Research Brief Measuring Sales Manager Performance. June 2015. Research underwriter

Research Brief Measuring Sales Manager Performance June 2015 Research underwriter

Author Robert J. Kelly Chairman The Sales Management Association First published June 2015. Sales Management Association 1440 Dutch Valley Place NE Suite 990 Atlanta, Georgia 30324 USA +1 (404) 963-7992 http://salesmanagement.org Copyright 2014-15 The Sales Management Association, Inc. All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the publishers. Research Brief: Measuring Sales Manager Performance This document has been prepared by The Sales Management Association for use by its members. The Sales Management Association has worked to ensure the accuracy of the information it provides to its members. This report relies upon data obtained from many sources, however, and The Sales Management Association is not engaged in rendering legal, accounting, or other professional services. Its reports should not be construed as professional advice on any particular set of facts or circumstances. Members requiring such services are advised to consult an appropriate professional. Neither the Sales Management Association nor its programs are responsible for any claims or losses that may arise from a) any errors or omissions in their reports, whether caused by The Sales Management Association or its sources, or b) reliance upon any recommendation made by the Sales Management Association. Descriptions or viewpoints contained herein regarding organizations profiled in this material do not necessarily reflect the policies or viewpoints of those organizations. About The Sales Management Association The Sales Management Association is a global, cross-industry professional organization for sales operations, sales effectiveness, and sales leadership professions. We provide our members with tools, networking, research, training, and professional development. Our research initiatives address topics relevant to practitioners across a broad spectrum of sales effectiveness issues. Our research is available to members on our site at www.salesmanagement.org. In addition to research we publish best practice tools, archived webcasts, and expert content. Visit our website at http//salesmanagement.org to learn more. 2 Copyright 2014-15 the Sales Management Association. All rights reserved.

Research Brief: Measuring Sales Manager Performance Contents 1 Research Summary 5 1.1 Study Objectives: What Determines Sales Manager Success? 5 1.2 Summary of Key Findings 5 2 About the Research 7 2.1 Research Approach 7 2.2 Research Timing and Scope 7 2.3 Research Underwriters 7 3 The Sales Manager Role 8 3.1 One Size Won t Fit All 8 3.2 Sales Managers Most Important Responsibilities 8 4 Quantifying Sales Manager Effectiveness 10 4.1 Sales Manager Capability Gaps 11 4.2 Sales Managers Most Critical Performance Priority: Improving Salesperson Effectiveness 11 5 Sales Manager Competencies 13 5.1 Competency Profiles are Not Widely Used 13 5.2 Focused Sales Manager Competency Use Correlates with Firm Performance 15 6 Sales Manager Performance Measures 16 6.1 Sales Manager Performance Measures, Frequency of Use by Firm 16 6.2 Mean Weightings by Performance Measure 18 6.3 Comparing Sales Manager Performance Measures in High- and Low-Performing Firms 20 7 Respondent Demographics 23 7.1 Firm Size 23 7.2 Firm Performance 23 7.3 Sales Force Size, Structure, and Management Span of Control 25 7.4 Job Role 26 Copyright 2014-15 the Sales Management Association. All rights reserved. 3

4 Copyright 2014-15 the Sales Management Association. All rights reserved.

Research Brief: Measuring Sales Manager Performance 1 Research Summary 1.1 Study Objectives: What Determines Sales Manager Success? Sales managers crucially influence their firms performance. Accordingly, this research examines how sales managers personal performance is defined, measured, and assessed, and offers a broad survey of practices related to sales manager performance measurement in business-to-business firms. Our research shows sales managers are assigned wide-ranging responsibilities. More significantly, their responsibilities are considered highly impactful to business performance. Our research confirms that sales managers represent a critical position in the firm, based on their breadth of scope, and magnitude of impact. 1.2 Summary of Key Findings Sales managers most critical contributions are realized through the teams they build, develop, and lead. Sales manager responsibilities deemed most important are hiring, holding salespeople accountable, and coaching. Manager activities associated with team building, talent management, and salesperson development outrank in importance activities connected to administrative responsibilities, such as pricing decisions, reducing salespeople s administrative work, solution development, new program communication, and managing sales meetings. Despite their vital role, we find ample evidence that sales manager responsibilities and skills may not be adequately focused in many organizations. Unsurprisingly, sales managers effectiveness ratings lag ratings of importance in many key activities. And, the use of competency models is inconsistently Copyright 2014-15 the Sales Management Association. All rights reserved. 5

Research Summery practiced and (even where practiced) is too often poorly targeted to the sales manager role. Team revenue, team profit, and MBO achievement are most widely used by firms as performance measures. Team revenue is given a 47% mean weighting across all respondent firms in determining pay, but was less important in determining overall performance (40% mean weighting), or in awarding promotion (42% mean weighting). Competency assessments are weighted only 6% on average when judging overall performance, and only 4% in determining pay, yet command a 13% average weighting in manager promotion decision criteria. Respondents most important improvement priorities for sales manager performance are a cluster of activities focused in improving salesperson performance. These are: coaching salespeople, conducting performance reviews, and helping salespeople focus time effectively. This cluster of activities represent sales managers past, present, and future impact on salesperson development. As much as any other finding, it suggests the extraordinary combination of short- and longterm objectives sales managers must balance, as well as their essential role as enablers of others performance. 6 Copyright 2014-15 the Sales Management Association. All rights reserved.

Research Brief: Measuring Sales Manager Performance 2 About the Research 2.1 Research Approach This study aggregates participating firms responses to a webbased survey. The Sales Management Association developed the survey and recruited participants from our membership and broader audience of sales managers and sales operations professionals. In exchange for participating, we offer respondents advance copies of the detailed study report. Before reporting results, we eliminate invalid or ineligible responses, and sometimes contact respondents to clarify their responses. Survey results are only reported in aggregate, and never in a way that would compromise the identity of any single respondent. All individual respondent data are treated with strict confidentiality. 2.2 Research Timing and Scope This research represents summarized data from 104 participating firms, directly employing more than 130,000 sales professionals. Data was collected during the months of October, November, and December 2014. Respondent demographics and descriptive information is summarized in report section seven below. 2.3 Research Underwriters This study was made possible in part through the underwriting support of Business Efficacy and Qvidian. Our research underwriters provide annual financial support to the Sales Management Association. Underwriters may suggest research topics, participate in ongoing research projects, and encourage participation or otherwise promote research initiatives. Underwriters are not involved with research administration, data collection, analysis, interpretation, or report development, unless explicitly noted in the report. Also, unless noted, underwriters do not pay a research-specific fee or directly commission research initiatives. The Sales Management Association is grateful for the support underwriters provide to our research efforts. Copyright 2014-15 the Sales Management Association. All rights reserved. 7

3 The Sales Manager Role 3.1 One Size Won t Fit All Most firms have more than one sales manager role. Among survey respondents, just 30% have a single sales manager role; 55% have between two and five unique sales manager roles; eight percent have six to 10 sales manager roles; and seven percent have more than 10 unique sales manager role. Number of Sales Manager Roles Percentage Distribution of Firms Firms differentiate sales manager roles based on channels or market segments managed, geographical assignments, or industries served. 8% Six to 10 30% One 7% More than 10 55% Two to Five As might be expected, the use of multiple sales manager roles increases in proportion to sales organization size, as larger organizations typically have more complex requirements. On average, firms using a single sales manager role employed nine sales managers; those with two to five unique manager roles employed 51 sales managers; those with six to 10 roles employed 122 managers; and those with greater than 10 unique manager roles employed an average of 467 sales managers. 3.1 Seventy percent of firms surveyed utilize more than one sales manager role. 3.2 Sales Managers Most Important Responsibilities Sales managers are assigned a broad set of responsibilities. We asked respondents to rate the importance of a long and varied set of sales manager activities, and were surprised how important all were considered. All activities in our list received ratings above the median value of four ( somewhat important ) on a seven-point scale, where a rating of one is not at all important, and a rating of seven is extremely important. Considered most important among sales manager activities are hiring, holding salespeople accountable, and coaching. Least important (though still considerably important): pricing, reducing salespeople s administrative activities, and solution development. 8 Copyright 2014-15 the Sales Management Association. All rights reserved.

Research Brief: Measuring Sales Manager Performance Manager activities associated with team building, talent management, and salesperson development outrank in importance activities connected to administrative responsibilities, such as pricing decisions, reducing salespeople s administrative work, solution development, new program communication, and managing sales meetings. Sales Manager Activities, Ratings of Importance by Firm Importance to SMs Impact Hiring Holding sales force accountable Coaching salespeople Motivating salespeople Monitoring salesperson activity Providing informal feedback Conducting performance reviews Helping salespeople focus time Helping with customers Training salespeople Helping with internal resources Territory or account planning Conducting sales meetings Communicating new programs Helping develop solutions Cutting admin work Pricing decisions 6.14 6.08 6.00 5.98 5.88 5.78 5.55 5.44 5.33 5.31 5.24 5.18 5.14 5.05 4.87 4.81 4.73 1 2 3 4 5 6 7 Not at all Somewhat Extremely 3.2 Recruiting, developing, and managing salespeople rate among the most important sales manager responsibilities. Given the breadth of sales managers job responsibilities, as well as the magnitude of their impact, our findings suggest the importance of properly focusing sales managers on the activities considered most essential and strategic for sales organization success. Copyright 2014-15 the Sales Management Association. All rights reserved. 9

4 Quantifying Sales Manager Effectiveness We also asked respondents to rate sales managers effectiveness in the same set of activities. Effectiveness ratings are less uniformly high, and in each case lag the corresponding rating of importance for an individual activity. Sales managers are rated most effective at helping with customers, holding salespeople accountable, and providing informal feedback; they are less effective at developing customer solutions, helping salespeople focus time, and coaching salespeople. Sales Manager Activities: Importance and Effectiveness Ratings of Importance and Sales Managers Effectiveness by Firm Hiring 4.71 Importance to SMs Impact SMs Effectiveness 6.14 Holding sales force accountable 4.80 6.08 Coaching salespeople 4.32 6.00 Motivating salespeople Monitoring salesperson activity Providing informal feedback Conducting performance reviews Helping salespeople focus time Helping with customers Training salespeople Helping with internal resources Territory or account planning Conducting sales meetings Communicating new programs Helping develop solutions 4.72 4.66 4.76 4.47 4.31 4.96 4.41 4.64 4.52 4.64 4.53 4.31 5.98 5.88 5.78 5.55 5.44 5.33 5.31 5.24 5.18 5.14 5.05 4.87 Cutting admin work 3.68 4.81 Pricing decisions 4.41 4.73 1 2 3 4 5 6 7 Not at all Somewhat Extremely 4.1 Sales managers effectiveness ratings lag importance ratings in all responsibility areas surveyed. 10 Copyright 2014-15 the Sales Management Association. All rights reserved.

Research Brief: Measuring Sales Manager Performance 4.1 Sales Manager Capability Gaps To illustrate these results with greater focus, we summarized them in a few additional formats. First, we calculated the absolute variance between ratings of importance and effectiveness for each activity. These variances might be considered sales manager capability gaps. Those activities with the largest variance between respondents ratings of importance and current manager effectiveness have the largest capability gap. Such gaps are shown in ascending order below. The largest sales manager capability gaps are in coaching salespeople, hiring, holding salespeople accountable, and motivating salespeople. The smallest gaps relate to pricing decisions, assisting customers, managing sales meetings, and communicating new programs. We further refined this analysis to isolate sales manager activities considered among the most important, and also rated among the lowest in manager effectiveness. Those activities meeting both criteria are considered the top-most improvement priorities. (This analysis approach is further explained below.) 4.2 Sales Managers Most Critical Performance Priority: Improving Salesperson Effectiveness We further refined this analysis to isolate sales manager activities considered among the most important, and also rated among the lowest in manager effectiveness. Those activities meeting both criteria are considered the top-most improvement priorities. (This analysis approach is further explained below.) Three activities met these criteria: coaching salespeople, conducting performance reviews, and helping salespeople focus time effectively. Each of these activities are squarely focused on improving salesperson effectiveness. These results reflect an unusually clear consensus among our research panel; namely, that sales managers most critical improvement need is in coaching and developing the salespeople they manage. This cluster of activities represent sales managers past, present, and future impact on salesperson development. As much as any other finding, it suggests the extraordinary balance in short- and long-term objectives sales managers must balance, as well as the importance of enabling the performance of those they manage. Copyright 2014-15 the Sales Management Association. All rights reserved. 11

4 Quantifying Sales Manager Effectiveness Plotting Sales Manager Importance and Performance 5.4 PERFORMANCE x = 4.5 Helping with customers Helping with internal resources Conducting sales meetings Territory or account planning Communicating new programs Pricing decisions Helping develop solutions Training salespeople Motivating salespeople Providing informal feedback Conducting performance reviews Helping salespeople focus time Holding sales force accountable Hiring Monitoring salesperson activity Coaching salespeople 3.7 Cutting admin work x = 5.4 IMPORTANCE 4.1 6.8 4.2 This analysis plots ratings of importance and effectiveness on an x-y axis, assigning effectiveness ratings y axis, importance ratings to the x-axis. The two axes intersect at the respective mean value for each rating scale (a mean importance rating of 5.4, and effectiveness rating of 4.5, both on a seven-point scale). This forces manager activities into one of four quadrants, as illustrated below. Manager activities ranked in the top 50% by importance rating are sorted on the right half of the chart; those ranked in the top 50% based on performance rating are forced to the top half of the chart. Those activities in the bottom right quadrant are considered the most important aggregate improvement priorities for our respondent firms. These activities are rated among the most important, but least well-performing, activities assigned to sales managers. 12 Copyright 2014-15 the Sales Management Association. All rights reserved.

Research Brief: Measuring Sales Manager Performance 5 Sales Manager Competencies Our study examined how firms measure quantifiable manager performance; we also examined how respondents identify and measure more qualitative measures of manager performance. Manager competency profiles, which define essential clusters of skills, behaviors, and capabilities, are an accepted management standard in this area. We therefore focused a significant portion of the research on examining how competency tools are utilized by respondents for measuring sales manager performance. 5.1 Competency Profiles are Not Widely Used The use of defined competency profiles is far from standard practice among respondent firms, however. Only sixty percent of firms use competency assessments to evaluate their sales managers overall performance; these firms assign a mean weighting of 10% for performance to competency standards versus other performance criteria. Yet few firms are using competency assessments in a consistent fashion; fewer still focus competencies on essential skills unique to the sales manager role. Firms Use of Competency-Based Sales Management Agreement Rating (Seven-Point Scale) 7 Completely Agree 6 5 4 Neither Agree Nor Disagree 3.96 4.40 4.52 4.54 4.67 3 2 1 Completely Disagree Consistently emphasized Focused on SM skills Used to hire Assessed at least annually Written 5.1 Sales manager competencies are not consistently emphasized. Copyright 2014-15 the Sales Management Association. All rights reserved. 13

5 Sales Manager Competencies Just 36% of respondents believe their firms emphasize sales manager competency standards; only eight percent indicate complete agreement that sales manager competencies are consistently emphasized (based on a seven-point agreement scale, where a rating of 1 represents complete disagreement, a rating of 4 represents nether agreement nor disagreement, and a rating of 7 represents complete agreement. More consistently implemented is the practice of maintaining written competency standards. Of the five competency-related How Generic (or Targeted) Are First-Line Sales Manager(FLSM) Competencies? 5.1.1 Competency tools used to manage sales managers are insufficiently focused on unique sales manager competencies. Percentage Distribution of Firms 30 20 10 0 1 2 3 4 5 6 7 Generic Somewhat Specific to FLSM Competencies' Degree of Focus on FLSM Highly Targeted to FLSM practices we asked about, it was most frequently present in respondent firms (though fully 40% of respondent firms do not maintain written competency standards for sales managers). Our research also found that even among firms with a competency model in place for sales managers, a significant number of firms rely on a generalized set of sales or management competencies, rather than those highly-targeted to sales management. Of firms utilizing sales manager competencies, just 42% characterize their competency models as more focused than generic. Only seven percent completely agree that their competency models are highly targeted to the sales manager role. 14 Copyright 2014-15 the Sales Management Association. All rights reserved.

Research Brief: Measuring Sales Manager Performance 5.2 Firms that focus competency tools on sales managerspecific competencies, use competencies in sales manager hiring, or incorporate competencies into regular assessments rate the overall effectiveness of their competency programs 10 to 14% higher than other firms. 5.2 Focused Sales Manager Competency Use Correlates with Firm Performance Using sales manager competency profiles correlates with overall firm sales performance. High-performing firms (those that met or exceeded the prior 12-month revenue objective) were 14% more likely to use sales manager competencies as a part of the hiring process, and 14% more likely to utilize them at least annually in judging sales manager effectiveness. Differences in Sales Manager (SM) Competency Programs, High-Performing vs. Low-Performing Firms Percentage Variance in Effectiveness Rating +15 Focused on +12 SM skills +9 +6 +3 0-3 Written Consistently emphasized Assessed at least annually Difference in High-Performing Firms Use of First-Line Sales Manager (FLSM) Competencies Used to hire Firm Rating of Sales Manager Competency Focus 7 Highly Focused on FLSM 6 Low Performing Firms High Performing Firms 5 4.26 4 Somewhat Focused on FLSM 3.58 3 2 1 Generic in Nature 5.2.1 High-performing firms used competency tools more focused on unique sales manager traits. High-performing firms also use competency profiles that are less generic, and more focused on competencies specific to the sales manager role. Compared to low-performing firms, high-performing firms rate their competency profiles as 19% more focused. Copyright 2014-15 the Sales Management Association. All rights reserved. 15

6 Sales Manager Performance Measures We compared sales manager performance measure usage in three contexts: judging overall sales performance, in the compensation program as a means of delivering incentive pay, and for the purpose of promoting sales managers into more senior positions within the firm. Team revenue is given a 47% mean weighting across all respondent firms in determining pay, but was less important in determining overall performance (40% mean weighting) or in awarding promotion (42% mean weighting). Competency assessments are weighted only six percent on average when judging overall performance, and only four percent in determining pay, yet command a 13% average weighting in manager promotion decision criteria. Team revenue, team profit, and MBO achievement are most widely used by firms as performance measures. 6.1 Sales Manager Performance Measures, Frequency of Use by Firm The charts in this section summarize frequency of use, by firm, of sales manager performance measures for (a) measuring overall manager performance, (b) determining annual compensation, and (c) as criteria for promotion. Team revenue performance is used by almost all firms as a sales manager performance measure. Team revenue performance includes the revenue or revenue quota achievement expectations assigned to the manager, including personal selling responsibilities, direct reports assignments, and assigned indirect revenue expectations. Other widely used performance measures are team profitability and MBOs. Both are used by more than half of respondent firms for measuring overall manager performance, determining annual manager compensation, and promoting managers. MBO, or Management by Objective refers to flexible measurement components that are more frequently changed than other performance measures, or that vary from manager to manager according to individual performance priorities. 16 Copyright 2014-15 the Sales Management Association. All rights reserved.

Research Brief: Measuring Sales Manager Performance Performance Measures Frequency of Use by Firm in Measuring Overall Sales Manager Performance Percentage of Firms Team Revenue MBOs Team Profitability Competency Assessment Hiring or Headcount Customer or Account Objectives Personal Sales Objective Product or Service Objective Direct Reports' Balanced Performance Process or Pipeline Objectives Coaching-Related Objectives Other 94% 73% 70% 61% 51% 46% 44% 41% 39% 28% 28% 8% 6.1 Team revenue is used by 94% of firms surveyed in determining overall sales manager performance. Coaching-related objectives are utilized by only 28% of surveyed firms. Performance Measures Frequency of Use by Firm in Determining Sales Managers Compensation Percentage of Firms Team Revenue MBOs Team Profitability Competency Assessment Customer or Account Objectives Personal Sales Objective Hiring or Headcount Product or Service Objective Process or Pipeline Objectives Direct Reports' Balanced Performance Coaching-Related Objectives Other 94% 57% 55% 40% 39% 36% 27% 27% 25% 22% 16% 6% 6.1.1 Team revenue is used by 94% of firms surveyed in determining sales manager compensation. Coaching-related objectives are utilized by only 16% of surveyed firms. Copyright 2014-15 the Sales Management Association. All rights reserved. 17

6 Sales Manager Performance Measures Performance Measures Frequency of Use by Firm in Promoting Sales Managers Percentage of Firms Team Revenue Competency Assessment Team Profitability MBOs Hiring or Headcount Customer or Account Objectives Personal Sales Objective Process or Pipeline Objectives Direct Reports' Balanced Performance Product or Service Objective Coaching-Related Objectives Other 88% 61% 59% 56% 42% 33% 30% 28% 27% 25% 19% 16% 6.1.2 Team revenue is used by 88% of firms surveyed in promoting sales managers into senior management roles. Coaching-related objectives are utilized by only 19% of surveyed firms. Less frequently used measures for determining overall manager performance are coaching-related objectives (28% of firms), process or pipeline management-related objectives (28% of firms), and balanced performance of direct reports (39% of firms). ( Other was specified as a criteria by 8% of respondent firms). 6.2 Mean Weightings by Performance Measure For measuring overall sales manager performance, team revenue achievement is most heavily emphasized. On average (across all respondent firms), team revenue achievement was assigned a weighting of 43%. Team profitability achievement was given an average weighting of 22%, and personal sales objectives were weighted at 15% on average. Least-emphasized performance measures for sales managers (for the purpose of evaluating overall performance) were customer or account objectives, weighted at 9% on average, coaching-related objectives (8%), and process or pipeline objectives (7%). 18 Copyright 2014-15 the Sales Management Association. All rights reserved.

Research Brief: Measuring Sales Manager Performance Performance Measures Use in Measuring Overall Sales Manager Performance Mean Weighting by Performance Measure, All Firms Team Revenue Team Profitability Personal Sales Objective Direct Reports' Balanced Performance Other MBOs Hiring or Headcount Product or Service Objective Competency Assessment Customer or Account Objectives Coaching-Related Objectives Process or Pipeline Objectives 43% 22% 15% 13% 12% 11% 10% 10% 10% 9% 8% 7% 6.2 Team revenue is weighted 43% on average, in determining overall sales manager performance. Process or pipeline management objectives are weighted at 7% on average. Performance Measures Use in Sales Managers Compensation Plans Mean Weighting by Performance Measure, All Firms Team Revenue Team Profitability Personal Sales Objective MBOs Competency Assessment Customer or Account Objectives Direct Reports' Balanced Performance Hiring or Headcount Process or Pipeline Objectives Product or Service Objective Coaching-Related Objectives Other 47% 17% 8% 6% 4% 4% 3% 3% 3% 2% 2% 1% 6.2.1 Team revenue is weighted 47% on average, in determining sales manager compensation. Coaching-related objectives are weighted at 2% on average. Copyright 2014-15 the Sales Management Association. All rights reserved. 19

6 Sales Manager Performance Measures Performance Measures Use in Promoting Sales Managers Mean Weighting by Performance Measure, All Firms Team Revenue Team Profitability Competency Assessment MBOs Personal Sales Objective Hiring or Headcount Other Customer or Account Objectives Process or Pipeline Objectives Direct Reports' Balanced Performance Product or Service Objective Coaching-Related Objectives 42% 14% 13% 7% 5% 5% 4% 3% 2% 2% 2% 2% 6.2.2 Team revenue is weighted 42% on average, in promoting sales managers to more senior management roles. Coaching-related objectives are weighted at 2% on average. 6.3 Comparing Sales Manager Performance Measures in High- and Low-Performing Firms We compared differences in mean performance measure weightings in high-performing and low-performing firms. Highperforming firms are those which met or exceeded firm sales revenue objectives in the prior 12 months. High-performing firms give less emphasis to team revenue than do low-performing firms; high-performing firms mean weighting is six percentage points (or 600 basis points) lower than low-performing firms. Also given less emphasis by highperforming firms: team profitability (three percentage points lower mean weighting compared to low-performing firms), and personal sales objectives (two percentage points lower weighting, on average). Given greater emphasis by high-performing firms were hiring or headcount objectives (weighted five percentage points higher than low-performing firms weightings), direct reports balanced performance (four percentage points higher), and objectives related to specific customers (three percentage points higher). 20 Copyright 2014-15 the Sales Management Association. All rights reserved.

Research Brief: Measuring Sales Manager Performance Variance in Mean Performance Measure Weightings Used by High-Performing and Low-Performing Firms in Sales Manager Performance Evaluation Variance in Mean Firm Weighting Team Revenue Team Profitability Other Personal Sales Objective Competency Assessment Product or Service Objective Process or Pipeline Objectives Coaching-Related Objectives MBOs Customer or Account Objectives Direct Reports' Balanced Performance Hiring or Headcount -6% -3% -2% -2% -1% 0% 0% 0% 2% 3% 4% 5% 6.2.3 High-performing firms emphasize team revenue less, and hiring or headcount management more, in determining overall sales manager performance. Variance in Mean Performance Measure Weightings Used by High-Performing and Low-Performing Firms in Sales Manager Compensation Variance in Mean Firm Weighting Personal Sales Objective Team Profitability Process or Pipeline Objectives Product or Service Objective Other Competency Assessment Direct Reports' Balanced Performance MBOs Coaching-Related Objectives Team Revenue Customer or Account Objectives Hiring or Headcount -8% -4% -2% 0% 1% 1% 1% 1% 2% 2% 3% 3% 6.2.4 High-performing firms emphasize personal sales objectives less, and customer, hiring or headcount management objectives more, in determining sales manager compensation. Copyright 2014-15 the Sales Management Association. All rights reserved. 21

6 Sales Manager Performance Measures Variance in Mean Performance Measure Weightings Used by High-Performing and Low-Performing Firms in Promoting Sales Managers Variance in Mean Firm Weighting Team Revenue Competency Assessment Personal Sales Objective Product or Service Objective Direct Reports' Balanced Performance Coaching-Related Objectives Customer or Account Objectives MBO Process or Pipeline Objectives Hiring or Headcount Team Profitability Other -6% -4% -2% -1% -1% 0% 1% 1% 1% 2% 4% 4% 6.2.5 High-performing firms emphasize team revenue less, and team profitability more, in promoting sales managers to more senior management positions. 22 Copyright 2014-15 the Sales Management Association. All rights reserved.

Research Brief: Measuring Sales Manager Performance 7 Respondent Demographics Respondents Firm Revenue Percentage of Respondent Firms 26% US$100 million to US$1 billion 29% US$10 million to US$100 million 7.1 Firm Size Seventy-seven participating firms ranged in size from small to very large. Forty-nine percent of respondents firms had annual revenue in excess of US$100 million; 5% were firms with annual revenues in excess of US$10 billion. 25% More than US$1 billion 7.1 Respondent firm size 20% US$1 to $10 million 7.2 Firm Performance Eighty-six percent of respondent firms met or exceeded firm sales objectives in the preceding 12 months, and 69% met or exceeded profit objective in the same period. Respondents were asked to rate their firm s achievement of profit and sales objective based on a seven-point scale ( 1 for far underachieved objective; 4 for met objective; 7 for far exceeded objective). Respondents Sales Objective Achievement Percentage Distribution of Firms 40 30 20 10 7.2 Respondent firm revenue objective achievement 0 1 2 3 4 5 6 7 Far Below Goal Firm Performance Met Goal Far Above Goal Copyright 2014-15 the Sales Management Association. All rights reserved. 23

7 Respondent Demographics We use this performance rating approach in order to normalize company performance across large and small firms, and high and moderate growth sectors. Thirteen percent of respondents rated profit objective achievement in the highest two categories ( 6 or 7 ); 39% of firms rated sales objective achievement in the highest two performing categories. Respondents Profit Objective Achievement 7.2.1 Distribution of firm profit objective achievement Percentage Distribution of Firms 40 30 20 10 0 1 2 3 4 5 6 7 Far Below Goal Firm Performance Met Goal Far Above Goal 7.2.2 Distribution of firm year-over-year sales growth Respondents Year-Over-Year Sales Growth Percentage Distribution of Firms 50 40 30 20 10 0 1 2 3 4 5 6 7 Far Below Prior Year Firm Performance No Change Far Above Prior Year 24 Copyright 2014-15 the Sales Management Association. All rights reserved.

Research Brief: Measuring Sales Manager Performance Seventy-two percent of respondent firms had positive revenue growth in the preceding 12 months. Fourteen percent had flat revenues, and 14% experienced declining firm revenues. Total Sales Managers by Firm 100 Total Salespeople by Firm 900 80 60 40 20 0 7.3 Sales managers by firm 800 700 High 600 75th Median 500 25th 400 Low Mean 300 200 100 0 7.3.1 Sales people by firm High 75th Median 25th Low Mean 7.3 Sales Force Size, Structure, and Management Span of Control Ratio of Salespeople to Sales Managers by Firm 18 16 14 High 12 75th 10 Median 25th 8 Low 6 Mean 4 2 0 Respondent firms have an average of 172 sales managers, and 1,295 salespeople; sales managers have 7.9 direct-report salespeople on average by firm; when calculated in aggregate, management spanof-control is 7.8. Corresponding median values are 82.5 salespeople per firm, 8 managers per firm, and a salespersonto-sales manager ratio of 6.7:1. Twenty-seven percent of respondent firms salespeople were inside sales; the median value by-form was 12.5%. In aggregate, 36% of all salespeople in respondent firms were inside salespeople. 7.3.2 Sales management span of control Copyright 2014-15 the Sales Management Association. All rights reserved. 25

7 Respondent Demographics Respondents Job Role Percentage of Respondents 29% Sales Ops 33% Senior Sales Leader (Manages SMs) 7.4 Job Role Respondents are predominately sales operations leaders in their firms. Twenty percent of respondents are first-line sales managers (i.e., they directly manage salespeople). An additional 18% are senior sales leaders, managing sales managers. Fifteen percent are in nonsales-related management positions, and 4% are salespeople. 24% Sales Manager (SM) 13% Manager (non sales) 7.4 Respondents job role 26 Copyright 2014-15 the Sales Management Association. All rights reserved.