Chapter Five: Choices in Sales Force Organization
5-1: What is Sales Organization?
According to H.R. Toosdal, a sales organization consists of human beings working together for
the marketing of products manufactured by the firm or marketing of commodities which have
been purchased for resale.
According to Still and Cundiff, a sales organization is group of individuals striving jointly to
reach certain goals and bearing formal and informal relations to each other.
According to American Marketing Association, a sales organization is the planning, directing,
and coordinating the activities of sales force for increasing organizational efficiency.
The sales organization is a vehicle that a selling firm owns especially to achieve sales objectives
in the best and most profitable way. Different sales personnel are being constructed in a group
having contemporary selling skills to achieve qualitative and quantitative sales objectives of the
firm.
In fact, the sales organization also called sales organizational structure is a group of sales-related
people who strived jointly to nurture the sales goals of the selling company. It is a part of the
whole selling organization, which is mainly concerned with effective handling of the customer’s
requests, proper distribution, and reaching objectives.
In addition, this is not limited to a sales company, sometimes a company produces products itself
and makes a contract with the organization solely involved in selling and has good market
coverage, and thus it is also called a selling organization.
Sales organization structure consists of formal and informal relations among the group of people.
These people have to cooperate with each other as said by the sales manager to achieve set sales
goals. The sales manager has a crucial role in this organization in activities such as hiring quality
talent, giving proper training, assigning roles and responsibilities, effective planning, and so
forth. He needs to have him skills to manage these people properly. It needs to have the
flexibility and built-in adaptability to respond appropriately to uncertain future circumstances.
5-2: Principles of Sales Organization
Although selling organization itself is an effective vehicle, to further make it more effective and
result-oriented it is guided by the following principles.
Principle of Executive Time Economy
Sales organizations should be designed to save time for executives while managing salespeople
in compliance with the established structure. This means that all salespeople and sales leaders
should have clearly defined jobs, responsibilities, and functions.
A. Principle of Objectives
Each sales organization has its own set of goals to achieve. As a result, sales managers and
executives must strive to achieve these goals through a well-managed framework.
B. Principle of Grouping Activities
Depending on the departmental system of working, each sales organizational structure should be
directed by the principle of grouping activities. Advertising salespeople, people reporting to the
general sales manager, people reporting to the assistant sales manager, and so on.
C. Principle of Position Assignment
Every sales organizational structure also should be abiding by the principle of position
assignment. For example, G.M., sales manager, assistant sales manager, director of sales
training, territories sales manager, etc.
D. Principle of Activity Performance
This principle focuses on the salespeople’s activity performance. It should not be a structure for
the sake of being a structure. This means that directions should be issued from the top down, and
performance reporting should be done from the bottom up.
E. Principle of Balance
All sales organizations should be guided by the principle of coordination/balance among the
salespeople and senior body. Otherwise, conflict may arise and sales performance would be
adversely affected.
F. Principle of Developing Specialists
This principle states that if a salesperson performs well in his or her assignments, there should be
enough room for him or her to be promoted. From a salesperson to a supervisor, for example.
G. Principle of Authority
All sales organizational structures should be guided by the principles of authority. Only
assigning duties, responsibilities, and accountability can not bring excellence in the performance
of salespeople. Therefore, matching the level of position, salespeople should be provided with
the adequate authority of making the assignment-related decisions by themselves.
5-3: Types of Sales Organization Structure
If sound practices are followed in setting up the sales department, the resulting structure takes on
features of one or more of four basic types of sales organizations: line, line and staff, functional,
and committee. The grouping of activities into positions and the charting of relationships of
positions causes the organization to take on a structural form. The first two types (line and line
staff) are the most common. Functional and committee organization are rare. Most sales
departments have hybrid organizational structures, with variations to adjust for personalities and
to fit specific operating conditions.
1. Line Sales Organization Structure
The line sales organization is the most basic forms of sales organization, characterized by a chain
of command running from the top sales executive down to the level of the salesman. All
executives have line authority over their subordinates who in turn are accountable only to their
immediate superior. Since lines of authority run vertically in this structure, executives at each
level are generally independent of all others at the same level. Through assignment of quotas or
sales targets, responsibilities are usually, clearly defined.
This is the first, oldest, and simplest form of sales organization where the chain of command
goes vertical from top-level to the salespeople (bottom level). Every salesperson is guided by one
person i.e. the next higher level to them and responds to do assigned assignments. This form of
organization structure best fits the small selling companies but there seems hard for it to work
well where the company is big and the concerns are growing rapidly.
2. Line and Staff Sales Organization
Line and staff organizations usually result as the size of the operations grows. It is
characteristically found in medium and large firms which sizeable sales staff selling diversified
product lines. The line and staff department is differentiated by the presence to staff specialists
of staff assistants to advise and assist the top sales executive. These specialists are experts in
their own fields which could be sales training, service, sales analysis and planning, dealer
relations, sales promotion, sales personnel development and so on. While staff executives and
assistants do not have the line authority to command, they advise the line executives through
recommendations and provide the benefit of specialization in the organization. The inclusion of
the staff component frees the line executive from the burden of detail. By delegating problem
involving in depth study or detailed analysis to staff specialists, the line executive gets more time
for policy making and planning. A pool of experts becomes available for providing advice and
assistance in specialized fields. The activity of planning can also be subdivided and assigned to
staff specialists. More information is also made available for better decision-making.
3. Functional Sales Organizational Structure
The functional sales organization is aimed at utilizing the benefits of specialization to its fullest
extent. In the functional sales organization, all sales personnel receive direction from, and are
accountable to different executives, on different aspects of their work. Somewhat in
contravention to the principle of unity of command, the functional organizational structure gives
all executives, each a specialist in his own field, a direct authority to command and issue orders
to his functional authority therefore, simply means that at any given time, a sales person could be
under instruction from a number of executives, depending upon the functional specializations
setup. The top sales executives has coordinating responsibilities in respect of the actions of
functional heads in functional organizations have not been found to be a very appropriate
structure for sales organization. Here each sales person is under direction of several
executives. In larger firms where the size of the sales force is substantial, the degree of
centralization necessitated by the functional organizational structure renders the operation
inefficient. Smaller the medium sized firms on the other hand find the system expensive because
of the high degree of specialization. Another weakness of the structure is that burden of
coordinating the activities of highly diverse specialists is placed on a single individual. In case
that individual is not capable enough in this regard, the whole structure is likely to become
cumbersome and ineffective.
4. Committee Sales Organizational Structure
In committee sales organization the committee is never the sole basis for organizing a sales
department. It is a method organizing the executive group for planning and policy formulation
while leaving actual operations, including implementation of plans and policies, to individual
executives. Thus, many firms have a sales training committee (comprised of the general sales
manager, his or her assistants, the sale training manager, and perhaps representative divisional or
regional sales managers) that meets periodically to draft training plans and formulate sales
training policies. Implementation of these plans and polices, however is the responsibility of the
sales training manger, if the company has one, or of the line and or staff executives responsible
for sales training in their own jurisdictions.
5-4. Determining the Kind of Sales Personnel
Sales-related marketing policies are the guidelines within which the company seeks to reach both
qualitative and quantitative personnel selling objectives. Decisions on what to sell (product
policies) and to whom to sell (distribution policies) shape the fundamental nature of a company
and are important determinants of the two components of personal-selling strategy – the kind of
sales personnel (qualitative objective) and their total number (quantitative objective). Pricing
policies, too, have an important impact, especially on the kind of sales staff. Sales-related
marketing policies also vary, presumably, with the competitive settings.
A. Qualitative Analysis
One key decision on personal-selling strategy is that on the kind of sales personnel. Making this
decision requires consideration of qualitative personal-selling objectives. Each company deals
with a unique set of marketing factors, such as the strengths and weaknesses of its products, the
motivation and buying practices of its customers and prospects, its pricing strategy, and the
competitive setting. Furthermore, different selling jobs require different levels of selling and
non-selling abilities, training, and technical and other knowledge.
The bottler’s driver-salesperson doing route selling has a considerably different job from that of
the salesperson who sells complex industrial installations. In determining the kind of salesperson,
then, one must understand what is expected of them: the job objectives, the duties and
responsibilities, and the performance measures. It helps in fitting the job to the person and the
person to the job. Sales Managers use the following techniques to ascertain the qualitative
objectives: Product market analysis, Analysis of salesperson’s role in securing orders, and
Choice of basic selling styles.
1. Product market analysis
No person is capable of selling all kinds of products to all kinds of customers. At one extreme, a
salesperson sells a single product to many kinds of customers. At the other extreme, a
salesperson sells a wide line of products to a single kind of customer. One way of categorizing
selling jobs, then, is into three classifications: Product specialists, Market specialists, and
Combination of product and market specialization.
2. Analysis of salesperson’s role in securing orders
The role(s) that a company expects its sales personnel to play in securing orders influences the
kind of sales staff required. The driver-salesperson for a soft drink bottling company is primarily
an order taker. The encyclopedia salesperson calling on households must often function as an
order getter. Depending upon whether promotional strategy places major reliance on personal
selling or advertising, salespeople may be either active or passive forces in securing orders. If the
promotional strategy is to heavily rely upon advertising to attract business and build demand,
marketing channels include several layers of middlemen, and the role of manufacturer’s
salesperson is that of order taker primarily and order getter only incidentally. The opposite
situation obtains when advertising is used mainly to back up personal selling, marketing channels
contain a minimum number of layers of middlemen, and the salesperson’s role is chiefly order
getting. In consumer goods marketing, the missionary salesperson’s major role is to assist
middlemen in making sales to their consumers. In industrial-goods marketing, the sales engineer
plays two major roles: advisor to middlemen and customers on technical product features and
applications, and design consultants to middlemen and industrial users on installations or
processes incorporating the manufacturer’s products.
3. Choice of basic selling styles
Differences in marketing factors cause each company to have individualized requirements as to
the kind of salesperson it employs. Sales job roles can be grouped into four basic styles: Trade
selling, Missionary selling, Technical selling, and New-business selling.
B. Quantitative Analysis
A key decision on personal-selling strategy is to decide on the size of the sales force. Having
determined the kind of salesperson that best fits the company’s needs, management now
determines how many are required to meet the sales volume and profit objectives. If the
company has too few salespersons, opportunities for sales and profits go unexploited, and if it
has too many, excessive expenditures for personal-selling reduce net profits. Three basic
approaches are used in approximating the exact number of salespersons that a particular
company should have: Work-load method, Sales potential method, and Incremental method.
1. Work-load method
In the work load method the basic assumption is that all sales people should shoulder equal work
loads. Companies applying this approach generally assume that the interactions of three major
factors – customer size, sales volume potential, and travel load – determine the total work load
involved in covering the entire market.
2. Sales potential method
The sales potential method is based on the assumption that performance of the set of activities
contained in the job description represents one sales personnel unit. If management expects all
company sales personnel to perform as specified in the job description, then the number of
salespersons required equals the number of units of sales personnel required. Sales job
descriptions are constructed on the management’s assumption that they describe what the
average salesperson with average performance will accomplish. With that assumption, then, one
can estimate the amount of sales volume that each salesperson should produce. Dividing this
amount into forecasted sales volume, and allowing for sales force turnover, results in an estimate
of the number of salespeople required.
3. Incremental method
Conceptually, the incremental method is the best approach to determining sales force size. It is
based on the proposition that net profits will increase when additional sales personnel are added
if the incremental sales revenues exceed the incremental costs incurred. Thus, to apply this
method, one needs to know two important items of information: incremental revenue and
incremental costs.
