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Resources: Return on Sales Gap

This has long been considered the best measurement to compare the performance of individual locations and their managers. Most companies track Return on Sales data for their organization and for individual locations because it’s useful to evaluate overall cost management efforts or the effects of marketing and/or competitive pressures both locally and nationally. Few companies, however, track the Return on Sales gap which exists between their top performers and those in the middle. This is critical. Without it, it’s impossible to understand the effectiveness of the organization’s management training and development programs, to say nothing of its overall communication and the management of key initiatives, processes and procedures.

Managers are classified as follows:

• “A” Managers — Top performers — Those managers who achieve the highest Return on Sales. An “A” manager has Return on Sales results in the top 10% of the company.
• “B” Managers — Middle performers — Defined as the next 80% of the managers, ranked by the Return on Sales percentage by location.
• “C” Managers — Sub-par performers — Those managers in the bottom 10% based on Return on Sales data (the issues regarding their performance are often extensive and complex, and we believe it would be hard to separate the impact of The Manager’s Red Book from other company efforts to improve their performance).

Most people think of performance in subjective terms such as “good with people,” “good trainer,” “organized,” “great with customers,” etc. However, the only objective way to measure performance is actual results, so that”s what we”ll use when classifying a manager’s performance level.

We’ll show you how in your operations.

Download the Performance Gap Calculation Sheet PDF