Isolating the Effects of the Program

To assess the Level 4 and 5 data accurately, it was imperative that the various influences on any improvement in sales performance be isolated. To isolate the effects of how each factor influenced sales (that is, TLC training, the new incentive plan, market changes, management influence, and so on), each had to be assessed by a credible source. The influence of each factor was determined by using participant and manager estimates regarding each factor. Because the managers work closely with the sales engineers (participants), it was felt that managers could respond credibly to these issues. The data were gathered from the participants in the Level 3 and 4 follow-up questionnaires and from the managers in a separate follow-up questionnaire. Table 12-3 reports the consolidated data.

Design and Implementation Costs

The development costs of $354,500 for this project included the salaries for development time of one project manager, five full-time employees, and four contract consultants. The costs associated with time spent in meetings and interviews with executive management, senior sales staff, and SMEs were also included. This included the time of the interviewer, as well as the people being interviewed. The cost of travel, meals, and lodging during development was also included.

Table 12-3. Consolidated Estimates—Isolating the Effects

Influencing Factor

Sales Engineers Average From 104 Respondents

Sales Managers Average From 8 Respondents

Lowest Value

New Incentive Plan

38%

37%

37%

TLC Training Program

38%

37%

37%

Executive Management Influence

7%

6%

6%

Coaching by Sales Manager

17%

18%

17%

Other (market changes, new products, product improvements, etc.)

2%

2%

2%

The material costs of $68,500 included a comprehensive workbook for participants, distribution of tutorial CDs, and some additional networking software.

The equipment cost of $91,000 included upgrades (systems, processors, and video/graphics capability) to the specified hardware setup. This cost category also included the purchase of several new laptops for the sales engineers, digital editing equipment for editing the video and graphics in each module, and two platform servers capable of handling the multi-operational usage.

Eight SMEs were assigned to the project. These eight lead sales engineers were paid their sales average ($150 per day) for the 18 days each spent on the module designs, video shoots, and other project duties.

The analysis and evaluation costs of $71,000 included all costs associated with the initial performance analysis and evaluation process (for example, employee time during interviews and questionnaires). This cost category also included the use of an outside consulting firm to plan and implement the performance analysis and evaluation methodology for this project.

All the 117 sales engineers reported completing all modules during their personal time. Because they were compensated mostly by commissions, they usually spent their work hours conducting sales planning and call activities. Table 12-4 summarizes the fully loaded costs for the TLC program.

Because no sales were occurring for SMEs during the 18 project days, the commission payments may represent a cost to the sales bottom line. The management team felt the lead sales engineers would be able to maintain their average sales throughout the year even with their involvement in this project. Therefore, they did not feel that lost sales should be included as an opportunity cost. Salaries and benefits and opportunity costs for the “actual training time” are not included in the calculations because none of the 104 sales engineers reported implementing the TLC training during normal company work hours.

Table 12-4. Fully Loaded Costs

Development costs

$354,500

Materials/software

$68,500

Equipment

$91,000

SME time (commission paid to expert sales engineers for lost opportunity) eight people @ $150/day × 18 days

$21,600

Analysis and evaluation costs

$71,000

TOTAL

$606,600

Level 3 and 4 Results

The results of the initiative were encouraging. Prior year sales records revealed that sales engineers' overall performance showed an average of 14 closes per month at

$980 profit margin per close. Six months after the implementation of TLC, the engineers averaged 16.65 closes per month at $1,350 profit margin per close. From the previous year, this was an average increase of 2.65 closes per month and an additional $370 profit margin on revenue.

The design team decided to use the ROI Methodology's conservative process when calculating the ROI based on revenue generated from new or increased closes. This decision helped to enhance the credibility of the data because participant and manager estimates were the only methods used to isolate the impact of training. The profit margin portion of the revenue increase attributable to the training (TLC) was used as a basis for the ROI calculation.

The Level 5 data were calculated by comparing the cost with the net benefits attributable to the TLC implementation. The benefit attributed to the use of TLC for improvement was considered to be 37 percent, based on the lowest value of the two estimates (manager estimates) from Table 12-3.

The benefits, except for improved customer satisfaction, were then converted to a monetary value, and a return on investment was calculated. Customer satisfaction improvements and other data that could not be converted to monetary values were captured as intangible benefits. Level 3 and 4 performance data and intangible benefits were documented in the final evaluation report.

ROI Results

Monitoring the performance records revealed the total increase in sales attributable to all influencing factors was $5,022,810. There was an average of 2.65 additional closes per month (16.65 – 14.0). However, based on the lowest estimates, only 37 percent of this increase in sales was influenced by the TLC program. The conservative adjustment of benefits resulting from the TLC program was a factor of 0.98 additional closes per month (2.65 × 0.37). This resulted in an average of $1,323 profit margin per close ($1,350 × 0.98). Multiplied by 12 months and 117 engineers to annualize, this produced $1,857,492 in monetary benefits attributable to TLC.

O 2.65 closes × 0.37 = 0.98 factor for additional closes attributable to TLC program

O 0.98 × $1,350 per close = $1,323

O $1,323 × 12 months = $15,876 × 117 sales engineers = $1,857,492

The total cost of the TLC training program was $606,600. After rounding the benefits from the program, the ROI for the TLC program was calculated as follows:

In addition to the impact of the TLC training, participants and managers reported the new incentive plan implemented in June had influenced an increase in sales by 36 percent, or $1,808,000.

Intangible Benefits

The results from quarterly customer satisfaction surveys were used to compare the previous year with the current year. Positive improvements and trends were identified. These data were not converted to a monetary value because management had no standard monetary value for an increase in customer satisfaction. It was also difficult to determine how much the skills and behavior from the training actually influenced the improvement in customer satisfaction. Data to isolate and substantiate this would need to come directly from customers because many factors could influence their satisfaction level. When using estimates, only customers are likely to know the extent of such influences. However, executive management felt the customer satisfaction scores were a good indicator of how the organization was responding to the market.

The customer satisfaction scores showed an average improvement of 23 percent since the previous year. Sales engineers and sales managers reported additional intangible benefits, such as increased job satisfaction, better understanding of expectations, reduced turnover, and increased recruiting effectiveness of future sales engineers.

 
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