SMU MBA ASSIGNMENTS

Owing to intense global competition, slow growth in markets and different customer expectations, sales organizations have to reengineer their organization structures and streamline their processes. An inefficient organization structure can frustrate top managers as it may result in strategic plans going astray due to absence of clearly defined responsibilities and reporting relationships. Developing customer-centric organizations, building strong relationships within and outside the organization, modifying the traditional top-down hierarchical structure and introducing cross-functional teams are some steps companies are taking to improve their efficiency and profitability. 

The organizational structure should fulfill the purpose for which it has been designed. The role of a sales organization is to achieve company objectives, streamline reporting relationships, facilitate effective coordination and control and develop an efficient sales force structure to ensure effective selling strategy. Designing the sales organization plays a crucial role in a company’s overall success.

One must consider the influence of external and internal factors while designing a sales organization. External factors include the markets targeted and the technology prevailing in the target market. Internal factors influencing the design of a sales organization include the company objectives, the size of the sales force, core competence of the company, compensation system, reporting relationships, etc. Based on the span of control, authority, hierarchical levels and departmentalization, four basic organization structures are possible. These are formal and informal structure, centralized and decentralized structure, vertical and horizontal structure and line and staff organization structure.

To efficiently serve the ever-changing needs of customers in the best possible manner, a company can have a product-based, geographic-based, customer-based or a combination-based sales force structure. The type of customers, the market size and its potential, the type of industry in which the company is operating, level of sales desired, size of the sales force and the width and depth of the product mix are some factors that influence the decision on the type of sales force structure to be adopted.

Sales culture plays an important role in the success of a sales organization. Sales culture is a collective impression of the values, attitudes and personality of top management in an organization. It pervades down to the lower levels of hierarchy over time. Sales culture has a significant influence on sales force activities and attitudes. The various components that make up sales culture include symbols, language, ceremonies, rites and rituals, role models, tales and stories, and values and beliefs. The strength and direction or fit of the sales culture also play a crucial role in developing a sound sales organization.

 

Types of Sales Organizations

Sales organization development refers to the formal, coordinating process of communication, authority and responsibility for sales groups and individuals. An effectively designed sales organization has a framework that enables the organization to serve its customers. Once the sales people know what their responsibilities are and who they report to, they can concentrate on doing their expected jobs to the best of their ability.

Thus, a sales manager must recognise and deal with some basic problems faced by organizations, when developing his own sales organization. The sales organization structure can be:

Formal and informal organizations
Vertical and horizontal organizations
Centralized and decentralized organizations
Line and staff organizations

Line and staff components

Marketing organizations also feature line and staff components. A line function is a primary activity and a staff function is a supporting activity. In a marketing organization, the selling function is the line component whereas advertising, marketing research, marketing planning, sales training and distributor relations are usually considered staff roles.

Although the use of the terms line and staff has been criticized in many quarters, the basic premise behind them remains applicable to marketing organizations. A modern sales force has to receive various types of support in order to accomplish its objectives. Advertising and sales promotional support is needed to precondition the prospect to accept the salesperson’s presentation; marketing research and sales planning are required because they allow field representatives to concentrate their efforts on the largest potential markets; in-house sales correspondents relieve the field force of activities that would distract them from their basic efforts; and distribution, credit, and maintenance of personnel ensure that the customer is satisfied with the purchase.
Here, a marketing organization is simply the sales organization. This type of arrangement may be satisfactory for small firms in basic industrial markets.

First, the Chief Marketing Officer is typically called the Vice President for Marketing or Director of Marketing, rather than Vice President of Sales. The title change is indicative of the person’s added responsibilities under a line and staff structure. The Vice President for Marketing is in charge of more than just the field sales force. The line and staff organization indicates that all marketing activities have been grouped together, suggesting that the basic tenets of the marketing concept have been accepted.

Second, staff activities report to the line position that they support. Distributor relations, sales planning, sales analysis and sales training are considered to be directly supportive of the field sales effort so these departments report to the General Sales Manager. By contrast, marketing research and advertising are broader functions and they report to the Vice President for Marketing.

Formal and informal organizations

Every firm has a formal and an informal organization. The formal organization is a fixed set of rules of intra organization procedure and structure that of the management whereas the informal organization is often developed from the informal relationships existing within the organization. Also called the grapevine, informal organization is basically a communications pattern that emerges to facilitate the operation of its formal counterpart. Most formal organizations would be totally ineffective if it were not for a supportive informal organization.

An informal communications pattern that might exist in a marketing organization. Actual communications do not usually follow the formal organizational lines. This allows the formal structure to operate efficiently.

Consider the case of a field salesperson who is responsible for collecting certain competitive information such as prices and trade discounts. If this information were forwarded through the formal organization the data would be so backdated that it would be useless to the management. The informal communication system, however, allows the information to be transmitted directly to the director of marketing research. Similarly, consumer complaints over delays in correcting billing errors can be mitigated when the district sales manager directly contacts the head of accounts.

The development of an effective sales organization requires that informal relationships and communication patterns be recognised as being equally useful in accomplishing sales objectives. They should be encouraged to the extent that they improve organizational efficiency.

Horizontal and vertical organizations

A sales force can have either a horizontal or a vertical organizational format. This arrangement varies among companies even within the same industry.
In this structure, there are several layers of sales management — all of which report vertically.
In horizontal organization the number of management levels is reduced appreciably, but the number of managers at any particular level is increased. Instead of two or three district sales managers, there may be seven or eight.

The factor that determines whether a vertical or horizontal organizational structure should be employed is the effective span.