sdm-ch.5 1 chapter 5 organizing and staffing the sales force

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

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

SDM-Ch.5 1

Chapter 5

Organizing and Staffing the Sales force

Page 2: 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

Page 3: SDM-Ch.5 1 Chapter 5 Organizing and Staffing the Sales force

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

Page 4: SDM-Ch.5 1 Chapter 5 Organizing and Staffing the Sales force

SDM-Ch.5 4

Line Organisation

Characteristics: All managers have line authority to direct and control subordinates. Used in small firms / departmentsAdvantages: Simple organisation, clear authority, quick decisions, low costDisadvantages: No support to line managers from subordinates who have specialised knowledge / skills. Less time for planning / analysis

HeadMarketing

Sales Manager

Area Sales Manager1

Area Sales Manager3

Area Sales Manager2

Area Sales Manager4

salespeople salespeople salespeople salespeople

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

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

Head-Marketing

Marketing ResearchManager

Sales ManagerPromotional

ManagerCustomer Service

Manager

Area Sales Manager-1

Area Sales Manager-1

Area Sales Manager-1

Salespeople Salespeople Salespeople

Page 6: SDM-Ch.5 1 Chapter 5 Organizing and Staffing the Sales force

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

Head-Marketing

Marketing Research Manager

Promotional Manager

Customer ServiceManagerSales Manager

Area Sales Manager #4

Salespeople

Page 7: SDM-Ch.5 1 Chapter 5 Organizing and Staffing the Sales force

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

Page 8: SDM-Ch.5 1 Chapter 5 Organizing and Staffing the Sales force

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

Page 9: SDM-Ch.5 1 Chapter 5 Organizing and Staffing the Sales force

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

Head-Marketing

Marketing ResearchManager

General SalesManager Promotion

Manager

Customer ServiceManager

Branch SalesManager-1

Branch SalesManager-2

Branch SalesManager-3

Branch SalesManager-4

Salespeople Salespeople Salespeople Salespeople

Page 10: SDM-Ch.5 1 Chapter 5 Organizing and Staffing the Sales force

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

Head-Marketing

Marketing ResearchManager

GeneralSales Manager

Sales TrainingManager

PromotionManager

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

Page 11: SDM-Ch.5 1 Chapter 5 Organizing and Staffing the Sales force

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

Head-Marketing

Marketing ResearchManager

PromotionManager

Product ManagerProduct Gr. ‘B’

Product ManagerProduct Gr. ‘A’

GeneralSales Manager

Area Sales Managers

Salespeople

Product Specialisation (Continued)

Page 12: SDM-Ch.5 1 Chapter 5 Organizing and Staffing the Sales force

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

General SalesManager

Sales Manager-International-

Markets

Sales Manager-Commercial

Sales Manager-Consumer Markets

Sales Manager-Government

Area Sales MgrsInternational

Sales Executives

Area Sales Manager-Commercial

Salespeople

Area Sales Manager-Government

Salespeople

Area Sales Mgrs-Consumer Markets

Salespeople

Page 13: SDM-Ch.5 1 Chapter 5 Organizing and Staffing the Sales force

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

Director – Sales & Marketing

General ManagerSales - North

General ManagerSales - East

General ManagerSales - South

General ManagerSales - West

Regional SalesMgr. – Govt.

Regional SalesMgr. - Dealers

Regional SalesMgr. - Commercial

Salespeople Salespeople Salespeople

Page 14: SDM-Ch.5 1 Chapter 5 Organizing and Staffing the Sales force

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

Page 15: SDM-Ch.5 1 Chapter 5 Organizing and Staffing the Sales force

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

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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 potential2) Decide time per sales call and call frequencies for

each class of customers3) Calculate total market workload = (1) x (2) in hours4) Decide total work time available per salesperson5) Divide total work time available by different activities

per salesperson in hours6) Calculate total number of salespeople needed

)5(

)3(

nsalespersoperavailabletimesellingtotal

workloadmarkettotal

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SDM-Ch.5 17

1) 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 = 18000 hours

1000 customers x 6 hours = 6000 hours

total = 24000

4)Decide total work time available per salesperson

40 hours per week , 45 weeks per year

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SDM-Ch.5 18

5) 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

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SDM-Ch.5 19

Workload Method (Continued) Advantages: simple method, conceptually sound, used for

all types of selling situations Disadvantages: Neglects sales productivity & salesforce

turnoverSales Potential / Breakdown Method

The formula used is: , whereN=Number of salespeople needed, or salesforce sizeS=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( TP

SN

Page 20: SDM-Ch.5 1 Chapter 5 Organizing and Staffing the Sales force

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

Page 21: SDM-Ch.5 1 Chapter 5 Organizing and Staffing the Sales force

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

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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

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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

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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

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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.

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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

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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

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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

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SDM-Ch.5 29

Finding the Sources of Sales Recruits

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

Internal Sources External 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

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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

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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

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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

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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

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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

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SDM-Ch.5 35

Reference Checks They are important due to possibilities of resume frauds and

false personal information They are done by letters / e-mails, 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

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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

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SDM-Ch.5 37

“Your most unhappy customers are your greatest source of learning.”

BY:-

Bill Gates