1. Evaluating the Effectiveness of the Organization
Module Nine
Evaluating the Effectiveness of the Organization

2. Evaluating Effectiveness An Expert’s Viewpoint:
Sovereign Bank recently installed Salesnet, a sales force automation product. According to Bill Pattern, director of MIS and project administration, “We can look and see who our prospects are the probability of closing. Tracking our pipeline is an enormous amount of our responsibility.” The software also allows managers to monitor salespeople’s performance and productivity.
Action

3. Evaluating Effectiveness An Expert’s Viewpoint:
Result
According to Pattern, Salesnet pays for itself. It has reduced paperwork and improved sales productivity. The system allows managers to better analyze sales and customer relationships, more carefully track sales force productivity, pinpoint problems, and define opportunities. As such, it not only helps track sales force effectiveness, but helps improve it.

4. Sales Organization Effectiveness vs. Salesperson Performance
Organizational
Factors
Sales
Organization
Effectiveness
Salesforce
Nonselling
Behavior
Performance
Environmental
Selling
Behavioral
Outcome
Characteristics
Control
System

5. Sales Organization Audit
Comprehensive, systematic, diagnostic and prescriptive tool.
Assesses the a firm’s sales management process
Provides direction for improved performance and prescription for needed changes.
Should be performed regularly,
Should be conducted by someone from outside the sales organization.
Although it is an expensive and time-consuming process, the sales organization audit generates benefits that usually outweigh the costs. 3

6. Sales Organization Audit Framework
SALES ORGANIZATION PLANNING SYSTEM
Objectives
Sales Management Program
Implementation of the Program
Sales force Management Auditor
SALES MANAGEMENT FUNCTIONS
Sales force Organization
Recruitment and Selection
Sales Training
Compensation and Expenses
Supervision, Morale, and Motivation
Sales Forecasting
Budgeting
Quotas
Territories and Routing
Sales Analysis
Cost/Profitability Analysis
Sales force Evaluation
SALES ORGANIZATION ENVIRONMENT
Extra-organizational Factors
Economic-Demographic
Political-Legal
Technological
Competitive
Market
Customer
Intra-organizational Factors
Company Organization
Sales-Marketing Department Links
Sales-Other Department Links
Marketing Mix
SALES MANAGEMENT EVALUATION
Adequacy of Sales Managers
Adequacy of Management Practices 4

7. Benchmarking
Benchmarking is an ongoing measurement and analysis process that compares an organization’s current operating practices with the “best practices” used by world-class organizations. 7

8. Implement & Control to Improve Performance
Benchmarking Process
Analyze & Communicate
Determine current performance gap.
Project future performance levels.
Communicate benchmark findings and gain acceptance.
Plan
Identify what to benchmark.
Identify comparative companies or sales forces.
Implement & Control to Improve Performance
Establish functional goals.
Develop action plans.
Implement specific action plans and monitor progress.
Recalibrate benchmark.
Gather Data
Determine data collection method and collect data. 8

9. Sales Organization Effectiveness Evaluations
No one summary measure of sales organization effectiveness.
Multiple factors must be assessed
Four types of analyses are typically necessary to develop a comprehensive evaluation of any sales organization
Conducting analysis in each of these areas is a complex task 5

10. Sales Organization Effectiveness Framework
Sales Analysis
Profitability Analysis
Sales Organization Effectiveness
Cost Analysis
Productivity Analysis 5

11. Sales Analysis When should we count an order as a sale?
When an order is place
When an order is shipped
When payment is received
What is the primary metric?
Dollars
Units 9

12. Sales Analysis Framework
Organizational
Level of Analysis
Type of Sales
Type of Analysis 10

13. Sales Analysis Framework
Organizational
Level of Analysis
Type of Sales
Type of Analysis
Sales Organization
Zones
Regions
Districts
Territories
Accounts 10

14. Sales Analysis Framework
Organizational
Level of Analysis
Type of Sales
Type of Analysis
Total Sales
Type of Product
Type of Account
Type of Distribution
Order Size 10

15. Sales Analysis Framework
Organizational
Level of Analysis
Type of Sales
Type of Analysis
Comparisons with Forecasts
Comparisons with Sales quotas
Comparisons with Previous period
Comparisons within Sales Organization
Comparisons with Industry/Competitors 10

16. Example of Hierarchical Sales Analysis
Region 1
Sales
Organization
Region 2
Region 3
Region 4
District 1
Territory 1
Territory 2
Territory 3
Territory 4
Territory 5
Territory 6
District 5
District 4
District 3
District 2
$62,000,000
$56,000,000
$73,000,000
$11,000,000
$12,000,000
$13,500,000
$7,000,000
$12,500,000
$1,100,000
$1,300,000
$1,250,000
$1,400,000
$750,000
$1,200,000
Additional
Analysis 11

17. Example of Type-of-Sales Analysis
Product
Type A
Type B
Type C
Account
Type Sales
Sales
$175,000
$275,000
$300,000
$290,000
$285,000
Territory 5
Additional Analysis 11

18. Types of Analysis Examples
Sales
District 1
District 2
District 3
District 4
District 5
Sales Quota
$250,000
Sales Growth 4% 9% 6% 3%
Market Share
26%
29%
18%
27%
Effectiveness Index 98
104
102 70
109
$11,000,000
$12,000,000
$10,000,000
$7,000,000
$12,150,000
$13,000,000
$11,500,000
Sales Last Year
$10,700,000
$10,350,000
$6,800,000
$12,250,000
$11,050,000
Industry Sales
$42,000,000
$45,000,000
$40,000,000 13

19. Cost Analysis
The emphasis is on assessing the costs incurred by the sales organization to generate the achieved levels of sales.
The general approach is to compare the costs incurred with planned costs as defined by selling budgets.
Corporate resources earmarked for personal selling expenses for a designated period represent the total selling budget. 9

20. Selling Budgets
Developed at all levels of the sales organization and for all key expenditure categories.
The basic objective of budgeting for each category is to determine the lowest expenditure level necessary to achieve the sales quotas.
Two approaches to setting the selling budget:
percentage of sales method
objective and task method 9

21. Selling Expense Categories
Compensation expenses
Salaries
Commissions
Bonuses
Total
Travel expenses
Lodging
Food
Transportation
Miscellaneous
Administrative expenses
Recruiting
Training
Meetings
Sales offices
Classification
Actual 2002
Original Budget 2003
April Revision
July Revision
OctoberRevision
$14750
$15000
$15500
$15400
$15400 15

22. Cost Analysis Examples
Region 1
Region 2
Region 3
Region 4
$3,660,000
$3,500,000
$3,150,000
$4,200,000
$3,600,000
$3,700,000
$3,400,000
$3,900,000
$60,000
($200,000)
($250,000)
$350,000
Actual
Budget
Variance
$985,000
$2,110,000
$830,000
$2,3400,000
($45,000)
$70,000
($230,000)
$180,000
Compensation Costs
Training Costs
Actual % Sales
Budgeted % Sales
6.1
5.8
5.4
6.0
2.9
3.1
2.6
3.0 15

23. Profitability Analysis: Income Statement Analysis
Full cost approach attempts to allocate shared costs to individual units based on some type of cost allocation procedure
Contribution approach only includes direct costs in the profitability analysis 16

24. Profitability Analysis Example
Sales
Cost of Goods Sold
Profit Contribution
Net Profit
Gross Margin
District Selling Expenses
Allocated Portion of Shared Zone Costs
Regional Direct Selling Expenses
Region
$ 24,000,000
$ 8,000,000
$ 45,000,000
$255,000,000
$300,000,000
$ 11,000,000
$ 16,000,000
$ 10,000,000
Full Cost
Approach
$180,000,000
District 1
District 2
District 3
$ 6,500,000
$ 8,000,000
$19,500,000
$ 11,500,000
$11,500,000
$22,000,000
$28,000,000
$50,000,000
$58,500,000
$70,000,000
$168,500,000
$ 8,250,000
$ 3,500,000
$ 5,000,000
---
Contribution Approach 18

25. Profitability Analysis: Activity-Based Costing (ABC)
Allocates costs to individual units on the basis of how the units actually expend or cause these costs.
Places greater emphasis on more accurately defining unit profitability by tracing activities and their associated costs directly to a specific unit. 17

26. Profitability Analysis: Return on Assets Managed Analysis (ROAM)
Calculations provide an assessment of profitability and useful diagnostic information.
ROAM is determined by both profit contribution percentage and asset turnover.
ROAM = Profit contribution as percentage of sales X Asset turnover rate
= `Profit contribution / Sales) X (Sales / Assets managed) 17

27. Return on Assets Managed (ROAM)
District 1
District 2
District 3
District 4
Sales
Cost of Goods Sold
Accounts Receivable
Gross Margin
District Selling Expenses
Inventory
Total Assets Managed
Profit Contribution Percentage
Asset Turnover
ROAM
$24,000,000
$24,000,000
$24,000,000
$24,000,000
12,000,000
12,000,000
14,000,000
14,000,000
12,000,000
12,000,000
10,000,000
10,000,000
7,200,000
9,600,000
5,200,000
8,800,000
Profit Contribution
4,800,000
2,400,000
4,800,000
1,200,000
8,000,000
4,000,000
16,000,000
4,000,000
8,000,000
4,000,000
16,000,000
4,000,000
16,000,000
8,000,000
32,000,000
8,000,000
20%
10%
20% 5%
1.5
3.0
.75
3.0
30%
30%
15%
15% 18

28. Productivity Analysis
Compares profits and asset investments
Expressed in terms of ratios of inputs to output
Productivity improvements are obtained in one of two basic ways:
Increasing output with the same level of input
Maintaining the same level of output but using less input 19

29. Productivity Analysis Example
Sales
Selling Expenses
Sales/Salesperson
Sales Calls
Proposals
District 1
$ 1,000,000
9,000
2,000,000
$20,000,000
200
$24,000,000
District 2
District 3
District 4
$ 800,000
$1,000,000
7,500
8,500
10,000
3,000,000
2,400,000
270
260
180
Number of Salespeople 20 30
Expenses/Salesperson
$ ,000
$ ,000
$ 150,000
Calls/Salesperson
450
250
425
$ ,000
333
Proposals/Salesperson 11 6 13 9 20