PERFORMANCE APPRAISAL OF SALESPEOPLE

SALES MANAGEMENT

Dated: 29 December 2011

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Table of Contents
Defining Performance Appraisal and Its Purposes...................................................................................... 3

The Performance Appraisal Relationship to Behavior ................................................................................ 4

The Performance Appraisal Processes and Purposes ................................................................................. 4

The Legal Aspects of Performance Appraisals............................................................................................. 8

Rules for Performance Appraisals ............................................................................................................... 9

Conducting the Appraisal Sessions ............................................................................................................ 10

Conclusion .................................................................................................................................................. 11

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EVALUATION OF SALESPEOPLES PERFORMANCE

DEFINING PERFORMANCE APPRAISALS AND ITS PURPOSES
The system of evaluating and comparing a salespersons performance with already specified goals and standards is called performance appraisals. Performance Appraisals are the best way to determine productivity or lack of it among salespeople, which is very important to know for the success of any organization. The major challenge is to set the goals which are achievable for your salespeople in such a way that neither are they too difficult to attain nor too easy. They should be challenging and in accordance with the past standards. There are several very specific purposes which performance appraisals serve. They are listed below: Compensation, determination of appropriate salary, incentives and bonuses on the basis of performance or results. Development, determination of strength and weaknesses of salespeople resulting in development of individuals. Feedback, a chance of communication between manager and salesperson resulting in exchange of information. This helps in setting the goals and development of individuals and creates trust. Goals, determination of future goals of salespeople. Legal Compliance, it provides a legal shape to all human resource management functions. Motivation, it motivates the salespeople by showing them that their efforts are recognized and rewarded through an unbiased system. Penalties, determines if people are not productive enough for the organization to be retained or rewarded. Personnel, it helps in determining the skills and requirements needed when recruiting and selecting salespeople. Planning, it helps in planning what kind of people to hire, what kind of training to be provided, what should be rewarded and how far the company can depend on its sales team for its success. Promotion, determines who deserves to be promoted to a higher level. Training, it determines what type of training is required and who needs this training for enhanced sales performance.

All these purposes can be categorized into two major aspects of appraisals; evaluation and development. Out of these purposes, compensation, promotion, penalties and personnel are evaluative 3|Page

in nature whereas development, motivation, planning, feedback, training and goals are developmental. The evaluative aspect focuses on past performance of salesperson and helps in determining their rewards or punishments and provides a base to set future goals. The developmental aspect focuses on the future expected performance and determines what efforts should be taken to attain the set goals in the coming time and highlight specific training needs. Hence performance appraisals help the organization in creating a strong sales team and enhance its chances of success.

THE PERORMANCE APRAISALS RELATIONSHIP TO BEHAVIOR

Performance appraisals help in determining the rewards that should be given to the salespeople. If the salespeople think that the rewards were according to his performance and equal and fair for everyone they will be satisfied and will be more motivated to work. Motivation will lead to enhanced effort from their side and these efforts, combined with skills and abilities will result in performance level. This performance level is then evaluated once again and the cycle starts again. This shows that how majorly performance appraisals can be used as a motivational tool for salespeople. Through correct evaluation of their performance, the salesperson can be encouraged to increase their performance by ensuring that this will be fairly rewarded. It also helps managers in understanding their salespeople better and gives them insights about what will be more motivating for every individual in their team. This knowledge helps them in giving rewards which are not only fair but also something that the salesperson actually wants, giving them a major boost to work and offers job satisfaction to a great level.

PERFORMANCE APPRAISAL PROCESSES AND PROCEDURES

Performance appraisal is a cyclic, ongoing process. The process starts with job analysis which determines the tasks and activities that need to be done and the qualifications required for performing them. On basis of this analysis, job description is made. Job description is a document that states the nature, responsibilities and requirements of a job. This job description is converted into job specifications i.e. what are the skills, abilities, education and other qualifications that are necessary in individuals to perform the job successfully. This clearly defines the actual job requirements and provides the base for formation of equitable performance criteria. These criteria are the benchmarks which are then compared with the actual performance of salespeople. Based on these criteria, managers plan the appraisal system for their sales team, implement this system and evaluate salespeoples performance accordingly. The planning, implementation and evaluation of the appraisal system is critical. This defines the whole procedure of performance appraisals. It is based on seven basic questions: 1. 2. 3. 4. Who should evaluate the salespeople? When should salespeople be evaluated? Are the performance criteria appropriate? What forms should be used for gathering information?

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5. What may influence the appraisals accuracy? 6. How should the appraisal be conducted? 7. How can the appraisal process be evaluated?

WHO SHOULD EVALUATE THE SALES PEOPLE?

Primarily the entire evaluation is done by the immediate supervisor of the salesperson and approved by his supervisor without any further inputs. This is done so because the supervisor has knowledge about the salespeoples skills, has worked with them in the field and knows how to motivate them. These supervisors also recommend the promotions, demotions, pay raises and incentives that should be rewarded. In some organizations evaluation is conducted by not only the immediate supervisor but his own supervisor as well. They both work together to come to an evaluation. Sometimes, managers from other areas also give their opinions about this evaluation. In some companies, the whole management group from a region works together on evaluations. Some companies also acquire the help of a home-office personnel specialist to overlook the process of evaluation. This specialist makes sure that the appraisal system is followed and the rewards are fair and equal.

WHEN SHOULD SALESPEOPLE BE EVALUATED?

A minimal of one evaluation should be conducted once every year for every salesperson. But most companies evaluate salespeople on more regular bases. The evaluation is carried out at the end of each performance cycle which is a specific period assigned to specific goals and activities. This performance cycle varies for different companies according to their products and services. For consumer-goods companies, this cycle can be as short as two months and they evaluate six times n a year. Some service companies evaluate on quarterly bases. All these evaluation are combined together at the year-end for the annual appraisal and gives regular input on performance.

ARE THE PERFORMANCE CRITERIA APPROPRIATE?

Performance criteria are the benchmarks or standards a company set for performance that they expect from their salespeople and hoe these both will be compared and measured. GUIDELINES FOR PERFORMANCE CRITERIA: Formation of performance criteria is a critical process which requires consideration of a few essential guidelines given below: Measurable; the criteria needs to be measurable to a large extent. Although quantitative performance results can be measured accurately such as sales volume, but qualitative factors such as communication skills and friendliness could not be accurately measured and are solely subjective in nature. Practical;the criteria should be practical and according to the type of industry you belong to. Mostly sales volume is considered to be the major measure of performance but sometimes that is not an accurate measure of performance. Hence, it should be practical according to the companys situation.

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Relevant;the criteria needs to be developed on the bases of top three to ten activities that are most relevant for a salesperson to perform a job successfully. There can be as many as 50 to 100 activities a person performs and all might be important but evaluating them all is not possible. So, a set of 3 to 10 most relevant activities for the job should be specified as a part of the criteria and evaluation should be carried out on the bases of these activities. Discriminating;the criteria should discriminate fairly between poor, average, good and excellent performers. Although appreciating all is necessary, discrimination helps in encouraging and developing salespeople. Stable; the criteria should be stable. It means that the criteria can be evaluated by more than one person and can gain consensus. If there is a difference in consensus regarding an activity included in the evaluation criteria, that activity should be eliminated since it might not be relevant or measurable.

DEVELOPMENT OF PERFORMANCE CRITERIA: A performance criteria should be based on two things; activities and results of salesperson. Results are quantitative data and are easily measurable whereas activities are qualitative in nature and are not measurable. For good criteria, a combination of both is necessary to be evaluated since results are dependent on activities. Quantitative Performance Criteria: These include easy to measure and accurate variables to evaluate and give a more effective evaluation. This derives comparison from the end results and are objective in nature such as sales volume, new customers obtained, average sales call per day, selling cost to sales ratio, sales order generated and goods returned etc. Qualitative Performance Criteria: Qualitative data can be an important part of the evaluation criteria because quantitative results depend majorly on them. Since qualitative data cannot be measured and it is subjective in nature, the evaluator should be careful to minimize biases and evaluate fairly. This includes sales skill, customer service, follow ups, empathy, attitude, team spirit etc.

PERFORMANCE EVALUATION FORMS FOR GATHERING INFORMATION

Evaluation forms are of several types and have several variations in them. There are five basic types of forms which are generally used for evaluation of salespeople discussed below: GRAPHIC APPRAISAL SCALES: This is the most commonly used form for evaluation. In this form, different performance criteria are rated by the manager according to a provided scale ranging between two extremes; outstanding and poor. Different scores are assigned to different extremes, poor being the lowest and excellent being the highest score. The manager then checks the score appropriate for the person being evaluated. With the evaluation of each criterion, the scores are added and the person with the highest score is the best salesperson. Score is also affected by the weight assigned to each criterion. DESCRIPTIVE STATEMENTS: In this form of appraisal, the manager has to provide a detailed, written description of each salesperson. The manager is provided with a few traits or activities about which he has to write detailed statements. Then salespeople are ranked on the bases of these descriptions and the best salesperson is selected. Descriptive statements can cause a lot of 6|Page

problems.Excellent performers and poor performers can be easily identified but describing average salespeople becomes difficult through this form. Another problem is the number of employees to be evaluated. A manager with few employees working for him can use this method within good time but large companies with too many employees cannot write descriptions about all of them. Often, paired comparisons are done among the employees where descriptions are made on the bases of comparison between two employees. This leads to a drawback which is a lot of numbers of comparisons to be made. The comparisons for 10 employees can be determined by a simple formula:

This shows that for only a few employees a lot of comparisons need to be made creating a hassle for the evaluator. MANAGEMENT BY OBJECTIVE: In this method evaluation is done through measuring results. At the start of performance cycle, salespeople are provided with specific objectives and at the end the percentage of attainment of each objective is measured. A performance index is developed by dividing the actual performance by objectives and multiplying it by 100. The criteria which fail to meet objectives are then discussed and efforts are made to make sure it is attained in the future. BEHAVIORALLY ANCHORED RATING SCALES: BARS (behaviorally anchored rating scales or behavioral expectation scales) is a combination/modification of graphic appraisal scales and descriptive statements. In this method a scale of rating is provided about each performance criteria but each score is accompanied by accurate descriptions of that score which helps the manager in evaluating and make the evaluation standards are well defined. It also helps the salesperson in understanding on what bases he was awarded a specific rank and what areas he needs to improve for a better rank. BARS has reduced the vagueness of graphic scales by providing standards and descriptions to rank the salespeople. 360-DEGREE FEEDBACK: This is an evaluation method which is becoming more popular lately. In this method, the supervisor obtains a feedback from a salespersons peers, clients, assistants and even his own manager. These forms are distributed to all these peoples and are filled anonymously and collected back through mail. This is an effective method in highlighting the strengths and weaknesses of each salesperson not just on quantitative bases but also qualitative bases. The major drawback of this method is the time and cost involved in carrying it out. Also, so many opinions can lead to many irrelevant or biased evaluations.

INFLUENCES ON A PERFORMANCE APPRAISALS ACCURACY

Although properly established criteria and appropriate forms are important for successful evaluation, the evaluator also influences the results of appraisals to a large extent. It is essential to study how the evaluator can influence evaluation in the following ways: NEW SALES MANAGER: For a new sales manager it is hard to evaluate a salesperson since there is not enough interaction that could help in evaluation. Often, sales volume is not an accurate representative of performance and evaluation needs to be done on different criteria causing problem for new managers with less idea of the salespeoples job. This problem also occurs with managers

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having too many salespeople working for them and interaction between manager and supervisor is minimal. This often leads to unintentional but unfair evaluation. FALSE PERFORMANCE RESULTS: This problem arises when standards determined are inadequate or miscalculated due to some unusual past event. If, based on past performance which was not usual, the standards are set too high; the salespeople will be evaluated incorrectly and, in the short term, this will lead to de-motivation and poor performance or dissatisfaction from job. PERSONALITIES ENTER IN: Several problems occur in evaluation because the evaluator let their own expectations or standards overcome the actual evaluation. This leads to the entrance of personal biases and attitudes in evaluation and following errors can occur: Central Tendency Errors: This error occurs when managers rate all salespeople as average avoiding to rate some as poor or excellent. This may happen for three reasons; the salespeople actually perform average, the performance measurement might be difficult, and the manager might be reluctant to rate people too high or too low. Different Evaluation Standards: This problem occurs when different managers have different standards for rating. What might be excellent for one may be above average for another. An error of leniency occurs when managers give everyone favorable ratings while error of strictness occurs when managers are too strict in rating their employees. The Halo Effect: This error occurs when, due to one particular event, a negative or positive aura is associated with a person and evaluation is overshadowed by this aura for a long time even if it does not reflect their actual performance. Recent Performance Error: This error occurs when a salesperson is evaluated at the end of year only on the bases of very recent performance rather than taking in account all performance periods evaluations. This also leads to unfair result of total evaluation. THE MANAGERS ATTITUDE: Often some managers have a negative attitude towards evaluation. Some managers do not like rating other people and are reluctant to make evaluations. This attitude towards evaluation leads to inaccurate results. SALESPEOPLES EXPECTATIONS: Like managers, salespeople also have problems with appraisals. This problem occurs in two cases. First, when salespeople are not aware of what is expected from them and the goals are not clearly communicated. And second, when they lack the ability to meet the expectations. This can be rectified by trainings.

THE LEGAL ASPECTS OF PERFORMANCE APPRAISALS

The reason for conducting proper performance appraisals is the legal requirements. Any lag in proper documentation can lead to a lot of difficulties and sometimes huge unnecessary cost in case of a lawsuit, which can be avoided by proper documentation. The companies should make policies according to law and managers are required to follow these policies and have complete record of evaluations. With increasing number of employees exercising their rights in courtrooms, this paperwork can save companies from a lot of hassles. 8|Page

RULES FOR PERFORMANCE APPRAISALS

When used properly, performance appraisal system can become an effective tool for any organization to drive it towards success and save unnecessary hassles. Success of appraisals depends largely upon the managers performing the appraisals. For appraisals to be fair and accurate, following guidelines should be followed by managers:

BE OBJECTIVE
When managers work with salespeople, they do form some personal opinions about them. These opinions might be positive or negative. They might be related to work or some personal reasons. For the appraisals to be fair, these personal opinions of managers should not be reviewed or expressed until they are directly related to job performance.

SET GOALS AND STANDARDS

Goals and standards should be set and communicated clearly to the salespeople and their feedback on these goals should be accounted for and encouraged. They should be given a proper timeline and they should be given a participative role in setting their own goals. Feedback should be obtained from time to time to see if the salespeople are working properly toward the attainment of their goals and time to adjust in case of new policies should be accounted for.

BE HONEST
When evaluating someone, personal biases should be avoided to a maximum. Friend or enemy, managers should inform them about their evaluations honestly in a professional way. In case of poor performance, the problem should be explicitly stated in order to ensure development in that specific area.

BE CONSISTENT
It means that the managers should view the consistent performance of salespeople rather than concentrating on any one or recent performance which might be good or bad. One poor performance period should not overshadow all excellent past performances.

USE PROPER DOCUMENTATION

Proper documentation of each and every step of evaluation should be maintained in order to justify any specific action taken in case of any unfair lawsuits. A complete record of every personnel should be maintained and the complete appraisal system should be documented.

FOLLOW COMPANY POLICY

Managers should always go by the company policies when taking actions in order to avoid any allegations against them. Any deviation from policies will lead to suspection. 9|Page

CONDUCTING THE APPRAISAL SESSION

While conducting the appraisal session with the salesperson, the managers should follow these guidelines to make the session effective: 1. Both the manager and the salesperson should be informed about the session and should be well prepared for it. A time must be set; the manager should collect and review all the information regarding the appraisal, the salesperson should be asked to evaluate his or her own performance. 2. Both the manager and the salesperson should have a positive attitude towards appraisal system. They should keep in mind that this will lead to improvement and development of employee rather than just criticizing. Negative attitude towards appraisal will lead to defensive behavior. 3. The manager should actually go through the appraisal and review it thoroughly. Conflict may arise on certain results of evaluation and salesperson might get defensive but the manager should be willing to explain the reasons for evaluation that rank low and try to work out ways to improve weak areas. 4. After reviewing the appraisals with the salesperson, the results should be finalized and ranks should be communicated to the salesperson clearly. 5. Summarize the evaluation in a single-word review keeping in mind all the past and current performance levels. Salesperson should be informed about their overall performance. 6. Future objectives should be established through discussion and inputs from both the manager and the sales person. These objectives will act as bases for future evaluation. 7. Make a formal document of the complete session. Mention the evaluation results and the agreed objectives. A letter should be sent to the salesperson with everything restated clearly and a copy should be provided to the managers supervisor. Proper personnel file of the salesperson should be maintained.

EVALUATE THE EVALUATION SYSTEM

Evaluation system can prove to be a powerful tool for any organization if carried out in a proper way. For this system to be maintained, the system itself should be evaluated to check its effectiveness and make improvements to enhance it. It also provides companies with proper legal protection. Several aspects should be taken into account when measuring the effectiveness of an appraisal system. This includes reviewing following questions; what goals the system actually meets? Does it conform to the idea of employees of a fair appraisal system? Are the forms used gathering required information? Are the appraisals sessions are conducted effectively? By reviewing these questions the companies can evaluate their appraisal system and determine how it can be improved.

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CONCLUSION
After this whole discussion it can be concluded that performance appraisal systems are an important tool to make an organization successful by creating a motivated, well-satisfied sales team. Performance appraisal systems require much effort and care to be developed and carried out. While evaluating performance all the policies of the company should be followed and it should be a documented process to avoid legal difficulties. Performance appraisals are one of the most critical functions of an organization.

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