Setting Up A Sales Organization

Not often is a sales organization built entirely from scratch, as some struc­ture usually exists. Most problems of sales organization, in other words, are problems of reorganization—the sales organization exists and the goal is to make it more effective. It is appropriate, nevertheless, for the sales execu­tive to approach the organizational problem, each time it arises, as though a completely new organization were being built. There are five major steps in setting up a sales organization:

1. Defining the objectives.
2. Delineating the necessary activities.
3. Grouping activities into “jobs” or “positions.”
4. Assigning personnel to positions.
5. Providing for coordination and control.

1. Defining Objectives

The initial step is to define the sales department’s objectives. Top man­agement, of course, defines the long-run objectives for the company, and from these, the general, or long-run, objectives for the sales department are derived. Considered collectively, general objectives constitute top manage­ment’s vision of the company at some future time. Top management, for instance, may want the firm not only to survive but to achieve industry lead­ership, develop a reputation for outstanding technical research, diversify its product lines, provide excellent service to customers, furnish investors with a generous return, establish an image of public responsibility, and so on. From such composites, sales management determines the implications for the sales department and articulates a set of qualitative personal-selling objectives. Quantitative personal-selling objectives, in turn, are set with an eye on the qualitative objectives. Survival, for instance, is the most basic qualitative objective of any enterprise as well as its sales department, and this requires, among other things, a continuing flow of sales revenue; so, securing a given level of sales volume is an important sales department quantitative objective.

Survival also requires profits. Hence, a second qualitative personal­selling objective is to produce profits, not only by making profitable sales but by controlling departmental costs and expenses. Furthermore, survival requires growth in both sales and profits; otherwise, in a growing econ­omy the company is destined to fall behind competitors or even risk being forced out of business. It follows that a third qualitative personal-selling objective is to realize long-term growth in sales and profits. Therefore, three of the sales department’s general objectives—all traceable to man­agement’s desire for survival of the firm—may be summed up in three words: sales, profits, and growth.

Qualitative personal-selling objectives are indispensable for long- range planning and must be kept in mind in short-range planning. Quan­titative personal-selling objectives are required as operating guideposts. Thus, the qualitative personal-selling objective of producing profits may be translated into specific quantitative personal-selling objectives such as “to increase our market share of the hand-held calculator business to 20 percent by the end of the current year” and “to secure four wholesalers in Australia and one in New Zealand to introduce our vest-pocket calculators in those markets next year.” People in the sales department, as those else­where, work more effectively, with less wasted time, effort, and money, when assigned definite goals. The sales department as a whole, similarly, operates more smoothly, and its activities are more purposeful, when it has specific quantitative objectives.

The qualitative objectives set for the sales department form the basis for the general policies governing its long-term performance. The quanti­tative objectives set are the foundations from which to develop day-to-day operating sales policies and programs. A thorough examination—perhaps even a restatement—of the qualitative and quantitative goals of the sales department is the logical place to begin the task of reorganization.

2. Determination of Activities and Their Volume of Performance

Fundamental to a sound organizational design is recognition that activities are being organized. Only after determining all necessary activities and estimating their volume of performance is it possible to answer such ques­tions as: What executive positions are required? What should be their rela­tionships to other positions? What should be the duties and responsibilities of persons who fill these positions?

Determining the necessary activities and their volume of performance is a matter of analyzing the sales department’s qualitative and quantitative objectives. Thorough examination discloses which activities must be per­formed in what volume. The activities involved in modern sales management are similar from firm to firm, and although individual sales executives think that their operations are different, most differences are more apparent than real. Almost every sales department carries on the same general activities; differences among departments are those of detail, of relative emphasis placed upon individual activity and in volume of performance.

3. Grouping Activities to Positions

Next, the activities identified as necessary are allocated to different posi­tions. The planner must keep in mind that activities are aimed at achieving certain objectives—ultimately the composite provides the raw material from which job descriptions are compiled (in terms of reporting relationships, job objectives, duties and responsibilities, and performance measures).

Activities are classified and grouped so that closely related tasks are assigned to the same position. Each position should contain not only a suf­ficient number of tasks but sufficient variation to provide for job challenge, interest, and involvement. Only in very large organizations, where extreme specialization is practiced, should a position comprise only a single activ­ity, and even here the burden of proof should be on those proposing such a move. Pressures of administrative economy are generally strong enough that most position holders are responsible for a number of diversified, although related, activities.

Certain activities are of crucial importance to success of the sales department, and this has implications for organizational design. For exam­ple, in a highly competitive field, product merchandising and pricing are assigned to positions high up in the organizational structure. Activities of lesser importance are assigned to lower-level jobs.

When a large number of positions is being set up, groups of related jobs are brought together to form departmental subdivisions. In most cases, a number of intermediate-level positions would, in turn, have to be coor­dinated by the top sales executive. Nevertheless, the planner should guard against building too many levels into the department. The smallest number of administrative levels that permits the organization both to perform its activities and to operate smoothly is best.

4. Assignment of Personnel to Positions

The next step is to assign personnel to the positions. This brings up the question of whether to recruit special individuals to fill the positions or to modify the positions to fit the capabilities of available personnel. This is a question that has long been controversial. Compromises are frequent. On the one hand, some position requirements are sufficiently general that many individuals possess the necessary qualifications, or can acquire them through training. On the other hand, some individuals possess such unique talents and abilities that it is prudent and profitable to modify the job spec­ifications to fit them. Nevertheless, planners prefer, whenever the situation permits, to have individuals grow into particular jobs rather than to have jobs grow up around individuals.

5. Provision for Coordination and Control

Sales executives who have others reporting to them (that is, those with line authority) require means to control their subordinates and to coordinate their efforts. They should not be so overburdened with detailed and unde­legated responsibilities that they have insufficient time for coordination. Nor should they have too many subordinates reporting directly to them— this weakens the quality of control and prevents the discharge of other duties. Thus, in providing for coordination and control, consideration must be given the span of executive control.

Control and coordination is obtainable through both informal and for­mal means. Strong leaders control and coordinate the efforts of their sub­ordinates largely on an informal basis. Through sheer force of personality coupled with unusual abilities to attract and hold the loyalty of followers, the strong leader tends to make minimal use of formal instruments of con­trol and coordination. But all sales executives, whether strong leaders or not, can improve their effectiveness through formal instruments of control.

The most important formal instrument of organizational control is the written job description. This instrument sets forth for each job: reporting relationships, job objectives, duties and responsibilities, and performance measurements. The most critical section is that of setting forth the job objectives—many planners argue that the job objective section should be the part emphasized and, to the extent possible, the person who holds the job should be allowed to determine how to achieve these objectives. This not only encourages position holders to use their own initiative but makes it clear that they are to achieve stated job objectives even if that requires performing duties and responsibilities beyond those contained in job descriptions. Few sales executives will dispute this argument, but most are also convinced that there is merit in detailing duties and responsibilities and in defining the mea­sures for evaluating the position holder’s performance.

Good job descriptions provide clear pictures of the roles job holders are to play in the sales organization, and are also useful in other situations. Written job descriptions find use in employee selection processes. They are used, too, in matching job specifications with applicants’ qualifications—where recruits cannot be found with all desired qualifications, job specifications form the basis for training. Position holders, in addition, can use their job descriptions as yardsticks against which to appraise their own performances.

An organizational chart, another control instrument, shows formal rela­tions among different positions. A chart reduces confusion about the individ­ual’s role. An organizational chart delineates formal relations and, because of this, rarely provides a true picture of how the organization actually works. Nevertheless, availability of an organizational chart enables members of a sales department to learn the nature of their formal relations with others, to know with whom they are expected to cooperate, and to clarify their formal roles.

An instrument of organizational control used increasingly is the orga­nizational manual. It is an extension of the organizational chart. Typically, it contains charts for both the company and the departments, write-ups of job descriptions and specifications, and summaries of major company and depart­mental objectives and policies. The organizational manual brings together a great deal of information and helps its users to learn and understand the nature of their responsibilities, authorities, and relations with others.

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.