SDM-Ch.5 1 Chapter 5 Organizing and Staffing the Sales force

SDM-Ch.5 2 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

SDM-Ch.5 3 Basic Types of Sales Organisations Sales organisations are generally classified into four basic types: Line Organisation Line and staff organisation Functional organisation Horizontal organisation

SDM-Ch.5 4 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

SDM-Ch.5 5 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

SDM-Ch.5 6 Functional Organisation Characteristics: Each functional specialist has line responsibility over salespeople. Used by a large firm with many products / market segments, minimizing line authority to functional managers Advantages: Qualified specialists guide salesforce, simple to administer Disadvantage: confusion due to more managers giving orders to salesforce

SDM-Ch.5 7 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

SDM-Ch.5 8 Specialisation within Sales Organisation Needed to increase effectiveness of salesforce Done by expanding basic sales organisation Basis 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

SDM-Ch.5 9 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

SDM-Ch.5 10 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 Fig. ‘x’ Sales Organisation with product specialised salesforce

SDM-Ch.5 11 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 Product Specialisation (Continued)

SDM-Ch.5 12 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

SDM-Ch.5 13 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

SDM-Ch.5 14 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

SDM-Ch.5 15 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

SDM-Ch.5 16 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

SDM-Ch )Classify customers as per their sales potential ‘A’ class =500 number ‘B’ class = 1000 number 2) Decide time per sales call and call frequencies for each class of customers Class ‘A’ : 60 minutes per call x 36 calls a year = 36 hours/year Class ‘B’ : 30mintues per call x 12 calls a year = 6 hours / year 3) Calculate total market workload = (1) x (2) in hours 500 customers x 36 hours = hours 1000 customers x 6 hours = 6000 hours total = )Decide total work time available per salesperson 40 hours per week, 45 weeks per year

SDM-Ch ) Divide total work time available by different activities per salesperson in hours selling activities : 40 %= 720 hours Non-selling activities30 %= 540 hours Traveling 30%= 540hours 100%= 1800 hours 6) Calculate total number of salespeople needed 24000/ 720 =33.3

SDM-Ch.5 19 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

SDM-Ch.5 20 Sales Potential / Breakdown Method Firm sales forecast is Rs 50 million for next year, productivity for the average salesperson is Rs 2 million,sales force turnover 20% N= 50,000,000/2,000,000X (1+0.20) = 25X1.20=30 salespeople

SDM-Ch.5 21 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

SDM-Ch.5 22 Salesforce Staffing It is one of the most challenging and important responsibilities / activities of sales management Salesforce Staffing Process includes following stages: Planning Recruiting Selecting Hiring Socialisation

SDM-Ch.5 23 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

SDM-Ch.5 24 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

SDM-Ch.5 25 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.

SDM-Ch.5 26 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

SDM-Ch.5 27 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 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

SDM-Ch.5 28 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

SDM-Ch.5 29 Finding the Sources of Sales Recruits For identifying prospective candidates, firms use internal and external sources. They include: Internal SourcesExternal 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

SDM-Ch.5 30 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

SDM-Ch.5 31 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

SDM-Ch.5 32 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

SDM-Ch.5 33 Interviews 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 Semi-structured interviews Behaviour and performance based interviews Stress interviews Purpose is to decide a candidate’s fitness for a job

SDM-Ch.5 34 Testing 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

SDM-Ch.5 35 Reference Checks They are important due to possibilities of resume frauds and false personal information They are done by letters / s, telephones, or personal visits Instead of candidate’s references, previous employers / customers to be included for reference checks Physical Examination Objective is to find a physical problem that may prevent job performance of an applicant Most companies want their prospective employees to undergo physical examination Increasing number of firms ask applicant to complete the health information form without seeing a medical doctor

SDM-Ch.5 36 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 Socialisation Stage It is the process through which new salespeople learn values, norms, attitudes, and behaviour of people working in the firm Socialisation 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 process Companies have this process, in order to retain new salespeople

SDM-Ch.5 37 “ Your most unhappy customers are your greatest source of learning.” BY:- Bill Gates