Basic Types of Sales Organizational Structures

If sound practices are followed in setting up the sales department, the result­ing structure takes on features of one or more of four basic types: line, line and staff, and functional, and committee. The grouping of activities into posi­tions and the charting of relationships of positions causes the organization to take on structural form. Most sales departments have hybrid organiza­tional structures, with variations to adjust for personalities and to fit specific operating conditions.

The sales department’s structure evolves from the needs of the business. No two companies have identical sales organizations, because no two have identical needs. The customers, the marketing channels, the company size, the product or product line, the practices of competitors, and the personalities and abilities of the personnel are but a few of the factors affecting the organizational structure of the sales department. So numerous are the factors influencing the structure of individual sales departments that it is impractical to draw generalizations about the many possible “mixed” types; the discussion that follows is an analysis of the three basic types. Organizational planners should know the chief features of each type, and its respective merits and limitations. If they have this background and understand the other factors influencing the structure of the sales department, they are equipped to evaluate its appropriateness.

1. Line Sales Organization

The line organization is the oldest and simplest sales organizational structure. It is widely used in smaller firms and in firms with small numbers of selling personnel—for instance, in companies that cover a limited geo­graphic area or sell a narrow product line. The chain of command runs from the top sales executives down through subordinates. All executives exercise line authority, and each subordinate is responsible only to one person on the next higher level. Responsibility is definitely fixed, and those charged with it also make decisions and take action. Lines of authority run vertically through the structure, and all persons on any one organizational level are independent of all others on that level.

The line sales organization sees its greatest use in companies where all sales personnel report directly to the chief sales executive. In these companies this executive often is preoccupied with active supervision and seldom has much time to devote to planning or to work with other top executives. Occasionally, however, the line sales organization is used where more than two levels of authority are present.

Figure 7.1 shows a fairly large sales department organized on the line basis. The sales manager reports to the general manager, assistant sales managers report to the sales manager, and salespeople report to assistant managers. Theoretically, there is no cross-communication between persons on the same level. Contacts between persons on the same level are indirect and are effected through the next higher level. For example, the assistant sales manager of Division 1 arranges to confer with the assistant sales manager of Division 2 through the sales manager. Similarly, contacts by sales personnel with the office staff flow up through the organization to the sales manager and back down through the assistant sales manager in charge of the office to the office staff.

The basic simplicity of line organization is the main reason for its use. Because each department member reports to only one superior, prob­lems of discipline and control are small. Lines of authority and respon­sibility are clear and logical, and it is difficult for individuals to shift or evade responsibilities. Definite placement of authority and responsibility saves time in making policy changes, in deciding new plans, and in con­verting plans into action. The simplicity makes it easy for executives to develop close relations with salespersons. With this working atmosphere, it is not surprising that executives who come up through a line organiza­tion are frequently strong leaders. As the typical line sales department has few organizational levels, administrative expenses are low.

The greatest weakness of the line sales organization is that so much depends upon the department head. The head needs outstanding abil­ity and rare qualifications, and should be well versed in all phases of sales management, for there are no subordinates with specialized skills and knowledge. Even if the head is an all-around expert, there is insuffi­cient time for policymaking and planning, since rigidity of the line struc­ture requires that a great deal of attention be given to direction of sales operations. The head often must make decisions and take action without benefit of planning. Under such conditions, results are often disappointing.

For rapidly growing concerns and for those with large sales staffs, the line organizational structure is inappropriate. As the department grows, new layers of executives must be added to retain control. Orders and direc­tions must be passed down through a growing series of administrative levels. Managerial effectiveness becomes impaired and results are less pre­dictable, as directions become more and more distorted and garbled at each succeeding organizational level. Moreover, as growth proceeds, ear­lier advantages of close relations among executives and salespeople are sacrificed, and maintaining morale becomes a greater challenge.

Not many executives have the talents needed to manage a large-scale line sales department effectively, and line organization offers little oppor­tunity for subordinates to acquire these skills. Ordinarily, the stakes are too high, except perhaps in the smallest companies, for management to gamble on the availability of a replacement at the time needed. Sound organizational practice dictates that trained understudies be ready to step into the shoes of their superiors. But more often than not, chief sales executives in line sales organizations fail to groom their own replacements.

2. Line and Staff Sales Organization

The line and staff sales department is often found in large and medium-sized firms, employing substantial numbers of sales personnel, and selling diversified product lines over wide geographic areas. In contrast to the line organization, the line and staff organization provides the top sales executive with a group of specialists—experts in dealer and distributor relations, sales analysis, sales organization, sales personnel, sales plan­ning, sales promotion, sales training, service, traffic and warehousing, and similar fields. This staff helps to conserve the top sales executives’ time and frees them from excessively detailed work. They make it possible for their chiefs to concentrate their efforts where they have the most skill. If the top sales executive is not equipped, through prior training or expe­rience, to handle certain problems, staff specialists assist in increasing overall effectiveness of the department. Similarly, by delegating problems involving considerable study or detailed analysis to staff executives the top sales executive has more time for planning and for dealing with higher- priority matters.

Staff sales executives do not have authority to issue orders or directives. Staff recommendations are submitted to the top sales executives, who if they approve, transmit necessary instructions to the line organization. Departures from this procedure are occasionally made. For example, staff members may be authorized to deal directly with line executives regarding execution of plans and implementation of policies developed by the staff and approved by management. Although staff members act on behalf of line sales executives in these instances, they assume joint responsibility for results. This departure from the normal procedure is justified if it speeds the translation of staff plans into line action.

Figure 7.2 illustrates the line and staff sales organization. The general sales manager reports to the vice-president in charge of marketing as does the advertising manager and the manager of marketing research. Six sub­ordinates report to the general sales manager, but only one, the assistant general sales manager, is a line executive. Four of the five staff executives have responsibilities in specialized fields; the fifth, the assistant to the gen­eral sales manager, is given more general assignments.

Note the difference between the assistant to and assistant. The assis­tant to is a staff executive who is given a broader operating area than those staff specialists with more descriptive titles. In contrast, the assistant has general line authority delegated by the superior. The assistant general sales manager is an understudy of the general sales manager who performs assignments of a line nature in the name of the superior. The assistant to the general sales manager carries part of the general administrative load that would otherwise be borne by the general sales manager.

The advantages of the line and staff organization are mainly those of specialization. The chief sales executive, being relieved from much detail work, can take a broader view of the department. Problems can be seen in clearer perspective, and connections between apparently unrelated problems are brought into focus. A pool of experts provides advice and assistance in specialized fields. Planning activities are subdivided and apportioned to staff members, and decisions and policies rests on a sounder base than in the line organization.

Meanwhile, the top sales executive can concentrate on control and coordination of subordinates. Staff members assume much of the burden of solving problems in their areas. Thus, the top sales executive can devote more attention to the human aspects of administration.

The specialization made possible by line and staff organization is also the source of its weaknesses. Work of the staff specialists must be coordinated, and this is costly. Other administrative expenses may also increase, unless the number of staff executives is kept in line with departmental needs. The staff should be expanded only when it can be shown that the contributions of new staff members will equal or exceed the costs of maintaining them.

Close control over staff-line relations is essential. If staff people issue instructions directly to line executives, it is difficult to prevent some persons from evading unwanted responsibilities. All areas in which line and staff executives share authority and responsibility should be noted in written job descriptions and in the organizational manual. All other areas of responsibility and authority should be delineated and assigned to specific individuals.

When the line and staff sales organization is used, the time between problem recognition and corrective action tends to widen. This results from giving staff executives time to study problems before making rec­ommendations to the decision makers. This interval is reduced by permit­ting staff planners to assist in expediting the implementation of the plan. But, as already indicated, this may play into the hands of those wanting to evade responsibility. When time is important, though, it is wise to use staff people in this capacity. However, when salespeople take instructions from several sources, confusion may result, especially if experts overstep their authority. Then, too, problems in maintaining contact with individual salespersons are multiplied.

3. Functional Sales Organization

Some few sales departments use functional organization.¹ This type, derived from the management theory developed by Frederick W. Taylor, is based upon the premise that each individual in an organization, executive and employee, should have as few distinct duties as possible. The principle of specialization is utilized to the fullest extent. Duty assignments and del­egations of authority are made according to function.

No matter where a particular function appears in the organization, it is in the jurisdiction of the same executive. In the functional sales department, salespeople receive instructions from several executives but on different aspects of their work. Provision for coordinating the functional executives is made only at the top of the structure; executives at lower levels do not have coordinating responsibilities. In contrast to the line and staff organization, all specialists in a functional organization have line authority of a sort—or, more properly, they have functional authority. Instructions, and even poli­cies, can be put into effect with or without prior approval of the top-level coordinating executive.

A functional sales organizational structure is shown in Figure 7.3. The coordinating executive is the director of sales administration; all executives on the next level are specialists. As indicated, sales personnel receive instructions from six different executives.

The outstanding advantage claimed for the functional sales depart­ment is improved performance. Specialized activities are assigned to experts, whose guidance should help in increasing the effectiveness of the sales force. The sheer size of the sales force in many large firms makes the highly centralized sales operations of a functional organiza­tion impractical. This limitation is traced to the requirement in the func­tional model for a lone official to coordinate the specialists. Most large firms need more administrative levels when the marketing area is exten­sive, when the product line is wide, or when large numbers of selling personnel are required. It is possible to use modified versions of the func­tional model—versions providing for a modicum of decentralization and for more administrative levels—but in its pure form, at least, functional organization for the sales department is inappropriate.

The practicality of functional organization for the sales department is open to question. Small and medium-sized firms do not find it feasible, or financially possible, to utilize the high degree of division of labor. It is sometimes contended that functional organization is suitable for large firms with stable operations and with opportunity for considerable divi­sion of labor; however, certain characteristics of functional organization cause it to be rejected even by most large firms. Large companies with stable selling operations are the exception rather than the rule.

Source: Richard R. Still, Edward W. Cundliff, Normal A. P Govoni, Sandeep Puri (2017), Sales and Distribution Management: Decisions, Strategies, and Cases, Pearson; Sixth edition.