Lecture Sales and distribution management: Chapter 5 - Krishna K Havaldar, Vasant M Cavale

Chapter 5, organising and staffing the salesforce. After studying this chapter you will be able: 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,…

Chapter

5

Organising and Staffing the

Salesforce

• To realise the importance of the various steps included in

planning, recruiting, and selection stages

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:

Basic Types of Sales

Line Organisation

Characteristics: All managers have line authority to direct and control subordinates Used in small firms / departments

Advantages: Simple organisation, clear authority, quick decisions, low cost

Disadvantages: No support to line managers from subordinates who have specialised knowledge / skills Less time for planning / analysis

Head Marketing

Sales Manager

Area Sales Manager1

Area Sales Manager3

Area Sales Manager2

Area Sales Manager4

salespeople salespeople salespeople salespeople

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 Research Manager Sales Manager Promotional

Manager

Customer Service Manager

Area Sales Manager-1

Area Sales Manager-1

Area Sales Manager-1

Salespeople Salespeople Salespeople

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 Service Manager Sales Manager

Area Sales Manager #4

Salespeople

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:

•Sales & Marketing

•Pricing, Promotion

•Channels, Logistics

Specialisation within Sales

Organisation

• Needed to increase effectiveness of salesforce

• Done by expanding basic sales organisation

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 needs

Advantages: Better market coverage and customer service, more control over salesforce, quick response to local conditions & competition

Disadvantages: Limited specialisation of marketing tasks Hence, it is combined with product / market sales organisation

Head-Marketing

Marketing Research Manager General Sales

Manager Promotion

Manager

Customer Service Manager

Branch Sales Manager-1

Branch Sales Manager-2

Branch Sales Manager-3

Branch Sales Manager-4

Salespeople Salespeople Salespeople Salespeople

Product Specialisation

• Used when the company has many products and / or brands

• Two types of product specialisation

(x) Sales organisation with product specialised salesforce (y) Sales organisation with product managers as staff specialists

Head-Marketing

Marketing Research Manager

General Sales Manager Sales Training Manager

Promotion Manager

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

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 group

Advantage: Each product gets specialised attention from the salesforce

Disadvantage: Sometimes, more salespeople contact the same customer, resulting

in customer dissatisfaction and higher cost

In fig ‘y’: Characteristics: Each product manager plans and implements marketing plan, for a product group

Advantage: Corrects the problem of duplication calls on a customer by salespeople

Disadvantage: Lack of product specialisation by salespeople

Head-Marketing

Marketing Research

Manager Promotion Manager Sales Manager General Product Manager Product Gr ‘A’ Product Manager Product Gr ‘B’

Area Sales Managers

Salespeople

Product Specialisation (Continued)

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 Sales Manager

Sales International- Markets

Sales Commercial

Sales Consumer Markets

Sales Government

Manager-Area Sales Mgrs International

Mgrs-Salespeople

Combination Sales

Organisation

• Characteristics: Many firms use some combination of specialisation

General Manager Sales - East

General Manager Sales - South

General Manager Sales - West

Regional Sales Mgr – Govt.

Regional Sales Mgr - Dealers

Regional Sales Mgr - Commercial

Salespeople Salespeople Salespeople

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

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 Method

• Assumption: All salespeople have equal workload

• Steps involved to calculate salesforce size are:

1) Classify customers as per their sales potential

2) Decide time per sales call and call frequencies for each

class of customers 3) Calculate total market workload = (1) x (2) in hours

4) Decide total work time available per salesperson

5) Divide total work time available by different activities per

salesperson in hours 6) Calculate total number of salespeople needed

) 5 (

) 3

(

n salesperso per

available time

selling total

workload market

total

Workload Method (Continued)

• Advantages: simple method, conceptually sound, used for all types of selling situations

• Disadvantages: Neglects sales productivity & salesforce turnover

Sales Potential / Breakdown Method

• The formula used is: , where

N=Number of salespeople needed, or salesforce size

S=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 forward

• Disadvantages: Conceptually weak; lead time needed for a new salesperson to reach average productivity

) 1

( T P

S N

Incremental Method

• It is based on marginal analysis theory of economics

• Basic 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

Planning Stage

• It 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

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

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

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

Developing Job Qualifications /

Specifications

• These are generally based on job description

• Job specifications / qualifications include education, sales experience, skills, and personality traits

• Many studies done, but no generally accepted jobqualifications 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

• 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

Finding the Sources of Sales Recruits

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

• The Internet (job sites)

• Educational institutions

• Employment agencies

• Job fairs

• Other companies

Evaluating and selecting Recruiting Sources

• Recruiting sources are evaluated based on the database

built over number of years

• Evaluating 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

Screening Resumes

• It is done when the company receives many resumes

• This step / tool not required, if somebody else like employment agency does initial screening

• Initial screening of resumes are done by comparing with job specifications

Application Blank

• Widely used, it is a methodical way of collecting relevant information from the applicant

• Advantages of using application blank (also called

“formal application form”) are:

(1) Easy comparison of many applicants

(2) Useful for asking question during interview sessions

• Widely used selection tool

• A good predictor of the candidate’s performance

• Initial interviews are used for screening candidates

• Intensive interviews are conducted to get indepth view of candidates

• Interview structure / type of interviews:

• Structured / patterned / guided interviews

• Unstructured / non-directed / informal interviews

• Many firms use tests as a selection tool – EG P&G, IBM

• Purpose of testing: To find whether applicants have traits / characteristics that lead to success in sales job

• Type 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-confidence

• Tests must have reliability and validity

• Tests should be one of the selection tools and not the only tool

Hiring Stage

• After completing selection process, a list of candidates to be hired is made

• In hiring stage, two activities are performed:

(1) The company making the job offer

(2) Persuading the applicant to accept it

• Assimilation is the second stage of socialisation process

• Companies have this process, in order to retain new salespeople

• Companies use alternate approaches to deal effectively with major accounts

• Methods available for deciding optimum salesforce size

are: workload, sales potential, and incremental

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