In tough economic times a business owners needs to know the value and payback on every dollar paid out in the business including the money paid out to sales employees. So this is one of the areas that you need to closely examine as a business owner as your sales drive your revenue and revenue drives your profit.
Before you can evaluate the performance of your sales team, you must first analyze the components of sales performance. There is a simple, standard and accepted formula for analyzing the components of Performance.
Performance = Competence + Motivation + Opportunity
Each component is individually important. For instance a highly competent sales person or team that has no motivation is dead in the water and in these tough times if opportunity is not created, yes created, then all of the competence and motivation in the world will not end up in outstanding performance without opportunity. Here’s the catch though, a competent and motivated team will create its own opportunity no matter what.
After you evaluate the components of performance, evaluate the key measure of performance: sales results. After you complete all of your evaluations, you can take action for each sales representative. In a down economy results are king, it’s difficult to keep paying a highly competent, motivated sales team who creates opportunities but has a mediocre closing rate.
Competence includes knowledge of your products, your sales processes and policies, your company, and your industry. It also extends to knowledge of your customers, their problems and opportunities, and their industry. Additionally, it includes a basic understanding of how business operates. Do not forget, however, that competence includes the basic knowledge of what I call the anatomy of a sale, how does it happen, what are buying signals, what does “no” mean and what makes turns a suspect into a prospect and a prospect into a valued client.
Evaluate Historical Knowledge
Depending on your industry, sales representatives might need to have a certain amount of knowledge in technology, finance, engineering, manufacturing, or human resources or any number of fields wherein your prospects lie. But the rainmakers in your organization will also research their individual targets and know as much as possible about the prospect before even calling on them or making the initial phone call. Many sales are won or lost in the initial contact, ignorance of important details about a prospect or company can be lethal.
Consider Sales Abilities
The second element of competence is sales abilities. These skills include:
• Knowing how to find new leads and qualify them in advance
• Knowing how to prepare for a sales call, what to bring, information needed about the prospect
• Knowing how to build rapport and trust with customers, often the sale is not made in the first
• Knowing how to qualify prospects and assess their needs—never going in to pitch first without finding out the needs of the client, worst case scenario, beautiful pitch, prospect agrees with everything but has no need for product or service.
• Knowing how to write a proposal and deliver a sales presentation
• Knowing how to overcome objections and close the sale, most importantly knowing how to ask for the sale, well and often
When you evaluate representatives who manage key accounts, look at their skills in building relationships at multiple levels of the customer organization, managing change, communicating back into your company, influencing, negotiating, and thinking strategically.
Simple Guidelines for Sales Competency Appraisal
There are many complicated assessment tools and psychological profiles out there but this is after all gorilla Marketing, which means we are doing this on the cheap but also efficiently.
So here are some basic guidelines for your business evaluation of your sales team.
One star—operates like a newbie) Knows the names of all the products and can review features with customers from the product catalog or sales collateral. Don’t discount the novices, they make up for in enthusiasm what they lack in knowledge. A new broom often sweeps clean.
Two Stars—functions with competence Competent functioning requires that the two star sales person knows the names of all the products and can review features with customers from the product catalog or sales collateral. This Two Star Rep knows what’s going on in the world and can relate it to customer needs and benefits. . This representative can also demonstrate online products at a customer's desk and can answer a customer’s general questions about a product.
Three Stars—Functions Proficiently The Three Star Representative knows the names of all the products and can review features with customers without the assistance of the product catalog or sales collateral. This representative can readily link current events and trends to a customers business and has a feel for the next big thing that will affect the customer. A Three Star Rep demonstrates online products at a customer's desktop and can answer more specific questions about the products.
Four Stars: An Expert Rainmaker The Four Star Representative knows the names of all the products and can review features with customers without the assistance of the product catalog or sales collateral, if necessary. The Four Star Expert Rainmaker is good at defining trends early and creating sales opportunities out of them. . This Four Start Expert Rep can demonstrate online products at a customer's desktop and answers the most specific questions about the product without qualification or assistance.
Field Sales Call Shadowing
The most effective method of evaluating your sales team's competencies is to shadow them in the field and observe them in action. You need to know how they create relationships, demonstrate your product, deal with objections and their sales closing procedures. Use a competency assessment as a guide, and record what you see. Your representatives will appreciate the time you spend with them, and they will be much more likely to accept an on site, in person assessment and any constructive suggestions.
The Mystery of Motivation
Motivation is a self starting desire to succeed. It can come from within or from incentives.
Assessing your representatives' motivation is much more subjective than assessing their competencies. Observe them in the field and around the office, and note the following:
Are they giving 100 percent effort?
Do they have a positive attitude?
Do they understand the numbers, that it takes a certain amount of “nos” to get to the "yeses."
Do they enjoy interacting with your customers and creating concerned relationships?
Do they celebrate their sales successes because they know they are worthy of both success and praise?
Do they closely track their sales results and commissions earned? Are they constantly seeking to outdo themselves, they should be their own best competition?
Do they hit the ground running and enjoy getting out in the field or on the phone?
Does every new day of selling provide an exciting opportunity for them?
Also look at past performance. A decline in performance might indicate a motivation issue rather than a competency issue.
Opportunity is the availability of goals, territory, tools, products, and support.
Performance evaluation starts with you, the employer, the boss. To evaluate the opportunity component of performance, ask yourself the following questions:
Have you set the right sales strategy and goals?
Have you convinced your team that your goals are their goals?
Are territories clearly defined?
Do you have the right salespeople in the right territories?
Are your sales collateral and product demonstrations conducive to creating interest?
Does your sales team have marketable products fitting current economic trends and customer needs?
Are the products positioned, promoted, and priced effectively for the current market?
Do you make product training available and is it effective?
Do you create exciting promotions that will excite both your sales force and your clients?
Do you coach your representatives, help them in closing difficult deals? Do you create a winning attitude environment for them? The apple does not fall far from the tree!
Do you create effective sales incentive programs, partner with marketing to generate leads?
Do you augment the sales process with excellent fulfillment and Customer service?
Put a number on sales results
At this point, you have evaluated the competencies and motivation of your representatives. You have also considered the role that opportunity might have played in your representatives' performance. Now it is time to look at the most important measure of performance: sales results.
Metrics of sales performance against sales goals
The fairest way to evaluate sales results is to measure them against goals.
1. Keep track of whether your representatives achieve or exceed the goals that you set for them.
2. Do they achieve their own goals or even set them?
3. Be sure to set goals that support your sales strategy. If your growth strategy is to get more revenue from existing customers, it's a good idea that your sales representatives' individual goals state the source of the revenue.
4. Your evaluation measures might include a percentage of total revenues from existing customers, and an increase in revenues from existing customers compared with last year. You would not give much weight to any decline in the total number of accounts.
5. How about evaluating new accounts and lost accounts returned?
6. Measure sales results rather than sales activities
Be careful of the activity measures trap. If you measure sales activities (for example, number of calls or number of proposals), you get activity from your representatives, but it might be at the expense of results. Instead, measure results such as revenue, profit margins, number of new accounts opened, and increases over last year.
7. But in tough times, it’s important to also reward and evaluate activity because nothing happens until someone gets excited and gets out there..
BE Decisive, after all you are the boss!
After you complete your evaluations, use the following four categories to decide which action to take with each of your salespeople.
Top performers who are competent and motivated, you should keep and promote.
High potentials who are incompetent but motivated, if you can afford to keep, coach and train.
Underachievers who are competent and unmotivated, again if you can afford to keep and counsel, good employees are hard to find, perhaps you have a job better suited to them.
Unacceptable performers who are both incompetent and unmotivated, according to your budget you may chose to reassign to a non sales position but incompetent and unmotivated employees would only motivate me to dismiss them.
This blog post can be reproduced in its entirety with the following information:
© Joanne Quinn-Smith, Monday Morning Marketeer™ 412-628-5048
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This show was originally taped at Talk Shoe on Monday, 3-30-09