Sales force management

30th July , 2013

Sales Organization:
An organization structure defines relationship among jobs , and amongst the people in a company. It gives a framework showing what tasks or activities are performed by the various employees in the sales organization. Few important terms : 1. Degree of centralization
Centralized structure vs Decentralized structures A centralized structure has authority and responsibility placed at higher levels of management. In decentralized structures the A&R for carrying out tasks are delegated to lower-level managers. Decentralized structure based on decision making at lower levels would enable faster customer service.

Overview

2. Degree of specialization
General approach vs Specialized approach Managers ( leading , training , research) and salespersons ( training , merchandising , selling ) are generalists carrying out all activities. Less effective as the markets , products become more complex. In specialized approach the individuals become experts by focusing on few tasks resulting in better performance of the organization. Specialization could be functional , product , market or geographic.

Sales Organization:
Few important terms : 3. Line and staff positions
Line managers have authority & responsibility to direct and control immediate subordinates. Staff managers have areas of specialization and expertise wherein they have staff responsibility i.e advisory & recommending role. Training manager , M.R manager would have no sales generating responsibility.

4.

Span of control
Refers to number of individuals who report to each manager.

Overview

Organization structures:
Sales organizations can be classified into 4 basic types :
1. 2. 3. 4. Line sales organization Line and staff sales organization Functional sales organization Horizontal organization

Head Marketing Sales Manager

Line Sales Organization

Simplest structure with all managers ( Top & middle) having line authority. Widely used in smaller firms Advantages Clear authority & responsibility ; Low cost ; quick decision making. Disadvantages Too dependent on top ; lack of functional support

ASM 1 Sales people

ASM 2 Sales people

ASM 3 Sales people

Organization structures:
Head Marketing
Mktg Services Manager ASM 1 Sales Manager Mkt Research Manager ASM 3 Promotional Manager

ASM 2

Sales people

Sales people

Sales People

Line and Staff Sales Organization

Group of experts ( functional specialists) are made available to the top sales mgr. Staff managers donot have the authority to issue directives to salespeople. Widely used in medium and large sized firms Advantages Better marketing decisions ; Freeing of top manager time. Disadvantages Higher cost ;Slower decision making ; Conflict of staff mgr goals.

Organization structures:
Head Marketing

Mktg Services Manager

Sales Manager

Mkt Research Manager

Promotional Manager

ASMs #4

Sales people

Functional Sales Organization

Each functional specialist has line authority of their function over salespeople. Staff managers donot have the authority to issue directives to salespeople. Used in large sized firms with many products and/or market segments. Advantages Better marketing decisions ; Disadvantages Salespeople pulled in many directions ; Conflict of staff mgr goals.

Organization structures: Horizontal orgn.

Research & Design Team
- Customer Research - Product / service design

Operations Team
- Production / Operations
- Quality assurance - Systems engineering

Planning Team
- Strategic planning - Accounts , finance - HR , Administration - Chief Operations Officer

Service Team - Service

- Training - Information

Sales Team

- Sales and Marketing

- Pricing , Promotion - Channels , logistics

Organization structures:
Horizontal Sales Organization
Cross functional teams are formed by drawing people from various functions like R&D , Operations , Customer support & Sales. These teams work with customer teams to solve the customers problems. This structure removes management levels ( hierarchy) & also departmental boundaries. The support functions like strategic planning , HR , and finance are looked after by a small team of senior executives. Advantages Customer centric; faster turn around time

Specialization within Sales Organization

Many medium and large sized companies expand one of the basic sales org structures in some specialized design , in order to increase the effectiveness of their sales force. Specialization could be basis :
(a) Geography (d) Functional and (b) Product (c) Market (e) Combination of these factors

Organization structures:
Head Marketing Mktg Services Manager RSM (N) ASMs #5 Sales people Sales Manager Mkt Research Manager RSM (S) ASMs #3 Sales people Promotional Manager

RSM (E) ASMs #3 Sales people

RSM (W) ASMs #4 Sales People

Geographic specialization

Commonly deployed by large organizations with national footprint . Typically , salespeople are assigned a geographic area and are responsible for all selling activities within the assigned areas. Advantages Better market coverage ; Quick response to local conditions and competition ; Disadvantages Limited specialization of marketing tasks.

Organization structures:
Head Marketing Mktg Services Manager RSM
(Prod Group A)

Sales Manager RSM

(Prod Group B)

ASMs#5
(Prod Group A Sales People (A)

ASMs#4
(Prod Group B

Sales People(B)

Product specialization (A)

Commonly deployed when product portfolio is large and the product inter-relation is weak ( Type of consumers / Nature of usage / category / Type of outlets ) RSMs & ASMs are line managers and have no staff assistance. Advantages Better product focus ; Disadvantages Increased selling cost ; Geographical & customer duplication.

Organization structures:
Head Marketing Mktg Services Manager Promotion al Manager Sales Manager RSMs #4 ASMs #16 Sales training Manager
Mktg Manager ( Prod Group A) Mktg Manager ( Prod Group B)

Sales people

Product specialization (B)

Focus of the organization is on the basic customer need. Advantages duplicate call problem addressed ; Marketing manager focuses on the brands thru involvement in planning , promotion , coordination , market visits Disadvantages Lack of product specialization of salespeople.

Organization structures:
National Sales Manager

Sales Mgr Comml

Sales Mgr Govt.

ASMs Comml.

ASMs Govt.

Sales people

Sales people

Market specialization
Basis market specialization or by channel of distribution. Salespeople carry out selling activities for all products but for specific customer groups each of which have different buying practices and preferences. Advantages Customer centric ; Disadvantages Duplication of territory coverage ; higher selling costs

Tropicana North - snapshot

Hybrid Sales Organization
Geographic + market
GM Sales (N) Pb + Hy + HP + JK SM ASM 4 MT & Instt

Delhi SM

UP + Raj SM

ASM 1 UDS

ASM 2 UDS

ASM 3 UDS

CE 1

CE 2

CE 3

CE 4

Dist 1

CE 5

Dist 2

CE 6

Dist 3

Size of the salesforce:

Optimal size of salesforce enables company to balance between conflicting objectives of maximizing revenue & minimising costs. Less than optimal size of salesforce would lead to loss of sales & profits , on the other hand more than required numbers will lead o increase in sales and costs. Optimal salesforce size is determined using methods :
1. Workload method The size of the salesforce is based on the selling efforts required. Build up method which is based on workload being dependent on customer size , customer sales potential and travel time. 2. Sales potential or breakdown method In this method the sales productivity ( say revenue or volume delivery capability) of the average salesperson is assumed by the sales manager. Also the method is based on the premise that the company sales forecast is accurate. 3. Incremental method. This method is base on marginal-analysis theory of economics. Based on the premise that sales & consequent profits should increase on adding of salespeople. Salespeople added till incremental profit exceeds incremental cost.

Workload

Sales pot.

Increme ntal

Size of the salesforce:

Assume a company sales forecast of Rs100 cr with an average salesperson productivity being Rs 25 lac per annum. The anticipated salesforce turnover is 20%. What would be the size of the salesforce ?

Sales potential method

N=S(1+T) P Where , N = Size of salesforce S = Annual sales forecast for the company P = Estimated productivity of the average salesperson T = Estimated % of annual salesforce turnover on account of resignations , retirements and promotion. A company has 20 salespeople and sales manager has to decide whether he should add more salespeople. Sales manager estimates that incremental sales from further salespeople would respectively be Rs 12 lacs ; Rs 10 lacs ; Rs 8 lacs ; Rs 6 lacs and Rs 5 lacs on annual revenue basis. Cost of goods sold is a constant 60% of turnover. The co. salesperson is paid a salary of Rs 120,000 per year and average spent on food and travel per salesman works out to Rs 80,000 per annum. The salespeople are paid annualized incentive of 6% of

Incremental method

Increme ntal

Staffing the salesforce:

Proper staffing of the saleforce has strong impact on sales performance & resultant profits. Salesforce staffing is amongst the most challenging & critical responsibilities of sales management :
Done right - Force multipliers ; Foundation of manager goals being met Done wrong Objectives unmet ; activities backlog ; manager perf. Impacted adversely.

Planning
Establish responsibility Decide the number of salespeople needed Outline the type of salepeople needed

Recruiting

Selecting
Develop tools and procedure for measuring applicants

Hiring

Socialisation

Identify sources of sales recruits

Make the job offer

Socialisation

Evaluate the sources of recruits

Select the salespeople

Acceptance of the job

assimilation

Salesforce staffing process

Staffing the salesforce:

1. Establish responsibility
Responsibility for the staffing process are fixed. In larger organizations typically the sales manager is responsible for deciding the number and type of people needed ; selecting and making the job offers to the salespeople. The other stages are handled by HRD. Size of optimum salesforce is decided by using one or more of the 3 methods. Need = Size + ( Promotions + Retirements + transfers out + Resignations ) ( Transfers in ) Need assessment needs to happen in advance so as to allow for time to recruit , select , hire , assimilate & train. A detailed job description & specifications of the salespeople is essential to selecting the right profile of salespeople. The steps involved in process of developing the ideal profile are :
a) b) Job analysis Company identifies job duties , responsibilities and critical activities to be performed for the job success. Job description is then prepared. JD are formal , written statements describing the job in detail. Include Title of job ; Reporting relationship ; Types of products ; Types of customers ; Duties and responsibilities ; Job demands ; Technical requirements ; Location Duties & responsibilities are utilized to determine the desired traits and abilities needed to attain job success. Traits - Empathy , Ego drive ; Comfortable working in teams ; Risk taking ; Innovative Attitude Never-say-die ; Persistent ; Handle pressure well ;

2.

Deciding the number of salespeople needed

Planning stage

3.

Outline the type of salespeople needed

c)

Staffing the salesforce:

The purpose of Recruitment is to provide a pool of job candidates from where a company selects the right persons. Recruitment includes : 1. Finding or identifying the sources of sales recruits
Prospective candidates are located by using internal and external sources. Internal sources include Employee referral programs ; current employees ; promotions and transfers. External sources include Advertisements ; Internet ; Educational institutions ; Employment agencies ; Job fairs ; Other companies. Employee referral programs typically incentivize employees who provide successful referrals. Assures better cultural fit . Various sources are evaluated over the years for quality as denoted by ;
a) b) c) Performance rating of the salesforce over 2 years % Retention Cost of recruiting

2
Recruitment

stage
2.

Evaluation of recruiting sources

Once data is built the company identifies & uses the source(s) which permit most effective hires at least cost.

Staffing the salesforce:

1. Develop tools and procedure for measuring applicants
Selection Process
3

Selection stage

Applicants are measured against the job specifications that were developed in the planning stage. Selection process consists of number of filters which are progressively applied to screen out applicants not matching the job specifications. All the 7 steps are used by a very few organizations. Most use filters basis information needs & expenditure budget. Selection criteria prioritizes few selection criteria with objective of better fitment. Each applicant is ranked on qualifications and potential in relation to the selection criteria .

2. Selecting the salesperson

 Screening Step 1 resumes Application Step 2 Blank Initial Step 3 interview Intensive Step 4 Interview Testing

Selection Process:
Screening Resumes
Advertisements or education institutions yield large number of resumes which are screened basis job specifications. Relevant information ( Resume may lack in certain details) laid out in a particular order Properly conducted interview is a good predictor of the candidates performance . Interview structures may vary from structured to unstructured or semi-structured. Candidate made comfortable thru open ended qs on educational & family background. Focus on listening. Behavior based interviews / performance based interviews Selection tests are designed to measure aptitude , intelligence , creativity , interests , knowledge and personality of salespeople. The purpose of testing is to decide whether applicants have traits , knowledge , attitude for success.

Application Blank

Interview

Rejecting

Testing

Step 5

Reference Step 6 Check Medical Step 7 Check

Reference check
Also known as background checks with previous employers are helpful in validating applicants ability and character. Qs such as would you rehire him? Why did he leave ? helpful.
Typically used by companies for promotions & development but can also be used as a tool of selection process. Conduct simulated exercises such as role playing , business games , case analysis & individual presentations.

Assessment Centers

Staffing the salesforce:

4

1. Company makes the job offer

Job offer includes remuneration details.

Hiring stage

2. Acceptance of the job offer by the applicant

Join date & agreement to terms & conditions of employment.

1. Socialisation
5 The new salesperson is familiarised with values , culture of the organisation and also the attitudes , behaviour of people who are already working in the organisation.

Assimilat ion

2. Assimilation
Is the 2nd stage of socialisation the new salesperson is socially integrated into the new environment.