Sales organisation sales force management(2)

SDM-Ch.5 1

Chapter 5

Organising and Staffing the Salesforce

SDM-Ch.5 2

In an organisationDifference between marketing and sales departmentsShould sales manager be reporting to marketing

manager?Should sales be an independent function?Relations with Advertising, HR, Finance, Production,

Accounts, Legal deptts.Should sales be an independent function?

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Sales organisation depends on:Own sales effort or thru agents?Direct selling or through intermediaries: wholesale,

C&F agent, distributor, retailer?Telesales or salesmenPayment terms, InventoriesTargetsIntegration with management goals

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Organising salesforceOrder takers, order creators, or order getters,

missionary?Geographic or product/brand?Salesmen compensation, motivationAuthority, co-ordination, conflict avoidanceHow much centralisation?Line organisation, line-and-staff, and functional

organisationBrand organisation

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Learning Objectives

To understand the concepts of the sales organisation, and the basic types of sales organisations

To know specialization within the sales organisation, and alternative organizational approaches for major accounts

To determine the size of the salesforce by using various methods

To understand the major stages of salesforce staffing process, consisting of planning, recruiting, selecting, hiring, socialisation and assimilation

To realise the importance of the various steps included in planning, recruiting, and selection stages

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Concepts of Sales Organisation

A sales organisation assists the sales manager to carry out needed tasks efficiently and effectively to achieve results

The basic concepts of the sales organisation are:• Degree of centralisation• Degree of specialisation• Line or staff positions• Market orientation• Effective co-ordination

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Basic Types of Sales Organisations

Sales organisations are generally classified into four basic types:

• Line Organisation• Line and staff organisation• Functional organisation• Horizontal organisation

We shall discuss main characteristics, advantages, and disadvantages of each type of sales organisation

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Line Organisation

Characteristics: All managers have line authority to direct and control subordinates. Used in small firms / departmentsAdvantages: Simple organisation, clear authority, quick decisions, low costDisadvantages: No support to line managers from subordinates who have specialised knowledge / skills. Less time for planning / analysis

HeadMarketing

Sales Manager

Area Sales Manager1

Area Sales Manager3

Area Sales Manager2

Area Sales Manager4

salespeople salespeople salespeople salespeople

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Line and Staff Organisation

Characteristics: Specialist staff managers are available for senior marketing / sales managers. Staff managers’ role is to assist / advise line managers. Used in medium and large size organisations

Advantages: Better marketing decisions, superior sales performance

Disadvantages: High cost and coordination, slower decision making, conflict may arise if staff managers’ role is not clear

Head-Marketing

Marketing ResearchManager

Sales ManagerPromotional

ManagerCustomer Service

Manager

Area Sales Manager-1



Salespeople Salespeople Salespeople

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Functional Organisation

Characteristics: Each functional specialist has line responsibility over salespeople. Used by a large firm with many products / market segments, minimising line authority to functional managers

Advantages: Qualified specialists guide salesforce, simple to administer

Disadvantage: confusion due to more managers giving orders to salesforce

Head-Marketing

Marketing Research Manager

Promotional Manager

Customer ServiceManagerSales Manager

Area Sales Manager #4

Salespeople

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Horizontal Organisation

Characteristics: Removes management levels & departmental boundaries. Except planning team, all others are members of cross-functional teams. Used by firms having partnering relationships with customers.Advantages: Reduction in supervision, unnecessary tasks, & cost; Improved efficiency and customer responses.

Research & Design Team:•Customer Research•Product / Service Design

Planning Team:•Strategic Planning•Accounts, Finance•HR, Administration•Chief Operation Officer

Operations Team:•Production / Operations•Quality Assurance•Systems Engineering

Customer Support Team:•Information•Service•Training

Customer Satisfaction Team:•Sales & Marketing•Pricing, Promotion•Channels, Logistics

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Specialisation within Sales Organisation

Needed to increase effectiveness of salesforceDone by expanding basic sales organisationBasis of specialisation

• Geography• Type of product• Market • Combination of above

Criteria for selection – (1) nature of product, (2) salesforce abilities, (3) demands of selling job, (4) customer and market facts

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Geographic Specialisation

Characteristics: salespeople, assigned geographic areas, are responsible for all selling activities to all customers within assigned areas. Branch sales managers adjust marketing plan to local needsAdvantages: Better market coverage and customer service, more control over salesforce, quick response to local conditions & competitionDisadvantages: Limited specialisation of marketing tasks. Hence, it is combined with product / market sales organisation

Head-Marketing


General SalesManager Promotion

Manager

Customer ServiceManager

Branch SalesManager-1




Salespeople Salespeople Salespeople Salespeople

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Product Specialisation

Used when the company has many products and / or brandsTwo types of product specialisation

(x). Sales organisation with product specialised salesforce

(y). Sales organisation with product managers as staff specialists

Head-Marketing


GeneralSales Manager

Sales TrainingManager

PromotionManager

Area Sales Managers –Product Group ‘A’

Area Sales Managers –Product Group ‘B’

Salespeople – Product Gr. ‘A’

Salespeople – Product Gr. ‘B’

Fig. ‘x’ Sales Organisation with product specialised salesforce

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Fig. ‘y’ Sales Organisation with Product Managers as Staff Specialists

In fig. ‘x’: Characteristics: Salespeople in each product group sell only the products in that groupAdvantage: Each product gets specialised attention from the salesforceDisadvantage: Sometimes, more salespeople contact the same customer, resulting in customer dissatisfaction and higher costIn fig. ‘y’: Characteristics: Each product manager plans and implements marketing plan, for a product groupAdvantage: Corrects the problem of duplication calls on a customer by salespeopleDisadvantage: Lack of product specialisation by salespeople

Head-Marketing


PromotionManager

Product ManagerProduct Gr. ‘B’

Product ManagerProduct Gr. ‘A’

GeneralSales Manager

Area Sales Managers

Salespeople

Product Specialisation (Continued)

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Market Specialisation

Characteristics: Desirable when customers are classified by type, user industry, or channel. Salespeople carry out all activities for all products only for specific customer groups

Advantages: Meets needs of specific customer groups, implements customer-centred philosophy of the company

Disadvantages: Geographic duplication, high cost

General SalesManager

Sales Manager-International-

Markets

Sales Manager-Commercial

Sales Manager-Consumer Markets

Sales Manager-Government

Area Sales MgrsInternational

Sales Executives

Area Sales Manager-Commercial

Salespeople

Area Sales Manager-Government

Salespeople

Area Sales Mgrs-Consumer Markets

Salespeople

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Combination Sales Organisation

Characteristics: Many firms use some combination of specialisation organisations, called hybrid or combination sales organisation, with a view to minimise disadvantages and maximise advantages of specialisation organisations

Figure above shows combination of geographic and market specialisations

Director – Sales & Marketing

General ManagerSales - North

General ManagerSales - East

General ManagerSales - South

General ManagerSales - West

Regional SalesMgr. – Govt.

Regional SalesMgr. - Dealers

Regional SalesMgr. - Commercial

Salespeople Salespeople Salespeople

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Alternatives for Major Accounts

Major accounts / customers are called by various names like key accounts, corporate accounts, house accounts

They make up a large share of a firm’s sales volume and profits

Firms use the following alternative approaches to deal effectively with them• Create a position of major / national account

manager• Use existing territory sales managers• Create a separate division• Create a separate salesforce

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Size of the Salesforce

How many salespeople needed (or salesforce size) to achieve a firm’s sales and profit objectives is a key decision

Methods available to decide optimum salesforce size are as follows:• Workload• Sales potential (or breakdown)• Incremental

We shall discuss these methods briefly:

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Workload Method

Assumption: All salespeople have equal workload Steps involved to salesforce size are:

1) Classify customers as per their sales potential2) Decide time per sales call and call frequencies for each

class of customers3) Calculate total market workload = (1) x (2) in hours4) Decide total work time available per salesperson5) Divide total work time available by different activities per

salesperson in hours6) Calculate total number of salespeople needed

)5(

)3(

nsalespersoperavailabletimesellingtotal

workloadmarkettotal=

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Workload Method (Continued)Advantages: simple method, conceptually sound, used for all

types of selling situationsDisadvantages: Neglects sales productivity & salesforce turnover

Sales Potential / Breakdown MethodThe formula used is: , where

N=Number of salespeople needed, or salesforce sizeS=Annual sales forecast for the company in value (Rs. Million)P=Estimated productivity of the average salesperson in sales (Rs. Million)T=Estimated percentage of annual salesforce turnover

Advantages: Simple and straight forwardDisadvantages: Conceptually weak; lead time needed for a new

salesperson to reach average productivity

)1( TP

SN +=

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Incremental Method

It is based on marginal analysis theory of economicsBasic concept: Net profits will increase when

additional salespeople are added, if the incremental sales revenues exceed the incremental costs

Merit: Conceptually accurate, as it quantifies relationships between salesforce size, sales, costs, profits

Demerit: Can not be used if historical data on sales and costs are not available

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Salesforce StaffingIt is one of the most challenging and important

responsibilities / activities of sales managementSalesforce Staffing Process includes following stages:

• Planning• Recruiting• Selecting• Hiring• Socialisation

We shall briefly discuss each of the above stages

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Planning StageIt consists of three steps:

• Establish responsibility for staffing process• Decide number of salespeople needed• Outline the type of salespeople needed

Establish responsibility for staffing process• Company management decides responsibilities for

various stages / activities of staffing process• Generally in a medium / large size company, middle

and senior levels H.R. and sales managers are responsible

• Proper coordination needed between sales, marketing, and HR executives

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Planning Stage (Continued)Decide the number of salespeople needed

Steps followed by each territory sales manager to plan requirement of sales people:

1) Decide optimum salesforce size (using methods discussed earlier)

2) Add number of promotions, retirements, transfers out, terminations, resignations expected from existing salespeople

3) Subtract expected transfers into the territory and existing salesforce

4) Make a total of new salespersons needed Territory sales managers submit their requirements to

national / general sales manager, who calculates the total number of new salespersons to be hired

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Outline Type of Salespeople Needed

The steps involved in the process are:• Conducting a job analysis• Preparing a job description• Developing job qualifications / specifications

Conducting a Job Analysis• It is done by a person from sales / H. R. department, or

a consultant. It consists of two tasks:(1) Analyse environment in which the salesperson would work – E.G. nature of customers, competitors, products.(2) Determine duties and responsibilities of the salesperson. Obtain information from sales managers, customers, etc.

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Preparing a Job Description

It is a written document developed from the job analysis

The detailed job description is a useful tool for recruiting, selecting, training, compensating, and evaluating salespeople

Some of the points it generally covers are:• Job title, reporting relationship, types of products /

services sold, types of customers, duties and responsibilities, location and geographic area to be covered

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Developing Job Qualifications / Specifications

These are generally based on job descriptionJob specifications / qualifications include education, sales

experience, skills, and personality traitsMany studies done, but no generally accepted job

qualifications for selecting salespeople, due to many types of sales jobs

Some methods used for developing job specifications are as under:• Study job description. Useful for a new company• Analyse personal histories of salespersons• Ask customers

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Recruiting Salesforce

Recruiting include activities to get individuals who will apply for the job

The general purpose of recruitment is to get enough qualified candidates, to enable company select the right persons

H.R. and sales managers must update information on government employment regulations

Recruiting stage / process includes following activities:• Finding the sources of sales recruits• Evaluating and selecting recruiting sources• Contacting candidates through the selected source

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Finding the Sources of Sales Recruits

For identifying prospective candidates, firms use internal and external sources. They include:

Internal Sources External Sources

• Employee referral programmes• Current employees• Promotions and transfers

• Advertisements in newspapers and journals / magazines• The Internet (job sites)• Educational institutions• Employment agencies• Job fairs• Other companies

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Evaluating and selecting Recruiting SourcesRecruiting sources are evaluated based on the database

built over number of yearsEvaluating factors are:

• Performance rating of salespeople, after 2 years working• Percentage of salespeople retained, after 2 years

working• Total cost of recruiting• Selecting most effective source of recruiting at least

cost• For a new company, selection depends on cost

Contacting candidates through the selected source is done by H. R. department

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Selecting Salesforce

Selection process consists of seven major selection steps / tools

Companies differ in using selection tools, depending on expenditure budget and time available

Major selection tools / steps are:• Screening resumes• Application blank• Initial interview• Intensive interview• Testing• Reference check• Physical examination

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Screening ResumesIt is done when the company receives many resumesThis step / tool not required, if somebody else like

employment agency does initial screeningInitial screening of resumes are done by comparing with

job specifications

Application BlankWidely used, it is a methodical way of collecting relevant

information from the applicantAdvantages of using application blank (also called “formal

application form”) are:(1) Easy comparison of many applicants(2) Useful for asking question during interview sessions

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InterviewsWidely used selection toolA good predictor of the candidate’s performanceInitial interviews are used for screening candidatesIntensive interviews are conducted to get indepth view of

candidatesInterview structure / type of interviews:

• Structured / patterned / guided interviews• Unstructured / non-directed / informal interviews• Semi-structured interviews• Behaviour and performance based interviews• Stress interviews

Purpose is to decide a candidate’s fitness for a job

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TestingMany firms use tests as a selection tool – EG P&G, IBMPurpose of testing: To find whether applicants have traits /

characteristics that lead to success in sales jobType of selection tests:

• Aptitude tests measure ability for selling and learning • Intelligence tests find out mental intelligence or intelligence

quotient (IQ)• Interest tests find out level of interest in a sales career• Knowledge tests measure knowledge of products, markets,

etc• Personality tests find out attitude or traits like empathy, self-

confidenceTests must have reliability and validityTests should be one of the selection tools and not the only tool

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Reference ChecksThey are important due to possibilities of resume frauds and

false personal informationThey are done by letters / e-mails, telephones, or personal visitsInstead of candidate’s references, previous employers /

customers to be included for reference checks

Physical ExaminationObjective is to find a physical problem that may prevent job

performance of an applicantMost companies want their prospective employees to undergo

physical examinationIncreasing number of firms ask applicant to complete the health

information form without seeing a medical doctor

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Hiring StageAfter completing selection process, a list of candidates to be

hired is madeIn hiring stage, two activities are performed:

(1) The company making the job offer(2) Persuading the applicant to accept it

Socialisation StageIt is the process through which new salespeople learn values,

norms, attitudes, and behaviour of people working in the firmSocialisation process starts before the new salesperson accepts

the job offer and continues until the person is assimilated into the company culture

Assimilation is the second stage of socialisation processCompanies have this process, in order to retain new salespeople

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Key Learnings

A sales organisation assists a sales manager to carry out needed tasks efficiently and effectively

Basic types of sales organisations are : (1) line, (2) line and staff, (3) functional, (4) horizontal

Specialisation within sales organisation, which are needed to increase effectiveness of salespeople, are: (a) geographic, (b) product, (c) market, (d) combination

Companies use alternate approaches to deal effectively with major accounts

Methods available for deciding optimum salesforce size are: workload, sales potential, and incremental

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Key Learnings (Continued)

Salesforce staffing process includes five stages: planning, recruiting, selecting, hiring, socialisation

Planning stage includes (1) establishing responsibilities, (2) deciding number of salespeople needed, (3) profiling the type of salespeople needed

Recruitment stage consists of (a) finding sources of sales recruit, (b) evaluating and selecting recruitment sources, (c) contacting candidates

Selection process consists of seven steps / tools: (1) screening resumes, (2) application blank, (3) initial interview, (4) intensive interview, (5) testing, (6) reference check, (7) physical examination

Hiring stage includes (a) making the job offer, (b) persuading applicant to accept it

Socialisation stage is required to retain new salespeople