Sales Management Performance Evaluation: A Residual Income Perspective

Cron, William L.; Levy, Michael
August 1987
Journal of Personal Selling & Sales Management;Aug87, Vol. 7 Issue 2, p57
Academic Journal
The article discusses the appropriateness of residual income as a measure of sales management's performance. Strategy implementation is of critical importance in the projected slow-growth economy of the 1980s and into the 1990s. Appropriate sales force behavior is critical for effective implementation of marketing strategy. Sales managers and salespeople have traditionally been evaluated on sales volume or sales-based ratios, e.g., sales growth, sales to quota, or market share. Surveys of sales managers suggest these are still the most common measures of sales force performance. The purpose of this paper is to discuss the appropriateness of residual income as a measure of sales management's performance. By including in a single measure both sales growth and profit performance, residual income is shown to be conceptually superior to the most comprehensive sales force profit measure currently used, return on assets managed. Despite slower forecasted economic growth, organizations are unlikely to focus exclusively on profits. This can be seen by examining the successful business strategies of individual firms.


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