Optimizing Sales Force Organization for Peak Performance

Posted on Nov 26, 2024 in Other subjects

Sales Force Organization

Factors in Sales Force Organization

Three basic steps are essential in the organization process:

  1. Maintain order to achieve sales force objectives and goals.
  2. Assign specific tasks and responsibilities.
  3. Integrate and coordinate activities with other firm elements.

Organization is a continuation of a company’s strategic planning process. An effective sales force organization provides the structure for achieving sales targets by developing the firm’s sales strategy. It enables maintaining order and assigning specific tasks to responsible individuals. An efficient organization ensures accountability.

Due to ongoing changes in business, marketing, and sales, managers are reevaluating traditional organizational tasks and forms. Peter Drucker suggests considering a company as an “information-based organization” with fewer management layers and more specialists in operational areas rather than main offices.

The purpose of sales organization is to facilitate achieving company sales objectives. This is accomplished by:

  • Responding to market needs: A critical role of the organization is to minimize the time a manager needs to assess market situations and take action. Flexibility and openness to change are crucial in the organizational structure.
  • Efficiently fixing activities: Efficiency largely results from specialization and routine. The challenge is balancing flexibility with necessary bureaucracy.
  • Establishing communication channels: The organizational structure should facilitate open communication with customers, employees, and stakeholders. Free-flowing feedback from the market and workplace is essential for an organization to remain responsive to change and ensure survival.

A well-planned sales organization benefits sellers by promoting efficiency, effectiveness, intra-organizational cooperation, customer satisfaction, and profitability.

While no perfect sales organization exists, and managers may disagree on the ideal structure for specific sales force conditions, the following criteria are suggested for building a solid sales organization:

  1. Market-oriented approach: Recognizing the customer as the organization’s raison d’être.
  2. Sales activity-based design: Focusing on the core activities of the sales process.
  3. Defined authority and responsibility: Clearly documented individual responsibilities with sufficient authority to complete assigned tasks.
  4. Reasonable span of control: Managers should maintain appropriate control through frequent direct contact.
  5. Flexibility: Adaptability to changing market conditions.
  6. Coordination and balance: Preventing undue influence by any individual.

A sales manager’s organizational process involves four steps:

  1. Understanding the organizational framework: Defining sales force goals, products, customer types, market coverage, and required sales staff.
  2. Separating sales activities into functional areas: Dividing tasks based on function.
  3. Assigning sellers to roles based on qualifications: Matching skills to specific responsibilities.
  4. Assigning performance responsibility: Establishing accountability for results.

Sales Force Organization Development

Developing a sales organizational structure is complex. Sales managers must address these basic aspects:

  1. Formal and informal organizations: Formal organizations are administratively created, while informal organizations arise from existing social relationships within the formal structure. Effective sales organizations recognize the value of informal relationships and communication.
  2. Horizontal and vertical organizations: Vertical organizations have multiple sales management levels with vertical reporting. Horizontal organizations reduce management levels but increase managers at each level.
  3. Centralized and decentralized organizations: Decentralized organizations delegate responsibility and authority to lower levels. Centralized organizations concentrate decision-making authority at higher levels. Decentralization increases with organizational size. Effective decentralization requires commensurate authority with delegated responsibility.
  4. Line and staff components: Line functions are primary organizational activities (e.g., sales). Staff functions are supportive (e.g., advertising, market research). Modern sales forces require diverse support to achieve goals.
  5. Company size and organization: Small to medium-sized companies often use simple organizational forms due to limited products, services, and distribution channels. As functional areas grow, larger businesses adopt more sophisticated sales organizations.

2. Basic Sales Organization Types

Classic Schemes

  1. Territory-based structure: Assigning each salesperson a geographical territory. Advantages include clear responsibility, motivation, localized customer relationships, and lower travel costs. Suitable for companies with small or homogenous product ranges. Disadvantages arise with diverse product lines and customer types.
  2. Product-based structure: Organizing sales teams by product or product line. Suitable when products require technical expertise, or the company has diverse product lines for different customers. Advantages include specialized sales expertise. Disadvantages include high travel costs.
  3. Customer-based structure: Segmenting the market by customer type and assigning sales teams accordingly. Beneficial when distinct customer types exist, allowing for specialized customer knowledge. Disadvantages include high travel costs and potential overlap between sales teams.

New Organizational Forms

New, more complex organizational forms offer greater commercial flexibility:

  1. Composite sales force structure: Combining criteria like territories, products, and customers (e.g., territory-customer, territory-product, customer-product). Suitable for companies with complex product ranges, diverse customers, and wide market boundaries.
  2. Two-tiered sales force structure: Utilizing both sedentary (phone/exhibition) and field sales teams. Sedentary teams qualify leads, while field teams handle demonstrations and visits. This reduces travel costs and increases efficiency.