALES FORCE MANAGEMENT

30. FIGURE 16.6 THE RELATIONSHIP OF MARKETING TO SALES FORCE MANAGEMENT continued

31. T HE B OTTOM L INE Effective job performance is essential for organizations to stay in business and for salespeople to keep their jobs. Managers must be aware of the legal repercussions of performance appraisals. Companies must develop, relevant, discriminating, and stable criteria. Performance evaluations serve to reward effective performers and penalize ineffective salespeople. Many difficulties can be corrected if performance evaluations are effectively conducted.