Who's Your Most Valuable Salesperson?

U.S. businesses spend $800 billion annually on sales force compensation and another $15 billion on sales training. Yet the backward-looking metrics they rely on (such as revenue generated) to gauge the impact of this spending provide limited insight into how a salesperson will do going forward and what types of training and incentives will be most effective. As a result, many companies misallocate sales force investments. The authors worked with data from a Fortune 500 B2B software, hardware, and services firm to develop a method for measuring reps' future profitability. The metric, salesperson future value (SFV), is the net present value of future cash flows from a salesperson's existing and prospective customers minus the costs of developing, motivating, and retaining the rep. The SFV analysis revealed that the firm had been overvaluing poor performers and undervaluing stars. Using the SFV calculations and data on each rep's prior training and incentives, the authors segmented reps according to whether they were motivated more by training or by various incentives. The firm then increased training for some reps and increased incentives for others, thus achieving an 8% increase in SFV across the sales force. The firm also increased its investments in high-SFV reps and reduced investments in low-SFV reps--a reallocation of resources that increased the firm's revenue by 4%.

• Finance and investing
• Accounting
• Sales team management
• Employee training
• Motivating people
• Employee incentives