Monrovia Oil Company: Petroleum Company – Decentralization of the National Account Department

Monrovia Oil Company, with head offices in New York City, was one of the largest producers of petroleum products in the United States. In his monthly meeting with Frank Spriegel, marketing vice-president, Jeff Gasden, vice-president of sales, recommended a reorganization to decen­tralize the national account department and bring its salespeople under the regional sales managers. The purpose was to achieve more coordination between the operations of the regional and division offices, which were engaged in direct marketing, and the national account department, which functioned as a sales contact group in handling special accounts.

The national account department, functioning as a separate sales orga­nization, was responsible for distribution of gasoline, fuel oils, and indus­trial lubricants to approximately three hundred companies. These customers operated in industries where reciprocity was a major factor in the devel­opment of new business. This department was headed by a department manager, reporting directly to the vice-president for sales, Gasden. The department manager, Grant Newcomb, supervised six sales representatives. The purchasing department supplied the manager with a weekly report on all purchases amounting to $25,000 or more. The national account man­ager (Newcomb) kept the sales staff informed of all purchases made by Monrovia from accounts they were now selling and from sources to which sales had not yet been made. Sales personnel were responsible for the devel­opment of sales to each account assigned to them, and made weekly reports. The regional and division offices were notified when a salesperson sold an account, and it was their responsibility to service the account.

Regional and division offices were strategically located throughout the company’s market area. Regional managers, who reported to Jeff Gasden, the vice-president of sales, were assigned five staff specialists. Each region was subdivided into three divisions. Under the division manager was a T.B.A. manager, a retail sales manager, a wholesale sales manager, an indus­trial sales manager, and a superintendent of operations (see Exhibit 1). Each division manager supervised from five to eight salespeople who called on all classes of trade in their territories, including national accounts after the initial contacts had been made.

The regional and division managers were critical of the national account department. They contended that the duplication of sales effort could be avoided by eliminating the department. On many occasions, sales­people from the division offices had quoted prices on fuel oil and gasoline that were different from those used by national account representatives. Since the division managers were responsible for the business developed by the national account department, they felt it should be their prerogative to quote prices advantageous to their own operations.

Gasden, the vice-president of sales, thought that more business could be obtained through decentralization of the national account department rather than through its elimination. He made the following proposals to the board of directors at the spring meeting: (1) the national account department should be decentralized, (2) the national account manager should be made an assistant to the vice-president of sales, (3) a national account salesperson should be assigned to each regional office to work with the division managers and their sales personnel, and (4) the activities of the national account salespersons should be coordinated with those of the division sales personnel by the regional managers.

Grant Newcomb, the national account manager, argued that the national account sales force should continue to report directly to him: “National account salespeople are needed as ‘blockbusters’ or ‘openers’ to get the original purchase from a large account. In addition, the national account organization has a career planning advantage. These more presti­gious sales positions provide a means of promotion and reward to capable salespeople who are not interested in sales management. Finally, because of their disproportionate effect on sales, operations, and profits, national accounts require special treatment (even on prices), and each treatment must be coordinated under a single head.”

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.