“Sales organisation is both an orienting point for cooperative endeavour and a structure of human relationships. It is composed of the group of individuals, striving jointly to reach qualitative and quantitative personal selling objectives and bearing both informal and formal relations to one another.”
A sales organisation is an organisation of individuals either working together for the marketing of products and services manufactured by an enterprise or for products that are procured by the firm for the purpose of reselling.
Learn about:-
1. Introduction to Sales Organisation 2. Meaning and Definitions of Sales Organisation 3. Characteristics 4. Criteria and Principles 5. Importance 6. Structures 7. Types
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8. Basis for Designing Organisations. 9. Planning 10. Purposes 11. Steps in Setting up Organisation 12. Factors 13. Advantages 14. Disadvantages 15. Schemes.
Sales Organisations: Meaning, Characteristics, Principles, Importance, Types, Purposes, Factors and Other Details
Sales Organisation – Introduction
The organisation is a mechanism to realize our objectives. Since the market conditions change, the sales organisation keeps on changing, always accommodating the necessary environmental changes. This ensures survival as well as growth.
Organisation is a structure as well as a process of putting together this structure. In organizational process, lines of authority are defined. We know who our superior is, and whom we are reporting to. The superior has the authority to direct us. He assigns part of his work load to us, and creates our duties/responsibilities.
We then have an obligation to him to carry out the tasks assigned. This obligation is our accountability. To ensure smooth flow, the organisation requires balance and coordination. It should also provide for career progression and should economize on executive time.
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We have to first identify the expectations of the sales function, and its overall place in the total organisation. To begin with, corporate objectives are identified – both qualitative and quantitative. We then decide how to go about achieving them and at what cost. We identify sales positions, classify them into groups, and decide the hierarchy. We then assign positions to persons. The resulting structure is evaluated in terms of its balance and flexibility.
Sales organisation is used, to attain the qualitative and quantitative objectives of personal selling. These objectives are related to sales volume, profitability and market share. Sales organisation is used not only to achieve the present objectives, but also to attain a particular future position. Sales organisation is a second priority, when a typical company starts its operations.
It first concentrates on the production and financial aspects. As it evolves it keeps on evolving the production and finance departments, but somehow tends to overlook the sales function. It is kept constant without much alteration as the company evolves. What changes is the selling style and the size of the salesforce? Sales organisation must be adapted to the changing environment.
Sales Organisation – Meaning and Definitions (Defined by Eminent Authors)
Sales organisation is a structural framework, specifying the formal authority and responsibility between persons working in the organisation. It consists of group of individuals working jointly to attain qualitative and quantitative selling objectives.
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Effective sales executives appreciate the importance of sound organization. Today’s sales executives recognize that sales organization must be shaped to achieve both qualitative and quantitative personal selling objectives.
In the words of C. L. Boiling, “A good sales organisation is one where functions of departments have been carefully planned and coordinated towards the objective of pulling the product in the hands of the customers, the whole effort being efficiently supervised and managed so that each functions is carried out in the desired manner.”
In the words of H. R. Tosdal, “A sales organisation consists of human beings working together for the marketing of products manufactured by the firm or the commodities which have been purchased for resale.”
In the words of Stiff, Cundiff and Govoni, “Sales organisation is both an orienting point for cooperative endeavour and a structure of human relationships. It is composed of the group of individuals, striving jointly to reach qualitative and quantitative personal selling objectives and bearing both informal and formal relations to one another.”
A sales organisation is an organization of individuals either working together for the marketing of products and services manufactured by an enterprise or for products that are procured by the firm for the purpose of reselling. A successful sales organization is one where the functions of each department are carefully planned and coordinated and the efforts of the individuals supervised.
A successful organisation also organizes resources towards the goal of delivering products and services in the hands of the customer for profit. Such an organization is a point of orientation for individuals for cooperative efforts aimed at establishing relationships both within enterprises and with the customers outside the organization.
A sales organisation defines the duties, roles, and the rights and responsibilities of salespeople engaged in selling activities meant for the effective execution of the sales function. This demands a coherent and unified effort of individuals in the organization for achieving a common goal. A sales organization is designed to execute functions which go beyond just achieving sales through the department.
A sales organization thus undertakes managerial functions such as the selection and recruitment of quality manpower, their induction and training for better performance, and the effective supervision of subordinates in the field force. The organization also motivates them to stay loyal and committed to achieve organizational goals and adequately compensates them for their efforts.
A sales organisation is a structural body through which the functions of sales management are carried out. A properly designed sales organization also helps in the flow of both the upward and downward communication in the organization for taking sales-related decisions. This flow of communication within the sales organization also helps in the proper forecasting of market demand and in executing the contingency sales plan in response to competition and market changes.
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A proper design also removes the duplication of efforts and enhances the productivity level of salespeople in the organization by keeping costs and expenses under control. Sales organizations generate the financial resources, which are circulated within the organization to finance its other functions.
An improperly designed sales organisation results from lack of planning, improper execution of plans, ineffective policies, lack of training and supervision, and improper coordination with other functions (production, finance, materials, and human resource management).
A correctly designed sales organization, on the other hand, increases managerial efficiency as it allows the management to delegate routine jobs to lower levels and pay proper attention to strategic organizational planning and the formulation of policies. This helps to avoid the duplication of activities and confusion among subordinates, and promotes the specialization of tasks within the organization. A sales organization executes the direction and control of the sales management function.
A properly designed sales organisation also helps in conducting a job analysis by subdividing the various sales functions, which helps to identify the qualifications needed to handle each activity and accordingly appoint personnel to handle respective job responsibilities. This principle of right job for the right person’ promotes selective specialization and plans and executes strategies for the achievement of its predetermined objectives.
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A good sales organisation always aims at achieving the sales target at the minimum cost and with maximum efficiency. The basic objective of an organization is to establish efficient and smooth coordination between the efforts of its employees for achieving the desired results. A sound sales organization coordinates the efforts of various departments, sub-departments, and employees for the attainment of the common objectives.
After defining the rights and responsibilities to every individual, it is necessary that adequate authority is delegated to respective levels to discharge their responsibilities. In the event of expansion and growth of an enterprise, both its sales and non-sales functions increase considerably. By setting up a separate sales organization, more attention is needed for individual functions of the sales department.
A sales organization serves as the unified contact or relationship point with customers. Building a separate sales organisation allows for continuous interaction with customers to obtain valuable information about their problems, suggestions, and future demands. A sales organization is set up for achieving the desired success in selling operations, where the ability of each salesperson is utilized to the optimum level to enable successful selling operations.
A good sales organisation can contribute to the development of new ideas and innovation by encouraging salespersons to innovate with new ideas while working within the scope of their authority.
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This organization contributes to building the morale of the sales employees and every individual in the department is clear about his position, role, and responsibility, and the opportunity for growth. A good sales organization is a reservoir of sincere, moral, and hardworking employees because the rights, duties, and responsibilities of every employee are defined and communicated.
The organisational policies, rules, and procedures governing the sales organization are laid down as the means of control and motivation. Proper supervision and control are exercised at the appropriate intervals and these are helpful not only in eliminating malpractices, but also in preventing their occurrence within the organization.
Effective customer relationship management is a prerequisite for organizational success, and a sales organization pays adequate attention to customer problems, their redressal, and suggestions for an effective and long-term relationship. A sales organization always makes efforts to increase sales, thereby achieving the principle of profit maximization, which contributes to the overall growth of the enterprise.
Sales Organisation – 9 Main Characteristics
1. Sales organisation is a part of the total enterprise dealing with sales activities.
2. It consists of a group of people engaged in selling activities.
3. It works for the attainment of common objectives of selling.
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4. There exist formal and informal relationships between persons engaged in selling activities.
5. It defines the duties, responsibilities and rights of people in the selling jobs.
6. It establishes departmentalization of selling activities separately.
7. It is a means to the efficient execution of the sales functions and accumulation of resources to perform those functions.
8. The success of sales organisation depends on the unified and coordinated efforts of salespersons.
9. The selling organisation acts under the direct control the sales manager.
Sales Organisation – Criteria for Setting a Successful Sales Organization
Before a sales organisation is developed, the management should know the criteria for setting a successful sales organization.
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These are as follows:
1. Sales organisation should specify precisely the functions of the sales department and plan and coordinate the activities of the salespeople and superiors in a coherent manner.
2. Proper allocation of resources should be made with a view to reach customers with the right marketing mix. The goals are – customer satisfaction and target return on investment.
3. Sales organizations should lead to a sales force structure that can effectively and efficiently control the sales operations. This means whatever the sales structure is, it must adequately cover the market and control the cost of selling operations.
A sales organisation is established on some important organizational principles very much akin to the principles of the whole organization. These principles are like software guiding and controlling the smooth functioning of the organization. Principles help the organization to explore market opportunities and move towards their goals. It protects the organization to stray from the pre-determined course of actions. Fundamentally, these principles are worth considering while developing a sales organization.
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These are as follows:
1. Span of control.
2. Unity of command.
3. Stability and continuity.
4. Centralization and decentralization.
5. Line and staff positions.
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6. Coordination and integration.
7. Specialization.
Span of control refers to the number of subordinates that a sales manager can supervise at a particular time. It is related to a manager’s ability to control to coordinate the activities of salespeople working under him and integrate them with other activities of the organization. A narrow span of control endorses tall structures of organization with more layers of supervision where only the field salesperson can reach to the level of end users.
A wider span of control encourages a flat organizational structure with lesser levels of supervision. Coordination between the lower- and higher-level employees is a bonus to such structure. Depending on the span of control, a sales manager has the capacity to manage his subordinate sales staff.
The unity of command principle says that no subordinate should be responsible to more than one supervisor. Each person should report to only one superior. However, this is too rigid to fit well with the modern organization where horizontal communication has a major role to play particularly in multi-specialty organizations such as – multi-speciality hospitals, IT firms, etc.
Moreover, flexibility in work culture is crucial to get warm cohabitation of managers and subordinates. For example, a territory manager is given a free hand to decide a sales budget for a particular project in a particular territory. It has been seen that an organization thrives more where the role of the superior leads the salespeople from the front rather than directing them to carry out the instructions.
It is suggested that jobs should not be assigned without giving due regards to the talent and preferences of the current employees. Managers should distribute job responsibilities according to the specializations of the salespeople where the latter has the knowledge and skill to execute the task.
To maintain stability in a firm, this becomes the key to an organization’s perpetual success and continuity which steadies the growth of business. For example, in a customer-based sales organization, salespeople are assigned to deal with customers where they have an experience to handle both new and existing customers.
Similarly, in a computer firm, a salesperson, experienced in retail selling, is deputed to take up selling responsibilities with dealers whereas a salesperson who has knowledge in institutional selling is asked to sell computers in educational units, banks, hotels, etc.
4. Centralization and Decentralization:
The concept of centralization and decentralization refers to the degree to which control and authority are vested to the top management in an organization. Centralization means that authority and control are concentrated to the top of the organization and decentralization indicates the same has been distributed from the top to the lower levels of working units.
In a centralized operation, staffing, training, motivating, compensating, and evaluating sales performance are controlled by a core management group located at the upper rung of the organization, whereas, in a decentralized firm the field sales managers are given the authority to perform these activities.
Absolute centralization and decentralization hardly exists in any firm. Organizations typically centralize some activities and decentralize the others. For example, recruiting and selecting, training, fixation of sales targets, territory distribution, and performance appraisal of the field sales staff is vested with middle-level managers in some firms. Decentralized firms allow more freedom of action and result in more motivated sales force. On the other hand, centralized firms provide more coordination and integration of work activities, behaviour of employees, and efforts.
It is seen that firms emphasizing on specialization are more successful with decentralization. Also, advances in technology enhance the scope of electronic communication and demands more decentralization for regional and branch units to perform businesses independently in distant corners of a nation.
A line of authority is exercised by immediate superiors over their subordinates and a chain of command is directed downwards through various levels of the organization. One subordinate is responsible only to one person on the next higher level. The chief executive officer takes the decision and this decision flows down the line for implementation.
So lines of authority move vertically down the structure and the members at the organizational level are independent of all others on that level. This type of organization is known as line organization. In line sales organization, sales managers control a number of subordinates and report directly to the next higher level in the organization.
On the other hand, a staff authority is directed to specialized staff that is associated with their areas of specialization. Staff sales organizations are bereft of a direct chain of command. Those in staff positions do not manage people directly but are entrusted with managing certain functions such as – recruiting and selecting, training, sales promotion, servicing, etc.
Staff sales managers do not have the authority to delegate orders or directives. The recommendations of staff managers are submitted to the top-level executives. If these are approved by the executive officers, instructions are run down to the line organizations. Both line and staff positions may coexist in the same organization.
The marketing research manager and sales training manager as staff authorities assist the line managers in taking managerial decisions.
For example, a sales organization with geographical specialization can entrust the chief executive officer, national sales, and regional sales managers to perform staff functions. District sales managers and salespeople are the other members in the line positions where salespeople report to district sales managers. District sales managers report to regional sales managers who send information to the national sales manager. The national sales manager, finally, submits the reports to the chief executive officer of the company.
Marketing research manager and sales training manager are the staff positions. Marketing research managers give feedback of all the market-related information to the line authority. A sales training manager located in between regional and district sales managers, looks after the training of salespeople and prepares them to handle selling jobs. The marketing research manager sends research reports and recommendations to both the regional and district sales managers. Training of salespeople is conducted by sales training manager at the regional level in cognizance with district sales managers.
6. Coordination and Integration:
Traditional sales organizations relied more on direct communication with customers through the sales force. The sales department in these traditional firms acted as the front office where they could deal with customers directly and assistance from the other functional areas such as – R&D, production, finance, etc., could be called for whenever required. Flow of communication was more or less unidirectional and no coordination amongst functional areas was ever felt.
But, modern organizations prescribe different roles for different departments. For instance, the sales department is responsible for solving customer problems. The communication flow, here, in these organizations is a two-way process between sales and other departments.
The sales force explores the needs of the customers and sends information to other functional departments. In usual cases, the R&D department develops the product; the production department gives physical shape to the product concept; the finance department decides on the sales budget and the company’s credit policy; the marketing department frames the advertising and distribution policies and decides the price of the product in consultation with the finance department. Finally the sales department takes charge of handing the products to the customers.
Therefore, it can be seen that coordination amongst different functions is extremely imperative. And integrating all the value-added activities together, to develop an offer that meets the expectations of the customers is also important.
7. Specialization:
A sales organization is a combination of different sales and marketing activities and requires the presence of managers and sales personnel with specializations in their respective fields. A sales manager is said to be capable of making call plans, prepare routing, and work scheduling for the salespeople. It is important to note that salespeople should be efficient in treating customers and handling their problems as well. For example, a financial firm needs salespeople with knowledge in accounting and finance. And a technologically oriented firm requires salespeople with technical qualifications.
So, the basic idea behind specialization is using the expertise and knowledge of the sales managers or people, so that a firm can understand the needs and expectations of the customers better, share information with other departments, shoot the problems of the customers professionally, and provide after-sales service with ease. So, specialization leads to improved performance of the organization.
Sales Organisation – Importance
A good sales organisation is a foundation for effective execution of sales policy and sales programme. A sales organisation must be planned in detail and all activities should be well coordinated and integrated to secure united efforts and maximum efficiency. A sales organisation is the medium to execute a sales plan.
Sales organisation is the counterpart of the factory. Just as the factory produces goods on a mass scale, in the same manner, the sales department, with the help of salesmanship, advertising and sales promotion, produces mass markets and brings about mass distribution through multiple channels of distribution.
In a good sales organisation, all departments are carefully planned. There is adequate co-ordination among all the departments. Each department or section should be self-contained and there should not be overlapping of functions. Division of labour and proper delegation of authority creates a sound sales organisation.
At the top, we have a general Sales Manager, the Chief Executive of the sales organisation in charge of planning, organising, directing and controlling all the activities relating to the selling function. He may have an Assistant Sales Manager to relieve him of some of his responsibilities, which can be delegated to his deputy.
The Sales Manager is responsible for coordinating and controlling all the activities of the department with the help of competent executives.
A sales organisation is like a power station sending out energy, which is devoted to the advertising and selling of particular lines and there is tremendous loss of energy between the power station and points where it reaches the consumers. Therefore, there arises the great necessity of planning, organising, and controlling all sales efforts through a sound sales organisation — to prevent wastage in distribution.
Sales manager must be skilled in planning, organising, coordinating and controlling all sales operations and must assure the optimum contribution of personal selling efforts to the overall marketing objectives of the company.
Sales Organisation – Organisation Structures (With Merits and Demerits)
The organization of a sales department is usually based on the nature and size of the enterprise. No two companies have identical sales organizations, because no two have identical needs. The customers, the marketing channels, the company size, the product or production line, the practices of competitors and to personality and abilities of the personnel and different. This way numerous factors influence the individual sales departments.
The chain of command runs from the top sales executives down through subordinates. All executives exercise line authority, and each subordinate is responsible to one person on the next higher level. Responsibility is definitely fixed, and those charged with it also make decisions and take action.
In the following line organization, sales manager acts as the head of the sales department. In a big organization, he is considered as next to the top authority in the chain of command. Divisional, district, or branch managers are appointed to assist the sales manager in his sales functions. They are accountable to the sales manager directly. Salesmen (local and traveling) are appointed to assist these authorities in the selling activities.
a. Line and Staff Structure:
For the efficiency of the sales organization, it is divided into different departments.
Such a division can be made on the basis of product, customer, territory, functions, or combinations of a few of these:
1. Structure on Product Basis:
When a number of products are to be marketed, the departmentalization of sales organization is based on the nature of the products. Each product is assigned to a department under the charge of a manager. For overall supervision, control and coordination, a General Manager (Sales) is appointed.
On product basis itself, two types of departments can be formed – (i) Sales department with line authority subdivided by products (one staff officer for all the products) and (ii) sales department subdivided by different sales authority (one staff officer for each product).
In the first case, one line authority and staff organization has been formed for the entire sales organization. The General Manger (Sales) reports to Vice-President in charge of marketing. Six subordinates report to the General Manager (Sales). Staff authority for all the products remains with one person. But separate line authority for each product is appointed, namely sales manager, product ‘A’, and sales manager product ‘B’. Staff authority (specialist) is appointed on the basis of sales functions to be performed.
In the second case, for each product, line and staff authority are appointed separately for each product, because of the complexity and technical nature of the product. But it is not necessary always that for each product same number of staff specialist will be appointed.
Organization Structure on product basis has the following merits and demerits:
Merits:
(i) Each product gets equal importance in the sales.
(ii) Advantages of specialization and division of work.
(iii) Unnecessary interference in different functions come to an end.
(iv) Easier to assign responsibility to everyone in the sales department.
(v) Comparative evaluation of efficiency of departments is possible.
(vi) The buyers get maximum satisfaction.
Demerits:
(i) Difficulty in coordinating the activities of different products/departments.
(ii) Selling costs tend to be higher if the sales at the estimated level are not reached.
(iii) The operational costs will also be higher because of the larger number of employees.
Suitability:
Departmentalization on the basis of product is suitable where:
(i) The number of products are many,
(ii) The prices of products are much higher to bear the expenses of different departments, and
(iii) The product are of technical nature.
2. Structure on the Basis of Customers:
This type of departmentalization advisable when the nature and types of customers differ. For example, for nature and types of customers differ. For example, for industrial as well as consumer products, different departments can be formed, based on the nature of the departments can be formed, based on the nature of the costumers and the nature of the product.
In this type of structure, the staff authorities (specialist) for all types of customers are similar.
Merits:
(i) Sufficient attention can be given to every category of customers.
(ii) Maximum services can be provided to the customers to their satisfaction.
(iii) Sales planning and policies can be made keeping in view of each category of customers.
(iv) Salesmen can be appointed keeping in view of the special features of the customers in each category.
Demerits:
(i) The establishment expenses will be too high.
(ii) Controlling and coordination of sales activities create problem.
(iii) Market-oriented structure
(iv) The departmentalization of sales organization may be made on geographical/market basis also. The total sales territory is divided and sub-divided into segments and for each subdivision, a separate sales department is set up. The responsibility of each department is assigned to a Manager. To coordinate and control the activities of respective sub-divisions, a Gen. Manger (sales) is appointed.
3. Structure on the Basis of Market:
(i) Better services can be made available to customers of individual marketing area.
(ii) New product requirements can be identified for each area.
(iii) Transportation cost can be minimized.
(iv) Necessary changes/modification in the products can be suitably made with the specific requirements of a particular market.
(v) Sales plans, policies and marketing efforts can be directed in accordance with the requirements of each market.
(vi) Marketing strategies for each market to deal with competition effectively can be formulated.
(vii) A comparative sales analysis between different zones/territories can be made possible.
(viii) Sales persons with specific qualities, belonging to particular zone, can be appointed keeping in view of the traditions existing in the particular market and can be controlled effectively.
(i) Departmentalization of this type is too expensive.
(ii) It is difficult to coordinate the activities of different markets.
(iii) There are chances of conflicts for resources allocation and other facilities between departments.
Suitability:
Territorial based departmentalization is suitable in the following situation where:
(i) The market territory is so extensive and substantial,
(ii) There are much difference in the characteristics of each market,
(iii) The products can be differentiated in quality according to market-wise, and
(iv) The total sales are much larger.
4. Structure on the Basis of Functions:
In this type of departmentalization, the selling activities are divided according to the functions to be performed, such as, sales planning, management of sales personnel, sales and distribution, advertising and sales promotion, sales analysis, marketing research, etc. In this type of departmentalization, special attention is given to every aspect of the sales activities and, therefore, profits may increase.
Merits:
(i) Specialization at different levels could be achieved.
(ii) The number of departmentalization may either be reduced or increased according to the needs.
(iii) Decision-making is quick as far as possible.
(iv) Easy to coordinate between sub-functions, with certain exceptions.
(v) Less expensive, compared to other types of departmentalization.
Demerits:
(i) More attention on a particular product cannot be given.
(ii) Functions of sub-departments sometimes get delayed because of their dependence on the other departments.
(iii) Due to increased responsibility on the General Manager (Sales), problem of coordination may arise.
(iv) Problems like non-cooperation, difference of opinion, etc. may exist between departments.
(v) Mal-functioning of a department may affect the efficiency of the organization as a whole.
Suitability:
Organization structure on functional basis is suitable in such situations where:
(i) The size of the organization is small,
(ii) There is only limited number of products, and
(iii) There are not much differences in the techniques of production.
5. Structure on Combined Basis:
Many big business organizations which produce diversified products and having extensive markets use the combined type of sales department. Such a setup is essential for them to get specialization at every stage of marketing activities. Two or more types of departments (products, market or other types are combined together) are usually combined for this purpose.
(i) Careful attention to every need of the sales organization is possible.
(ii) There is advantage of specialization.
(iii) Better coordination is possible between products, sales territories, and sales functions.
(i) Higher operating costs due to excessive specialization.
(ii) Problems of supervision and control on employees of different departments.
(iii) Problem of communication.
The combined type of departmentalization is suitable where:
(i) The size of the sales debarment is so larger
(ii) There are extensive and substantial markets for the product, and
(iii) The company operates with a number of products.
Committee Sales Organization:
The committee is never the sole basis for organizing a sales department. It is a method of organizing the executive group for planning and policy formulation; while leaving implementation of plans and policies to individual executives. The committees usually found in sales organizations include training committee, customer relations committee, personnel and merchandising committees, committee on new products, etc.
Merits:
The use of committees in the sales department has many advantages:
(i) Before policies are made and action is taken, important problems can be deliberated by the committee members and are measured against varied viewpoints.
(ii) Committees promote coordination among members of the executive team.
(iii) Committees render most important service in providing focal points for discussion and for making good suggestions.
Demerits:
There is wastage of time of executives, where the executives are not directly interested in the topics to be considered.
Sales Organisation – Classified into Four Basic Types
Based on three structural variables, different organization structures can be described viz. – formal and informal organizations, horizontal and vertical organizations, centralized and decentralized organizations, line and staff organizations. Formal organizations have rigid structures and reporting relationships which often result in poor flow of communication.
Informal organizations do not have a rigid hierarchical structure, set communication channels or reporting relationships. Vertical organization structure is a traditional management structure with authority being the basis of control.
They have more hierarchical levels. Horizontal organization is one in which both management levels and departmental boundaries are reduced greatly. Decentralized sales organization is one in which each division within the organization has its own sales force to sell the products of that division alone.
Sales organizations can be classified into four basic types:
Type # 1. Line Organizations:
Line organizations are the oldest and simplest form of sales organization structure. Generally these kinds of structures are observed in smaller sales organizations who have small number of sales executives. The companies have been found to cover limited geographical areas or the sales executives are found to sell a narrow product line.
The orders as such pass from top down. It is the top executives who exercise line authority and each lower level executive is supposed to report to one top boss. All managers have line authority to direct and control their subordinates.
The line sales organization structures are extensively used in companies where all sales personnel report directly to the sales manager. In such companies, the top boss is occupied with the responsibility of active supervision and has very little time as such to work on plans in tandem with the other top executives in the company.
The basic simplicity of the structure is the main reason for being used by many companies. Since over here, each executive reports directly to one boss, the problems with discipline and control are reduced greatly. The lines of authority moreover are clear and logical and it becomes easy to make any required changes in sales policies. Also in case of these structures the administrative expenses are low.
Some of the disadvantages however with line organizations is that there is no support to line managers from subordinates who have specialized knowledge and they are left with little time for planning or analysis. There is much that depends on the departmental head and it is the top boss who is required to be well versed with all aspects of sales management for smooth operations.
The rigidity of the line structure requires the sales manager to pay lot of attention to the direction of the sales operations. For large organizations thus, line structure is absolutely not feasible as because there are very few managers who actually have the capacity to run large organizations single handedly. Another problem with line structures is that it is difficult to find replacements once a manager leaves the ship.
2. Line and Staff Sales Organizations:
These kind of structures are generally observed in large and medium sized companies that employ large number of people as sales executives and they are found to sell diversified product lines across wide geographical areas. Specialist staff managers are available for sales managers. It is the staff manager who assists as well as advises the line managers.
The difference between line organizations and line and staff organizations is that this kind of structure provides the top level executive with a group of specialists who are experts in various areas of sales and marketing like dealer and distribution relations, sales analysis, sales planning, sales promotion etc.
It is these experts who help the top boss to concentrate on various planning and policy related matters and not just focus on daily discipline and control. The staff sales executives do not however have the authority to issue orders or directives. It is only after the approval of top executive that necessary recommendations made by the staff executives are executed through line organization.
Some of the advantages related to line and staff organizations are better marketing decisions and superior sales performance. Specialization is another advantage of these organizations.
A pool of experts are found to provide advice and assistance in various specialized fields and it is the planning activities that are sub divided and apportioned to staff members and the decisions thus taken are more sound compared to line organizations. It is the top sales executive who can concentrate on control and coordination of subordinates.
High cost and coordination, slower decision making and conflicts are some of the disadvantages of line and staff organizations. Work of the staff specialists need to be
coordinated and this gets costly.
There are certain other administrative expenses that may increase unless the number of staff executives are kept in tune with the needs of the department. It is also to be kept in mind that close control over staff line relations is essential.
If staff executives issue instructions directly to line executives it gets difficult for some people to evade unwanted responsibilities. In these organization structures, the time between problem recognition and corrective action tends to widen. In some cases, problems in maintaining contact with individual sales people are multiplied.
3. Functional Sales Organizations:
These organizations are based on the principle that each individual in an organization should have as few responsibilities as possible. The principle of specialization is utilized in these cases to the fullest extent. Assignments of duty and delegation of authority are made according to function. Each functional specialist has line responsibility over sales people. These structures are used by large companies with a number of products or market segments.
Irrespective of where a particular function appears in the organization, it is in the jurisdiction of the same executive. In these structures, sales people receive instructions from several executives but that is on different aspects of their job.
The provision for coordinating the functional executives is made at the top of organization hierarchy. Unlike line and staff organizations, in functional organizations all specialists have some kind of line authority. As the exhibit shows, a sales people over here receives directions from a number of members who are above him in the hierarchy of the organization.
One of the advantages of these organization structures is improved performance. Over here qualified specialists guide the sales force and these organizations are simple in terms of administration. Specialized activities are assigned to experts whose guidance are found to enhance the effectiveness of the sales force.
The disadvantage however is that since a salesperson is receiving orders from several entities, it can create confusion and conflicts. Also the sheer size of the sales team in many large companies make highly centralized sales operations of functional organizations unfeasible. Many large firms need more administrative levels when the marketing area is extensive and product line is wide.
4. Horizontal Organizations:
Horizontal organizations are found to remove management levels and departmental boundaries.
It is generally used by firms who have partnership relationships with customers. Some of the major advantages of horizontal organizations are reduction in supervision, cutting on unnecessary tasks and costs and enhancing the efficiency to customer queries and complaints.
Sales Organisation – 13 Important Basis on which Sales Organizations are Designed
Let us understand the basis on which sales organizations are designed:
1. Mission and Objectives of the Company:
It is widely understood fact that every organization across the globe has certain specific mission and objectives and the entire organization is attuned to work for the achievement of the objectives. Apart from hiring the people will skill sets attuned to the mission of the company, the very organization needs to be designed in such a way that it facilitates the mission plan and objectives of the sales organization.
2. Target Market Segments:
Every sales organization exists because of its customers or the target market. In this era of need based selling, the structures of the organization need to be so designed that they cater to requirements of the target market. It should be kept in mind that the sales organization structure should facilitate the sales organization to serve its target market in a better way.
3. Core Competence:
Like any organization type, each and very sales organization has certain core competencies. These are nothing but the specific strengths of the sales organizations on which the organization has to build up on. In this context, it has to be noted that the structures of the sales organization should be such that it reinforces the core competencies of the sales organization so as to enhance the profitability of the company.
4. Organizational Relationships:
The structure of the sales organization should be such that organizational hierarchies and the relationships (superior/subordinate) are clearly defined and understood as that serves as the reference point in the making of successful and effective sales organizations.
5. Flexibility:
Customers today are fast evolving and so are their needs and hence the structure of the sales organization should be such that they are able to modify with the evolving needs of the customers. Rigid organizational structures will deter sales organizations in progressing and staying in tune with the times.
6. Organizational Culture:
It needs to be understood that the structures of sales organizations should be in sync with the inherent culture of the sales organization. This will ensure that work within the organization happens smoothly and there is suitable coordination within the organization.
7. Size and Type of Sales Force:
The skill sets and attitude of the sales force is also another factor on which structures of sales organization are created. It can so happen that an organization has people with lesser amount of experience and these calls for a complex structure with a number of hierarchies. It can also so happen that the sales force is widely experienced and have the capacity to deal with a lot of things on their own. In such a case, they do not require to have complex organization structure.
8. Terms of Employment:
It is often the terms of employment that define the organization structure of a sales organization. For a company like Amway that works mostly with the personnel on commission basis, the structure will be radically different from a sales organization like that of a FMCG company where most sales executives are in the full time employment with the company.
9. Staffing Activity:
The skill sets of people hired at various levels along with the number of people existing at each level of the hierarchy will dictate the organization structure.
10. Compensation System:
Certain companies like insurance companies and other MLM businesses have majorly commission based compensations system while the FMCG companies and the banks have salaried personnel mainly. The difference in compensation system across sales organizations requires setting up of different kinds of organization structures.
11. Market Orientation:
Every sales organization comes to the market and does business with a certain kind of business and customer orientation. If customer service is the orientation, a particular kind of organization structure will be called for. Again if it is about pure product orientation, another sort of structure will be required.
12. Technology:
Technology has been found to bring customers closer to companies and it is also bringing organizations and their branch offices closer that has triggered the requirement for more evolved and sophisticated organization structures that have eliminated the requirement of creating number of hierarchies and have become relatively flatter in terms of structure.
13. Company Size:
This issue has already been discussed. There ought to be difference in structure based on the size of the organizations.
Sales Organisation – Planning at Sales Organizations
Any sales management planning involves setting objectives and determining ways to achieve them. It involves anticipating changes in the sales environment and making preparations so as to turn the developments into opportunities for the organization. Sales planning is very crucial while introducing new products. Strategic sales plans outline how resources are to be utilized to tap the marketing opportunities.
Sales planning happen at various levels of the selling organization. Each level of the corporate hierarchy is engaged in developing plans of a specific nature. The corporate mission of an organization along with defining SBUs and SBU objectives is developed by the top management.
Business strategies for each and every SBU are framed by the management at SBU level. While marketing strategies are developed by the marketing management team, sales strategies are framed by the sales team.
Sales plans can be strategic or tactical depending upon the time frame for which they are being developed. Strategic sales plans are developed for the long term while tactical plans are developed for the short term. Sales territory development can be an example of strategic sales planning while planning the recruitment of temporary manpower for sales campaign will be a case of tactical sales plan.
Sales Organisation – Purposes of Setting up Sales Organization
In the ideally organized sales department, duplication of effort would be eliminated, friction would be minimized and cooperation maximized. When sufficient attention is given to sales organization, personal selling efforts increase productivity.
The basic purposes of sales organization as laid down by Cundfiff and Stiff are as follows:
1. To Permit the Development of Specialists:
As a business expands, it becomes difficult to fix responsibility for performance of all activities on certain executives alone. At this stage re-organization of sales department is necessary to facilitate assignment of responsibility and delegation of authority by reshaping the structure of the sales organization. This includes fixing responsibility for specific tasks with specific individuals or groups. This is conducive to the improvement of specialists.
2. To Ensure that All Necessary Activities are Performed:
When the sales organization grows and specialization increases, it becomes necessary to perform all activities according to schedule. As a company grows, its marketing channels lengthen marketing area expands geographically and the executives begin to lose their informal contacts with customers. If such contacts are essential, the responsibility for maintaining them should be assigned to any person specialized in customer relations.
3. To Achieve Coordination:
Good sales organization achieves coordination smoothly. Total accomplishments of tasks are greater advantage when the sum of a combination of effort exceeds the efforts of individual effort. By getting people to pull together as a team rather than as an assortment of individuals; organization accomplishes more collectively than individual members could achieve. Motivating individuals to work together for achieving common objectives is important for coordination.
4. To Define Authorities:
Sales managers should know whether their authority is line, staff or operation. Line authority carries the power to require execution of orders by those lower in the organizational hierarchy. Staff authority is the power to suggest to those holding line authorities the method of implementation of an order. Functional or operational authority enables specialists in particular areas, to enforce their directives within a specified and limited field.
All executives should understand the nature of authority with respect to each aspect of the operation, otherwise friction develops. A smoothly operating sales organization has built in ways of achieving harmony, through free flowing communication system.
5. To Economize on Executive Time:
As the operations of sales department increases in complexity and number, additional subordinates are appointed. This facilitates the higher ranking executives to delegate more authority. It also allows for more effective use of specialization so that higher executives are relieved from devoting more time to operative functions. They can devote more time in planning and less time to operative functions.
6. Other Objectives:
They include the following:
(i) To organize activities related with recruitment, selection, placement of salesman, and to implement policies relating to their promotions, wages and salaries, welfare, etc.
(ii) To accumulate resources to meet with the objectives of sales department.
(iii) To motivate the sales persons and to boost their morale.
(iv) To impart training to sales persons to up-to-date their knowledge.
(v) To maintain free flow of communication system between sales employees.
(vi) To create peaceful and cordial atmosphere of work within the sales department.
(vii) To organize sales forecasting and allotment of sales quotas to every salesman.
(viii) To limit the sales expenses and costs at a minimum.
Sales Organisation – 5 Main Steps in Setting up Sales Organization
There are five main steps in setting up of sales organization.
These steps include the following:
1. Defining the objectives
2. Determination of activities
3. Grouping activities into job positions.
4. Assignment of personnel to positions.
5. Providing for coordination and control.
Step # 1. Defining Objectives:
The first step in setting up a sales organization is to define objectives. The top management defines the long-term objectives for the company and from these, the long-term objectives for the sales department are derived. The top management sets the objectives keeping in view of long-run survival of business and to achieve industry leadership, through the use of outstanding technology, diversification of product lines, providing excellent service to customers, and so on.
From such composite objectives, sales management determines its objectives such as personal selling objectives (qualitatively and quantitatively) to realize long-term growth in sales and profits.
Step # 2. Determination of Activities:
A sound organizational design requires that all activities are being organized in a systematic manner. Along with determining necessary activities, estimation of volume of performance is also done so as to ascertain the requirement of executive positions. Executive positions determine their relationships to other positions, their duties and responsibilities, etc. Determination of necessary activities and their volume of performance are made by analyzing the qualitative and quantitative objectives of the sales department.
Step # 3. Grouping Activities into Job Positions:
Next step in the process of organizational set up is to allocate different positions identified according to activities. It should be kept in mind that activities are aimed at achieving the set objectives for the sales organization. Activities should be suitably classified and grouped so that closely related tasks are assigned to the specific position.
Each position should contain not only a sufficient number of tasks, but sufficient variations to provide for challenge, involvement and interest. In a highly competitive field, product development and pricing etc. should be arranged to positions high up in the organizational structure. Activities of lesser importance should be assigned to lower level jobs.
When a large number of positions is being set-up, groups or related activities are brought together to form departmental sub-divisions. In such cases, a number of middle-level positions would have to be coordinated by top sales executives.
Step # 4. Assignment of Personal to Positions:
The next step in this process is to assign personnel to positions. This requires recruitment of special individuals to fill the positions or to see the personnel fit into the capabilities among the organization. Assignment of personal to positions should be done carefully keeping in view of unique talents and abilities of the person concerned.
Step # 5. Providing for Coordination and Control:
Sales executives with line authority require means to control their subordinates and to coordinate their efforts. They should not be so overburdened with detailed and undelegated responsibilities that they have insufficient time for coordination. Nor should they have too many subordinates reporting directly to them. This weakness the quality and control, and prevents the discharge of other duties.
Coordination and control can be achieved through both informal and formal means. Efficient managers control and coordinate the efforts of their subordinates largely on an informal basis. They tend to make minimal us of formal instruments of control and coordination. However, all sales executives can improve their effectiveness through formal instruments of control.
The important formal instrument of organizational control is the written job description. This instrument sets forth for each job, reporting relationship, job objectives, duties and responsibilities and performance measurements.
Good job descriptions provide clear picture of the roles job holders have to play in the sales organization. Written job descriptions find use in employee selection process. An organizational chart, another, control instruments, shows formal relations among different positions. A chart reduces confusion about the role of an individual.
An instrument of organizational control used increasingly is the organizational manual. It is an extension of the organizational chart. The organizational manual contains charts for both the company and the department, write-ups of job descriptions and specification and summarizes of major company and departmental objectives and policies. It brings together a great deal of information and helps its users to learn and understand the nature of their responsibilities, authorities, and relations with others.
Sales Organisation – Factors Influencing Sales Organisation
While designing a sales organization, there is a need for coordination among numerous interacting and interdependent factors, namely products and services-related, organization related, marketing mix-related, and external.
1. Product and Services-Related Factors:
The nature of the product or service determines the structure of the sales organization. In the case of fast moving consumer goods (FMCG), such as soaps, oils, and toothpaste, the size of the organization is large and flat at the lower level as it has to cater to a large customer base and frequency demanding product markets.
The quantity of the products to be marketed per period and the quantities involved in each sale (assortment size) will decide the structure of the organization. Organizations will be complex and large in size when both the product mix and the quantity of sale targeted per category are large. Similarly, in complex service offers, organizations are found to be complex and are supported by a large number of sales staff.
2. Organization-Related Factors:
If the size of the enterprise is small, there will be a limited number of products and customers, and in such a case, a simple structure of the sales organization may be sufficient to serve the market. Organizations having highly specialized products and serving niche markets have a smaller and simpler sales organization.
On the other hand, if the size of an organization is large with a corresponding production volume and sales executed through multiple channels in varied markets, the sales organization will also be large and complex. If the managers are competent and able to initiate new sales plans and policies so as to adjust with the developments taking place in the market, the structure of the sales organization will again be large and complex.
An organization with limited financial resources prefers to engage intermediaries for the distribution of its products and keeps the sales organization as simple as possible. On the other hand, if the financial resources of an organization are sound, such an organization will prefer to sell the product directly to the customers and establish direct contact with them which also will lead to a large and complex sales organization.
If the management follows a centralized policy where the majority of the sales-related decisions and functions are carried out at the corporate level or a central office, then the organization prefers a simple design.
On the other hand, when the management follows a decentralized policy, functions such as advertising, trade promotion, credit, and others sales functions are transferred to the regional or divisional office. In this case also, the structure of the sales organization will be large and complex.
3. Marketing Mix-Related Factors:
The size of the market also determines the structure and size of the organization. When the organization serves a global or transnational market, or a national market, such as India, the organization’s size will necessarily be large. Organizations follow different types of distribution channels as a part of their market coverage strategy.
Companies with a selective distribution strategy prefer to have their own outlets and decide in favour of simple sales organizations, whereas organizations with an intensive distribution strategy through retail channels have complex and large sales organizations, which are best suited for servicing wider and deeper pockets.
The price policy followed by the organization is an important factor influencing the size and structure of the sales organization. In case of low-priced goods, where the potential demand as well as the number of customers is large, the size of the organization will be large.
Contrary to this, when the price of the product is high as in the case of cars, television sets, and refrigerators, and the size of the market is limited to urban India only, the sales organization will be small. Organizations with an aggressive sales policy follow a large and complicated sales structure to cater to different segments of customers at the same time. If the organization sells the entire production to a sole selling agent, the sales organization will be small in size.
4. External Factors:
There are external factors influencing the size and structure of the organization. The customs and traditions used in the past to cater to the market also determine the size and structure of the organization. If an organization follows an intermediary network, it is difficult to change the structure and size in future.
The experiment to build up an alternative channel by IBM and Compaq to beat Dell Computers was not successful as there was a high level of channel conflict. The level of competition in the market influences the structure of the sales organization. In the case of intense competition, organizations decide to expand the size of the organization to enter into new markets or to serve the existing customers better.
Sales Organisation – Advantages
1. Territorial Sales Force Structure:
i. Local problems of customers can be- handled speedily and adequately.
ii. Salesperson can adapt with local conditions such as – climate, culture, customs, market sentiments, competition, behaviour of the customer, etc., to act comfortably.
iii. Intensive market coverage at low cost is possible.
iv. Sales force can be managed and controlled easily.
2. Product Sales Force Structure:
i. Highly effective when the company deals sales force with technically complex products.
ii. Each product gets separate attention and as a result customer queries on product features and benefits can easily be sorted out.
iii. Management can control the sales operations product wise; therefore, chance of overlooking the performance of a product is negligible.
3. Customer Sales Force Structure:
i. Customer needs can be satisfied more sales force effectively.
ii. Salespeople can develop better understanding of the needs of the customers.
iii. The company can develop better customer relationships that help to pay off in the long run.
iv. The company becomes more market driven and customer-oriented.
4. Functional Sales Force Structure:
i. Organizing the sales along functional specialization is simple to implement and administer.
ii. Efficient operations of each function are possible.
iii. Division of labour encourages salespeople to focus more on their functions and precision, which speeds up the selling of technical products.
5. Complex Sales Force Structure:
i. Specialization combining territories, products, customer, and functions is structure possible thus leading to more effective results.
ii. Each specialization is given due weightage by the management.
Sales Organisation – Disadvantages
1. Territorial Sales Force Structure:
i. Specialization is underemphasized.
ii. Coordination of multiple geographical operations might be a problem.
iii. As salespeople deal with all types of products in a territory, they can ignore difficult selling items.
2. Product Sales Force Structure:
i. High cost involvement because of the training and development of salespeople.
ii. Sometimes, two salespeople may pursue a highly potential customer for identical product separately at different times due to lack of coordination. So, duplication of calls on customers can increase the selling cost.
iii. Territorial duplication might be a problem because one salesperson may transgress to other salesperson’s area particularly when lack of coordination and unclear demarcation of selling areas spoil the field sales efforts.
3. Customer Sales Force Structure:
i. Problems of coordination among multi-tier channels such as – company sales force, distributors, etc., may pose customer duplication.
ii. Unhealthy competition amongst firms may procreate in new customer creation and existing customer retention. Customers can be lured to switch flank from one company to the other.
4. Functional Sales Force Structure:
i. Geographical duplication is possible.
ii. Customer duplication might be a problem.
iii. Lack of coordination amongst functions may jeopardize selling efforts.
5. Complex Sales Force Structure:
i. High cost involvement.
ii. Management may face organizational problems.
iii. Confusion amongst salespeople may occur and they may be at a fix to obey the guidelines and show accountability.
iv. Territorial and customer duplications might be major hurdles.
Sales Organisation – Schemes of Specialization within Sales Organizations
As sales operations expand, the burden of line authority and responsibility becomes incredible for the top level manager as there is an increasing number of people to supervise. A general line assistant might serve as a stop gap arrangement in this case but then as the burden of administrative work grows, it becomes necessary to provide additional assistants.
Tasks of line administration are found to be sub divided on various basis viz. geographical area, products and customers or market channels. Specialization within sales organization is needed to increase the effectiveness of sales force.
It is done by expanding the basic sales organization. The criteria for selection, of specialization depends on the nature of product, sales force abilities, demands of selling job and customer and market facts.
1. Geographic Specialization:
Salespeople assigned to geographic areas are responsible for selling activities to all customers within assigned areas. Branch sales managers adjust marketing plan to local needs. Large firms with highly expanded selling operations is likely to subdivide line authority geographically.
This classification is more applicable when large number of customers vary by geographic region and the selling problems are encountered in different areas. There is another important reason for dividing line authority geographically when customers are added in a wider geography and the size of the sales task increases enormously.
The geographic classification actually cuts sales tasks into certain manageable proportions. Geographic divisions are first classified into regions and then these are broken down into districts or branches.
Shortening the communication lines makes possible closer supervision of salespeople which further helps in improving customer service. Some of the advantages of this classification include better market coverage and customer service, more control over sales force and quick response to local conditions and competition.
Disadvantages of geographic classification include limited specialization of marketing and sales tasks. The system further calls for multiple offices and so administrative expenses increase. Excellent coordination is required in this system else conflicts may rise due to different policies in different regions.
2. Product Specialization:
When companies have many products or brands, they go for product specialization. There are basically two types of product specialization viz. sales organization with product specialized sale force and sales organizations with product managers as staff specialists.
In the former form of product specialization, salespeople in each product group sell only the products in that group. Each product gets specialized attention of the sales force while the disadvantage with this classification is that more sales people contact the same customer resulting in customer dissatisfaction and higher costs.
In the later form of product specialization, each product manager plans and implements marketing plan for a product group. The advantage with this system is that it corrects the problem of duplicate calls on a customer by sales people and the disadvantage being lack of product specialization by sales people.
When authority is divided on the basis of product lines, more than one sales force may be required. In some companies, the product lines are too wide to be distributed economically by a single sales force. There are some sales executives who deal in only non-technical products and then there are others who sell both technical and non-technical products.
Hence there will be some sales people who will require specialized training and some who will not require the same. In such cases, the economies of a single work force are reduced because different products are marketed to different types of customers. Unless there are strong reasons for retaining separate sales managers and sales forces line authority should be divided on some basis other than products.
The decision to use product line classification for line authority should be considered by comparing product specialization vis-a-vis additional expenses. If the benefits of product specialization do not outweigh costs, it is always wiser to organize the sales force on some other basis.
3. Market Specialization:
This is desirable when customers are classified by type, user industry or channel. Sales people carry out all activities for all products only for specific customer groups. The line authority is often found to be sub divided based on type of customer being served. This is suitable when nearly identical products are marketed to several types of customers and the problems of selling to each customer type is different.
When similar products are sold to a number of industries, they often find different applications in each industry. In each industry, the products are used for different purposes as customers not only have different needs but also they are influenced by different motives.
The advantage of this form of classification is that it meets the needs of specific customer groups and helps in implementing customer centric philosophy in the company while the disadvantages include geographic duplication and high costs.
4. Hybrid Specialization:
There can be another type of classification which is a combination of various types of specialization mention. Hybrid or combination sales organization classification helps to reduce the disadvantages inherent in each of the earlier systems and reinforces the specific advantages. Highlights an organization that is a combination of geographic and customer/market specialization.