Evaluation of sales programs/people

Factual Questions
1

I was curious what criteria companies tend to use on average for determining the performance of the sales force.

Gross sales for example could be misleading since if they are negotiating too low of a price, or offering value added services that were not part of an initial bid/arrangement, you could be losing money even though the gross is up.

Straight net sounds doable to me, but it sounds too simple.

The system where I work is a hodgepodge of different criteria for new customers, old customers, comparisons of average orders from year to year, % increase in order size., etc, etc, etc

Are there any other relatively simple guidelines for sales performance. I have this “gut feeling” that some of our sales force is setting us up for some major problems in the near future if we continue on our current course.

I could be wrong, but thats why I’m asking…

2

I’m not sure there is one simple answer. Obviously watching revenues and margins is key, but often times there are other priorities, such as gaining initial reference customers, gaining initial customer traction, and owning a good chunk of a market. All of these mean bringing in closes at reduced revenues and/or reduced margins (perhaps even negative net revenues), for greater strategic values.

Also, I’m not clear on what you’re looking for. Is there some current value that you know senior management watches that you feel is inappropriate? Or do you feel commissions are paid in such a way to be disadvantageous to the greater good of the company?

Perhaps some more detail would help…

3

The business involves providing materials for school fund raisers.

In my business we have a very solid market share, we are in a niche market where we have bought out most of our serious competition. Upper management seems to be trying to push for new customers, and commission structures reflect that. Problem is it costs us $500-$1000 in labor and overhead to assemble an order. The sales force, to obtain commissions for booking “repeat customers” are contacting customers who have extensive histories of not meeting minimum sales goals. In addition they are promising delivery dates that drive our warehouse crews into 60+ hour weeks. This further increases labor costs driving net revenues even lower.

The sad part is, they are under pressure to get new orders, but much of our market is either existing customers or poor performers.

4

Then someone isn’t paying attention to margin. But if the sales force isn’t being told to pay attention to margin, then it isn’t their fault.

My father was in sales all his life. I don’t know how he was evaluated, but I know how he evaluated himself:

  1. total number of clients – whether he was increasing or decreasing his customer count

  2. gross sales – that one was easy

  3. gross sales per customer – obviously that should also increase

  4. profit per unit – if a customer wanted too much value-added, too great a discount, too easy terms, etc., that reduced the profit per unit. At some point, even if gross sales continued to increase, the profit per unit might be reduced so much that he would figure out he (the company) couldn’t profitably serve the customer. In fact, he looked forward to losing those accounts because they’d suck the competition dry.

So your sales force is giving up profit to increase gross sales. Whose job is it to tell them that?

5

Well not mine but I am in a position to work on people who do. I have incentive programs but they are all tied to net and compliance with budget. My manager is in the same boat but seems to feel that he is stuck with what the sales force gives him…good or bad. Then all the “added value” stufff gets piled on as delivery time approaches. Of course every bit of “added value” has been demanded on threat of cancellation of the order.

We have a variety of problems not the least of which is a kinda wimpy manager dealing with sales reps who behave like the customers attourney. I just wish I had some kind of “black and white” or at least a good “light grey dark grey” guideline to point us in the proper direction… I like my job and really don’t want to see it go away in a few years from being driven into the ground by an easily avoidable misconception like “better 10% of a dollar than 100% of nothing.”

6

I’m still not clear…

First, these two statements seem to be in direct conflict:

At first, I thought you were saying that reps were paid good stronger commissions for brand new customers, but then it doesn’t look that way.

Also, when you mention that it costs $500-$1,000 to assemble an order, I have no idea what an order sells for, so that could be excellent or horrible.

and when you say

are you implying that these orders that are being booked, never actually get built? or get built, but sit in inventory as the customers cancel or delay the orders? or other?

Also, I didnt’ follow:

Are you saying that it’s unfortunate your business can’t find new business? If so, I agree, but it sounds like senior management is doing the best they can by incentivising reps who do find new business. Perhaps I misunderstood.

Your last issue makes me suspect I know where this is coming from, and forgive me if I have this wrong…

Is the real situation that you’re in manufacturing and don’t enjoy being given last minute orders that demand you work extra hours on the spur of the moment?

If that’s the case, yes I agree it does suck for you, but that doesn’t necessarily make it bad business. And in general, if you want to give advice to senior management, you’re usually best to give them advice about how they can do better, not how how you can work less.

As I say, if I misread that, please forgive me.