Reviewer
Dr. Scott Downey
Article
New evaluation metric for measuring sales training effectiveness by Joon-Hee Oh and Wesley J. Johnston
Source
Journal of Business Research, Volume 156, February 2023
Summary
Training ROI has gotten a lot of attention in the last several years and, for us here at Purdue, has changed the way we engage with the companies. Since we frequently help salespeople and sales managers develop more strategic efforts, this study really spoke to me.
The authors of this study built a model for measuring return on sales training and calculated optimal strategies for “developmental interventions.” They considered several factors in doing so. First, they classified salespeople into three distinct categories: those who exhibited greater success early in their careers, individuals who consistently improved over time, and those who excelled toward the end of their careers. They also incorporated insights from previous research that delineated salespeople’s effectiveness across three career stages. These stages included the initial rookie phase, which typically lasts about three months and emphasizes basic competencies; followed by a second stage lasting about nine months, dedicated to achieving productivity; and finally, the later phase of their careers characterized by seasoned expertise.
This study also looked at several different sales training strategies. One approach involved a single, comprehensive development activity early in a seller’s career. A second approach focused on several development activities dispersed throughout the early stages of a seller’s career. A third strategy prioritized development activities later in a seller’s career, often favored by companies who primarily hire experienced salespeople already established in the industry. A final approach offered consistent, steady sales development activities spread across the seller’s entire career.
Numerous factors went into the model’s design. First, there was the question of how to measure the efficacy of sales training. Was it best measured through sales revenue or profit? One challenge arose as there are several factors that determine a seller’s generation of revenue or profit. Attributing all revenue to training may overstate the value and discount other factors. To address this, the model incorporated various contributing factors such as the salesperson’s talent, marketing dollars allocated for generating sales, commission incentives, and profit margins. The model also took into consideration the obsolescence of different types of training over time and across career stages. Finally, it factored in the cost of training, including the frequency of training, among other things. Parameters for the model were estimated from other marketing research and professions. Subsequently, the model was used to estimate the aggregate sales talent of sellers given the diverse training approaches applied across varying levels of success among sellers.
The key takeaways from the study revolved around cost analysis, benefits, and breakeven points at three pivotal timeframes: 3 months (end of stage 1), 12 months (end of stage 2), and 18 months (into stage 3).
First, and not surprising, is that a one-time training event early in a career primarily influences short-term performance only in the rookie stage (the first three months). That same approach does not contribute much to performance by the third stage with a mere .09% impact on aggregate sales talent (AST). Even when development interventions were spread across multiple stages, when primarily given in the early stages of the career, the lasting impact in stage three is modest, accounting for only about 17%. Later career training (stage 3) achieved a 56% contribution by the end of 18 months. The study did not measure the impact beyond this timeframe, but presumably the impact of those development interventions would diminish as time goes past the 18-month mark. Development activities spanning all stages of a seller’s career had less impact in the three-month “rookie” period, approximately 28%. However, it had an impact on aggregate sales talent of 41% in the second career stage, and 42% in the third stage. While the concept of ongoing training yielding ongoing effects is no surprise, the numbers are interesting nonetheless.
The evaluation of development interventions, gauged by their impact on improving average sales talent in dollars, involved a comparison to their costs to calculate a breakeven point across different career stages. Notably, the lowest breakeven point was for the evenly spread interventions and those conducted in the early career stages (within three months and two months when provided during this stage). The longest breakeven points came from one-time interventions during the rookie or third stages, extending beyond the 18-months study period.
What does this mean for food and agricultural business?
The implications for food and agribusinesses are quite practical, I think. First, at its most basic, the idea of measuring the influence of development activities on sales outcomes should be fundamental to our investment decisions. Other research shows that the impact of training interventions alone drops off quite quickly, but training supported by a manager or coach doubles the impact and sustains it over a longer period. Second, it is important to deliver the correct type of training at the correct stage of a career. Putting first, second, and third stage sellers in the same development intervention doesn’t have the same impact for each of them. Third, the most valuable interventions span entire careers, with those offered in the second stage being particularly economical. Finally, development can’t solely rely on training. Development interventions include a variety of behaviors that should be created to accomplish very specific goals. The concept of measuring impacts across the sales force and forming strategies for allocating development efforts to maximize effectiveness is an approach deserving thoughtful consideration by all.
