Sales Management Chapter 5: Sales Organization PDF

**SALES MANAGEMENT** **Sales Organization** **Chapter 5:** **Introduction** - The sales organization should be adjusted to fitideally, to anticipate changing situations. Shifts in marketing, in competition, and in other business factors calls for changes in the sales organization....

**SALES MANAGEMENT** **Sales Organization** **Chapter 5:** **Introduction** - The sales organization should be adjusted to fitideally, to anticipate changing situations. Shifts in marketing, in competition, and in other business factors calls for changes in the sales organization. - The ideal sales organization has a built in adaptability allowing it to respond appropriately in fluid and diverse marketing environments. **Definition** - **Sales organization** is a group of people working together to achieve the objective of sales-which is to capture a certain share of market while satisfying the customers. - It undertakes the effective marketing of products produced by the undertaking or even products purchased for resale. - It ensures timely distribution of products to the customers in an economical and efficient manner. - It establishes restructuring between the customers and the organization on terms that are both acceptable to the buyer and the seller. - It is the backbone that supports the operations, helping each salesperson to understand their role and function within the team. **Need** - A sales organization bridges the gap between the market and the productive capacity of the firm. - The sales force complements the marketing strategy to boost sales of your products. - Having a sales organization is therefore essential for improving efficiency and outcomes. - Team members must know their allotted tasks, responsibilities, but also the challenges and objectives. **Importance of the sales organization** The need for and importance of sales organization can be described under the following points: **1.Increase Efficiency**: In the sales organization, jobs are properly distributed, duties are defined direction and control are properly provided. This helps to avoid duplication of work and to increase work efficiency. **2.Promotes Specialization**: The sales organization divides and subdivides various sales functions. Suitable persons are appointed to handle their respective activities. Thus, the right person performs the right job. **3.Facilitates Co-ordination:** A sound sales organization coordinates the efforts of different departments and sub departments, offices and employees for the attainment of sales goals and common objectives. **4. Delegation of Authority:** A sales organization defines the rights and responsibilities of every individual. This helps in the delegation of power to discharge their job and responsibilities. **5. Timely Contacts with Customer**: By assigning proper duties and by structuring the roles of employees, it is quite possible to make regular contact with customers. This also helps in obtaining valuable information relating to customers' problems and suggestions. **6. Contributes to Success of Business:** A good sales organization achieves goals at the minimum costs. It helps achieve the desired success in selling as well as the other areas of business. The salesman can work at the optimum level. This contributes to the overall progress of the Enterprise. **7. Promotes Innovations:** A good sales organization can contribute to the development of new ideas and innovations. It encourages salespeople to bring new changes in products by gathering information from salesmen. It promotes sales research, consumer survey, and market analysis. This helps to innovate products. **8. Increase Morale:** A good sales organization helps in building the morale of sales employees. Every person engaged in the selling activities has a clear knowledge about his position, rights and responsibilities. **Purpose of Sales Organization** **1) Defines Lines of Authority** A sound sales organization defines people in the organization in terms of authority, responsibility and accountability and identifies flow of authority. It enables the sales person to identify whether their authority is line, staff, or functional. **Line authority** describes the process of product managers giving instructions to line workers, or top management giving instructions to product managers. Line authority involves centralization of power, a clear chain of command, and work directly related to the company's customer-facing products or services. **Staff authority** involves staff positions supporting line positions with advice and insight. Staff workers do not have formal authority over line workers. For instance, a company's in-house accountant cannot tell a marketing manager how to do their job. Yet, these staff members can support line managers and line workers by offering insight and advice. In doing so, they exert staff authority. **Functional authority** gives individuals the ability to make decisions regarding the way a department will be run. They can create, manipulate, or change procedures in order to complete a project. It is delegated by their common superior to a staff specialist or a manager in another department. - All executives should understand the nature of their authority with respect to each aspect of the operation, otherwise, friction develops. - When, for instance, staff executives attempt to exercise line authority, they are heading for trouble with the line executives whose authority is usurped. **2) Ensures that all Necessary Activities are Assigned and Performed** The process of organizing presupposes the identification of all necessary activities which have to be performed for the achievement of objectives. As organization grows, tasks also multiply. It must be ensured that all necessary activities are specifically assigned. The sales executives are in close contact with the users in small companies but as the company grows, the top executives get farther and farther removed from the customers. At this point of time an individual should be assigned responsibility for maintaining such relationships. **3) Establishes Basis of Communication** Earlier because of simplicity of organizations, lines of communication were synonymous with lines of authority. Today, business has become a very complex phenomenon due to information overload. The flow of information is both horizontal and vertical. The organization structure identifies the sources of information, recipient of data and may also tell us who is responsible for generation of information. **4) Provides for Coordination and Balance** Good organization achieves coordination and balance. Individuals vary in competence, potential and effectiveness. By coordination we achieve Synergistic effect (when the sum of a combination effort exceeds the efforts of the same individuals working alone). Motivation also plays an important part and is achieved by training programmes, indoctrination (teaching), group meetings and two-way communications. **5) Provides Insight into Avenues of Advancement** The personnel looks upon sales organization as something that will advance and improve their future career. Possible avenues of advancement may be evident from the organizational chart which depicts the normal promotion route of the personnel. **6) Economies on Executive Time** As an organization grows, the sales department increases in number and complexity. Delegation of authority becomes imperative. This allows the executives to spend more time on planning and less in operation. For effective coordination, the span has to be limited but this depends on various factors like superior\'s ability of coordination, qualities of the subordinate, etc. One of the main purpose of coordination is to achieve economies on executive time. **Developing the Sales Organization** Sales organization develops in response to the market and company requirements. The setting up of an organization or the sales organization development takes place in a series of steps. 1\. Defining the sales organization\'s objectives. 2\. Defining the various activities that need to be performed to achieve these objectives and estimating the cost and volume of each of these. 3\. Grouping of the activities and positions. 4\. Assignment of personnel to positions. 5\. Control and coordination by formal and informal means. **Step 1** **Defining the sales objective** includes the setting of qualitative objectives. This can be done by asking what the company wants to achieve in terms of: The objectives of the sales organization need to be defined in the light of corporate objectives both in the **long-term (qualitative)** and **short-term (quantitative).** **Sales management** determines the qualitative and quantitative personal selling objectives. Quantitative personal selling objectives are set with an eye on qualitative flow of sales revenue. **Quantitative objectives.** earning profits by making miracle sales reducing the costs and the expenses of various departments. realize long term growth in sales and profits. This means that sales, profit and growth are the three general objectives. **Qualitative personal selling** objectives are translated with quantitative objectives, e.g., increasing the market share by 20%. If the goals are clear and defined then time and effort are better utilized and progress is more smooth. **Step 2** The analysis of the type and volume of activities needed to be performed will lead to assessment of how many executive and operating positions are required and how these positions would relate to each other. This also helps in **assessing the duties and responsibilities of the concerned persons who are employed** on these positions. The activities involved in modern sales organization are similar. Difference among the departments are those of details, of relative emphasis placed upon individual activity and performance. **Step 3** This consists of the following tasks: 1\. Identifying positions to whom these activities may be assigned. 2\. Classify and group closely related activities and assign them to same positions. 3\. Decide on hierarchy of activities by defining the level at which each activity will be performed. This will depend upon the importance of the activity, e.g., in an organization trying to sell a new product through middlemen, dealer relations become a crucial activity and has to be assigned a higher position in the sales organization. **Step 4** Assignment of personnel to positions consists of deciding on two things. First of all, to hire, select or recruit specialists to take up the positions so that the organization gets the best personnel in its armor who will perform the jobs in a resplendent manner and, Secondly, modifying the positions so as to take the services of existing personnel after training and developing them so that they fit in the requisite positions. An organization may take either of the two ways. **When should a company hire/recruit internally or externally?** Assignment of personnel to positions involves the following activities: 1\. Defining relation between positions -- how many individuals report to a particular superior -- and the span of control. 2\. Defining the nature of authority in respect of each position (delegation of authority, lines of authority, lines and staff). 3\. Assigning personnel to positions. **Step 5** Control and coordination in a sales organization can be done both formally and informally. Formally, it can be done by written job description, rules, regulations and procedures. Written job description is an important formal instrument for coordination and control. It gives details about the various attributes of each job like reporting relationships, job objectives, performance measurements and duties and responsibilities. Informally, it can be done by sheer force of personality coupled with ability to attract and hold the loyalty of followers One of the **methods of coordination** is the **chain of command.** We also try to have provision for growth, flexibility and control. Another instrument of control is an **organizational chart** because many things are specifically stated in it. An organizational chart shows the formal relationships between different positions. It helps in understanding the nature of authority and responsibility of each personnel with respect to each aspect of operation. This helps in avoiding friction which would exist if it had not been there. A supplement to organizational chart is an **organizational manual** which incorporates the company as well as departmental chart. The **organizational manual** is an extension of the organizational chart. The organizational manual typically contains write-ups of job descriptions and specifications and summaries of major company and departmental objectives and policies. The organizational manual also contains a lot of information which helps the users to learn and understand the nature of their responsibilities, authorities and relations with others. **Centralization vs Decentralization in Sales Organization** In **centralized system**, recruitment, training, compensation and evaluation are all managed from the central head quarter while in decentralized system the field sales managers take up most of these functions. It also depends on size of operation, cost effectiveness and competitive necessities. When firms are small and have only a few sales people, corporate office may be more efficient and effective. When size of operation increases, branch offices gradually emerge. **Decentralization** in this case provides more freedom to sales manager to allow him to display greater initiative and managerial skills. Most medium and large size firms combine the advantages of both centralized and decentralized operations. **Decentralized sales offices** are utilized to ensure better customer service while training and recruitment may be centralized. With growth, advantages of decentralized sales force management increasingly outweigh the higher costs. **Advantages of decentralized sales force management** 1\. The sales volume increases to cover the fixed costs. 2\. There is intensive cultivation of the market 3\. Due to effective control of sales personnel there is a comparatively better provision for improvement of customer services. 4\. Travelling expenses and allowances given get reduced considerably. 5\. A well managed channel structure offers a good training ground as the shortcomings are well known to the executives. 6\. The motivation and morale of the sales force increases. 7\. It provides effective control, improves supervision and increases sales productivity. Managerial philosophy towards delegation and control also affects the extent of centralization and decentralization. Increased use of computers has also influenced this philosophy. It has led to more centralized decision making as data can be processed much faster. **Basic Types of Organizational Structures** The **sales department\'s structure** evolves from the needs of the business. Different companies have different organizational structure depending upon their needs. The **organizational structure** is affected by company size, practices of competitors, marketing channels, customers and the personalities and abilities of personnel. **1. Lines Sale Organization** It is the most basic form of the sales organization characterized by a chain of command, **running from top sales executive down to salesman level.** Lines organization is **extensively used in smaller firms or those dealing in a narrow product line, or selling in a limited geographical area.** It places great demand on time and abilities of the top sales executives as all field reporting\'s finally come to him. **Operational details** of managing the sales department takes up a large part of line executives time. He is at times forced to take decisions without benefit of adequate planning. Line organization becomes **inappropriate in case of a rapidly growing organization or those with large sales staff** as growing department necessitates additional layers of executives to be added. **The greatest weakness of the line sales organization is that so much depends upon the department head.** The head needs outstanding ability and rare qualifications, and should be well versed in all phases of sales management, for there are no subordinates with specialized skills and knowledge. Even if the head is an all around expert, there is insufficient time for policy making and planning, since rigidity of the line structure requires that a great deal of attention be given to direction of sales operation. **Customer Channel Division of Line Authority** When the line authority becomes a burden because of increasing number of people to supervise, there are many options available for the organization. Customer division of line of authority is **suitable when almost similar products are sold in the market and are marketed to different types of customers.** It is also done when selling problems to each type are different. When the same, or identical, products are sold to a number of industries they often find different applications in each industry. Customers not only have different needs, they are influenced by different buying motives. Thus, special sales forces sell to each major type of customer. **2. Line and Staff Sales Organizational Structure** **Line and staff sales organizational structure results as the size of the operation grows.** It is characteristically found in medium and large firms with sizeable sales staff selling diversified product lines. Staff are specialists in their own field which can be sales training, service, sales analysis, planning dealer relations, sales promotion, sales personnel development, etc. A pool of experts become available for providing assistance in specialized fields. Organization is headed by **Managing Director** who has line managers called Regional Managers and Staff Managers, who look after the staff functions Manager reporting to him. **Customer Service Manager** is in charge of feeding in information and facilitation of customer services sales promotion. **Sales Promotion Manager** performs the advisory function with respect to sales promotion activities of the organization and correlates with the Regional Sales Manager as to promotional needs. **Regional Managers** are the line managers responsible for operating results in their own territories and control their own field staff. **Problems with line and staff is basically one of coordination reports.** Moreover recommendations take time to compile and there is time lag which hinders active coordination. Various problems of interpersonal relationships also arise. Staff sometimes assumes the authority to issue orders and direction. This leads to dual subordination and can be overcome if authority and responsibility are specifically written down. **3. Functional Sales Organization** Functional sales organization was designed by F W Taylor and takes into account, that, all the executives and employees should have different types of activities, as far as possible. **Functional sales organization** focuses on specialization within the marketing team. This means that everyone has their own purpose to fulfill within the team based on their specialties, interests, and other factors. Most of the firms use this type of organizational structure as it not only provides a platform for improved performance through specialization, but also, improves coordination among the functional executives. Functional organization is not feasible in all types of organizations. It is cumbersome and ineffective in its present form. Small and medium sized firms find it neither practical to implement nor are financially strong enough to employ high degree of specialization. Large organizations, however, find it suitable for stable operations as there are no constraints with regard to finance, labor and specialized executives. Large companies with stable selling operations are exceptions rather than the rule.  **4. Vertical and Horizontal Sales Organization** This type of organization has several levels of management. All the employees report in the upward direction to their next level (i.e., all report vertically upwards). **Horizontal Sales Organization** In this type of sales organization the number of management levels are small and the number of managers at a particular level is large.  In **vertical sales organization** we see a narrow space of control and in horizontal sales organization a wide span of control. Span of control is the number of subordinates that can be handled effectively by a superior. Field Sales organization is the group of sales force that work in the field periodically with retailers and customers in person. They send reports to the company and they are some kind of specialist. They can be important specialist, product specialists, or a coordinator of these are these force have organized based a product, market or customer, we can also have a combined based organization. This is practiced in very big companies where the area to be covered is very large and a large and a larger no. of product lines are to be marketed. As Salesman are dealing only in one product they get in a depth knowledge and specialization. In this type of organization the activities are duplicated. This is practiced in very big companies where the area to be covered is very large and a large and a larger no. of product lines are to be marketed. As Salesman are dealing only in one product they get in a depth knowledge and specialization. In this type of organization the activities are duplicated.  The salesman in such organizations gets to know more about the customers, their problems and methods of purchase. Builds relationship which a long way and give fruits when the customer is satisfied with the product and the service. The disadvantage is the duplication of facilities & resources. Extra expenditure is involved in maintaining a large sales force. **6. Combined Base Organization** In this type of organization two or more bases are combined to form an organization structure. It may overcome the problem of individual sales organization. Sales organization is the framework of relations of different people in the enterprise. Its function is to provide an efficient, economical and flexible administrative set up to ensure timely movement of products from the warehouses to consumers. **Importance of sales organization can be judged from the following points:** 1\. To plan the purchase. 2\. To create demand pattern for the products. 3\. To handle the orders received. 4\. To collect the dues. 5\. To reconcile the complaints. 6\. To handle the tasks of personnel management. A sales organization can exist in numerous forms. It can be a line organization or a line-staff organization or functional organization. The sales organization structure can also exist in two other forms which are vertical sales organization and horizontal sales organization. Depending on the needs and requirements various organizations choose their organizational structure. **Summary** Sales organization is a group of people working together to achieve the objective of sales. A sound sales organization defines people in the organization in terms of authority, responsibility and accountability and identifies flow of authority. A sales organization bridges the gap between the market and the productive capacity of the firm. Functional authority enables specialists in particular areas such as in technical product service to enforce their directives within a specific and limited field. The personnel looks upon sales organization as something that will advance and improve their future career. **Regional Managers** are the line managers responsible for operating results in their own territories and control their own field staff. Sales organization is the framework of relations of different people in the enterprise. A supplement to organizational chart is an organizational manual which incorporates the company as well as departmental chart. Control and coordination in a sales organization can be done both formally and informally. The organizational manual is an extension of the organizational chart. A well managed channel structure offers a good training ground as the shortcomings are well known to the executives. Operational details of managing the sales department takes up a large part of line executives time. The organization can also be customer based i.e. salesman catering to different type of customers.