SALES ORGANIZATION

OUTLINE

 Sales organization
 Purpose of sales organization
 Steps in setting up a sales organization structure
 Different types of sales organization structures
 Centralization and decentralization in sales force
 Schemes to divide line authority in sales organization

THE SALES ORGANIZATION

Effective sales executives insist upon sound organization, they recognize that the
sales organization must achieve both qualitative and quantitative personal-selling
objectives. Over the long haul, it must achieve qualitative objective i.e. those
concerning personal selling’s expected contributions to achievement of overall
company objectives. In the short run, it must attain the quantitative personal selling
objectives not only sales volume but other objectives related to profit such as
keeping selling expenses within certain limits and to competitive position such as
attaining given market shares. Achieving short-run quantitative personal-selling
objectives precedes attainment of the long-run qualitative personal-selling
objectives. The effective sales executive looks upon the sales organization both
with respect to the “here and now” and to the “future.” But the sales organization
makes its major contribution in the present and the near term, recognizing this, the
effective, sales executive builds both sales mindedness and profit-mindedness into
the sales organization.

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Existence of a sales organization implies the existence of patterns of relationships
among subgroups and individuals established for purposes of facilitating
accomplishment of the group’s aims. Organizational defects often trace to lack of
attention given to sales organization during the early existence of a company.
When setting up a business, management is more concerned with financing and
non-marketing problems. Executives of new enterprises consider organization
questions, but most often these relate to non-marketing activities. In
manufacturing, for example, as products are improved, production quantities
increased, new products added, and production processes developed, the
manufacturing organization is adapted to changed situations. Similar alterations in
the sales organization are frequently neglected or postponed.

Sales organizations in many companies evolved without regard for changing

conditions. The basic setup designed when the company was new remains, despite,
for example, changes in selling style and size of sales force. The sales
organization, after all, is the vehicle through which personal selling strategy is
implemented. A well-designed sales organization, like a well-designed automobile,
accomplishes more, and more economically, than does one that is an artifact. The
sales organization should be adjusted to fit-ideally, to anticipate changing
situations. Shifts in marketing, in competition, and in other business factors call for
changes in the sales organization. The ideal sales organization has a built-in
adaptability allowing it to respond appropriately in fluid and diverse marketing
environments.

Sales organization is therefore a group of people working together to achieve the

objective of sales-which is to capture a certain share of market while satisfying the
customers. It undertakes the effective marketing of products produced by the
undertaking or even products purchased for resale. It ensures timely distribution of
products to the customers in an economical and efficient manner. It establishes

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restructuring between the customers and the organization on terms that are both
acceptable to the buyer and the seller. A sales organization is both an orienting
point for cooperative endeavor and a structure of human relationships. It is a group
of individuals striving jointly to reach qualitative and quantitative objectives and
bearing formal and informal relations to one another. Implicit in the concept of a
sales organization is the notion that individual members cooperate to attain ends.
The sales organization is not an end in itself but rather the vehicle by which
individuals achieve given ends. Existence of a sales organization implies the
existence of patterns of relationships among subgroups and individuals established
for purposes of facilitating accomplishment of the group's aim.

PURPOSES OF SALES ORGANIZATION

In the ideally organized sales department, wasted motion and duplication of effort
would be eliminated, friction would be minimized, and cooperation maximized.
Dynamic characteristics inherent in marketing preclude the achievement of such
perfection. But when sufficient attention is given to sales organization, the ideal is
approached, if not attained, and personal selling efforts increase in productivity.

How an organization works is more important than how it is supposed to function.

Sales management should direct its main organizational efforts toward the
“informal” organization. Through intelligent leadership and related human
relations talents, the skilled manager moves both individuals and informal groups
along lines that facilitate achievement of the purposes of formal organization.

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  To Permit the Development of Specialists

As a business expands, marketing and selling activities multiply and become

increasingly complex. It is difficult to fix responsibility for performance of all
necessary activities, particularly when executives are reluctant to delegate
authority. One purpose of reorganizing the sales department is to facilitate
assignment of responsibility and delegation of authority. In fact, specialization, or
division of labor as economists call it, is the chief means through which the
processes of organization and reorganization are affected. As tasks grow in number
and complexity, they are broken down into manageable units and are assigned to
specialized personnel. The assignments made are called delegations of authority.
This is conducive to the development of specialists.

 To Assure that All Necessary Activities are Performed

As a sales organization grows and specialization increases, it is increasingly

important to perform all necessary activities. What are necessary changes over
time. When jobs are highly specialized, danger exists that the organizational plan
will not provide for supervision of all activities. Essential tasks may not be
performed, simply because they are not assigned to specific individuals. When a
company is small, for instance, its executives are in close contact with users of the
product. As a company grows, as marketing channels lengthen, and as the
marketing area expands geographically, top executives become farther and farther
removed from the customers. As soon as executives begin to lose their informal
contacts with customers, an individual should be assigned responsibility for
maintaining such relationships. If these contacts are highly important,
responsibility for maintaining them should be assigned to an executive specializing
in customer relations.

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  To Achieve Coordination or Balance

Good organization achieves coordination or balance; individuals vary in

competence, potential, and effectiveness. Their personalities may be such that
through assumption of authority, failure to delegate it, or both, their positions are
magnified out of all proportion to their importance. Worse yet, total
accomplishments of the organization are less than they could have been if, so to
speak, greater advantage had been taken. By getting people to pull together as a
team rather than as an assortment of individuals, the organization accomplishes
more collectively than its members could independently. Motivating individuals to
work together toward common objectives is, then, important in achieving
coordination. Individual goals are subordinated to, or reconciled with,
organizational goals. Some of the means for accomplishing this are indoctrination
and training programs, group meetings, supervision and guidance, and two-way
communications. Modern organizational theory suggests that sales departments
should be divided into small, freely communicating, and face-to-face groups to
decrease the possibility of uncoordinated proliferation.

 To Define Authority

Sales executives should know whether their authority is line, staff, or functional.
Line authority carries the power to require execution of orders by those lower in
the organizational hierarchy. Staff authority is the power to suggest to that holding
line authority the method for implementation of an order. Functional authority
enables specialists in particular areas, such as in technical product service, to
enforce their directives within a specific and limited field. Line executives make
decisions on the need, place, and time of action over a wide range of matters. Staff
executives advise line executives about methods but have no formal power to
require or enforce the execution of their recommendations. Functional executives

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are specialists-experts in some aspect of the business who assist executives holding
general line authority.

For example, such specialists advise on new product introduction. A sales

organization receives directions from several sources No person should have more
than one boss. The supporting argument is that, if individuals receive instructions
from multiple sources, they may get conflicting and confusing directions. The
argument is a good one, but the one-boss rule does not necessarily follow. Modern
organizational theory points out that the real problem is; one not of avoiding the
multiple-boss situation but harmonizing orders and directives from different
sources. A smoothly operating sales organization has built-in ways of achieving
harmony. Two important ways are continuing coordination of the work of different
executives and free flowing communications systems.

 To Economize on Executive Time

As a sales department’s operations and activities increase in complexity and

number, additional subordinates are added. This permits higher-ranking sales
executives to delegate more authority. It also allows for the more effective use of
specialization, while higher executives devote less time to operations and more to
planning. One purpose, then, of organization-and one often overlooked-is
achieving economies in the use of executive time. Top sales executives need not
concern themselves personally with the entire sales department’s problems and
activities, particularly routine or technical ones, when they have capable and well-
trained subordinates. In building the sales organization, then, the need for effective
coordination limits the number of subordinates who report directly to certain
executives. This limit is the “span of control” but the greater the abilities of the
coordinator and of those reporting to him or her, the larger the number that can be
effectively coordinated. Lower-level sales executives, however, those with
salespeople reporting directly to them, have a wider span of control than higher

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executives devoting much time to planning and policy formulation and little to
administrative and operating details.

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:

Delineating
Grouping Assigning Providing for
Defining the the
activities personnel to coordination
objectives necessary
into jobs positions and control
activities

 Defining Objectives

The initial step in setting up a sales organization 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. 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.

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Survival also requires profits; hence, a second qualitative personal-selling
objective is to produce profits, not only by making profitable sales but by
controlling departmental costs and expenses. 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. 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

 Determination of Activities and Their Volume of Performance

Fundamental to 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?

 Grouping Activities into 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.

Certain activities are of crucial importance to success of the sales department, and
this has implications for organizational design. For example, in a highly
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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. The smallest
number of administrative levels that permits the organization both to perform its
activities and to operate smoothly is best.

 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.

 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 un-delegated
responsibilities that they have insufficient time for coordination. 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

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formal instruments of control and coordination. 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.

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. 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.

BASIC TYPES OF SALES ORGANIZATIONAL STRUCTURES

Organization structure is the arrangement of people and tasks to accomplish

organizational goals. There are four basic types of sales organizational structure;
line, line and staff, functional, and committee. The grouping of activities into
positions and the charting of relationships of positions causes the organization to
take on Structural form. The first two types (line and line and staff) are the most
common. Functional and committee organizations are rare. 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

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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.

 Lines 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 anyone
organizational levels 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. 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
arid 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.

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 General
Manager

Sales Manager

Asst. Sales Asst. Sales Asst. Sales Asst. Sales

Manager Manager Manager Manager
Division 1 Division 2 Division 3 Division 4

Salespeople A Salespeople B Salespeople C Salespeople D

 Advantages of Line Structure

1. The basic simplicity of line organization is the main reason for its use
2. Because each department member reports to only one superior, problems of
discipline and control are small
3. Lines of authority and responsibility are clear and logical, and it is difficult
for individuals to shift or evade responsibilities
4. Definite placement of authority and responsibility saves time in making
policy changes, in deciding new plans, and in converting plans into action
5. 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.

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  Weakness of the Line Sales Organization
1. 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
2. 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. Moreover, as growth
proceeds, earlier advantages of close relations among executives and salespeople
are sacrificed and maintaining morale becomes a greater challenge.

 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

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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.

President

V P Marketing

Manager of
Advertising General Sales
Marketing
Manager Manager
Research

Director of Sales Sales Personnel Asst. General Asst. to General Sales Promotion Director of
Training Director Sales Manager Sales Manager Manager Dealer Relations

District Sales
Manager

Branch Sales
Manager

Sales Personnel

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. 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

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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

1. The chief sales executive, being relieved from much detail work, can take a
broader view of the department
2. Problems can be seen in clearer perspective, and connections between
apparently unrelated problems are brought into focus
3. A pool of experts provides advice and assistance in specialized fields
4. Planning activities are subdivided and apportioned to staff members, and
decisions and policies rests on a sounder base than lip the line organization
5. 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.

 Weaknesses
1. 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

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 2. 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
3. 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.
 Functional Sales Organization

Director of Sales
Administrator

Installation & Manager of

Manager of Manager of Manager of Manager of
Service Sales
Sales Training Sales Promotion Dealer Relations Sales Personnel
Manager Supervision

Salesperson Salesperson Salesperson Salesperson Salesperson Salesperson

This type of organizational structure is based upon the premise that each individual
in the organization executive and employee should as few distinct duties as
possible. The principle of specialization is used to the full 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 jurisdiction
of the same executive. In functional sales department sales people receive
instructions from several executives but on different aspect of their work.
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Provisions for coordinating the functional executives are made only at the top of
the structure; executives at lower level do not have coordinating responsibilities. In
contrast to line and staff organization, all specialists in functional organization
have line authority of the sort.

Instructions and even policies case be put into effect with or without prior approval
of the top level coordinating executives. The coordinating executive is the director
of sales administration all executives in the next level are specialists. As indicated
sales personnel receive instructions from six different executive

 Advantages of Functional Sales Organization

Specialized activities are assigned to experts whose guidance should help in

increasing the effectiveness of sales force

 Weakness
1. The sheer size of sales force in many large firms makes the highly
centralized sales operation of a functional organization impractical. This
limitation is traced to the requirement in functional model for lone official to
coordinate the specialists
2. 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 labour.
 Committee Sales Organization

The committee is never the sole basis for organizing a sales department. It is a
method of organizing the executive group for planning and policy formulation
while leaving actual operations, including implementation of plans and policies, to
individual executives. Thus, many firms have a sales training committee
(comprised of the general sales manager, his or her assistants, the sales training
manager, and perhaps representative divisional or regional sales managers) that
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meets periodically to draft training plans and formulate sales training policies.
Implementation of these plans and policies, however, is the responsibility of the
sales training manager, if the company has one, or of the line and/or staff
executives responsible for sales training in their own jurisdictions. Other,
committees found in sales organizations includes customer relations, operations,
personnel, merchandising, and new products.

 Advantages
1. Before policies are made and action is taken, important problems are
deliberated by committee members and are measured against varied
viewpoints
2. Committee meetings, where ideas are interchanged and diverse opinions are
present, promote coordination among members of the executive team
3. When problems are aired in the give and take of committee meetings,
cooperation is likely to be better than under any other organization plan.
However, unless decision making and policy formulation are left to specific
individuals, it is impossible to fix responsibility.
4. Committees render their most important service in providing focal points for
discussion and for the making of suggestions; so many companies prohibit
committees from making decisions or formulating policies. No committee
should develop into a vehicle for the evasion of responsibility.

For committees to operate effectively, other precautions are necessary. The agenda
must be planned and controlled to avoid wasting time of executives not directly
interested in the topics considered. The tendency for committees to consume large
amounts of time is counteracted if the chairperson keeps the discussion focused
upon the subject at hand.

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 FIELD ORGANIZATION OF THE SALES DEPARTMENT

Every growing company faces, sooner or later, the necessity for establishing a field
sales organization. The sales manager can personally supervise field selling
operations when a company is young, when only a few salespeople are employed,
when the sales force travels out of the home office, and when the marketing area is
small. As more salespersons are added, it is increasingly difficult to supervise and
control them. If growth in sales volume is to parallel additions to the sales force,
either the same marketing area must be worked more intensively or new areas must
be penetrated. Both alternatives call for closer supervision and control of field sales
personnel.

The field organization consists of all employees of the sales department who work
away from the home office. All outside salespeople are included, as are traveling
sales supervisors, branch and district managers, and clerical employees in branch
and district offices. Also included are service, repair, and sales promotion
personnel. Although not all are concerned directly with increasing the effectiveness
of field selling operations, each makes contributions to that end.

The two main purposes of a field organization are

1. To facilitate the selling task and

2. To improve the chances that salespeople will achieve their goals.

Sales personnel count on the field organization for assistance and support. Their
jobs should be made easier because of it. Companies that consider centralization
desirable have complex supervisory organizations. Each salesperson is subjected to
close supervision-hence the need for a considerable force of supervisors. Firms that
believe in decentralization, in contrast, permit individuals in the field to operate
more on their own.

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Numerous factors influence the size of the field organization; the larger the firm
(assuming similar sales-related marketing policies) the greater the required number
of salespeople, supervisors, and regional, branch, and district managers. The
relative emphasis placed on personal selling in the marketing program affects the
size of the field organization. For example, the firm selling directly to retailers,
ultimate consumers, or industrial users commits itself to the performance of a
sizable personal selling task, and it requires a field organization of commensurate
size. In contrast, companies using wholesalers find that their field organizations
can be correspondingly smaller, since parts of the personal selling and other-tasks
are transferred to these middlemen. Other factors affecting the size of the field
organization include desired frequency of sales calls, number of customers and
prospects, and geographical spread of sales ac-counts.

CENTRALIZATION VERSUS DECENTRALIZATION IN SALES

FORCE MANAGEMENT

In the centralized sales organization almost all activities, including sales force
management, are administered from a central headquarters. The central sales office
has full responsibility for recruiting, selecting, training, compensating, supervising,
motivating, controlling, and evaluating the sales force. In the de-centralized
organization, in theory at least, all these activities are handled by field sales
executives.

A decentralized sales organization is one in which there is decentralization in

management of various selling tasks and in performance of certain important
personnel management activities. For example, branch or district sales offices may
do the recruiting, selecting, motivating, and supervising; the central head-quarters
may handle training, compensating, and evaluating; and the branches and the

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central headquarters may share responsibility, in proportions varying with the
marketing situation and management philosophy, for other aspects of sales force
management. It is rare, in other words, for sales force management to be either
100% centralized or 100% decentralized. Management’s appraisal of relative costs
and effectiveness results in some aspects being centralized and others
decentralized.

Centralization in sales force management varies. Smaller companies that have few
salespeople and confine their operations to a small geographical area, keeping the
unit of sales high, the sales call frequency low, and the caliber of salespersons
relatively high, incline toward centralized sales force management. Manufacturing
firms relying almost entirely upon specialized wholesale middle-men for marketing
of their products need only minimum sales forces and, therefore, tend toward
centralization. Local wholesalers with restricted sales areas also have small sales
forces and, by the nature of their operations, are highly centralized. The principal
factor determining centralization, then, is a small size of sales force, but other
marketing factors, such as those illustrated, also move a company in this direction.

High decentralization in sales force management is found mainly among

companies with large sales forces. Likely to have considerable decentralization, for
instance, is a manufacturing firm distributing a wide line of consumer products
over a vast market area and selling directly to varied retailers, all conditions
indicating the need for a large number of salespeople. Wherever marketing
conditions require large sales forces; the economies and effectiveness of
decentralization are more attractive than are those of centralization.

Other things being equal, there is a strong pull in the direction of sales force
decentralization as a company grows. This is true even though decentralization
requires at least one more level of sales management, and the maintenance of
branch and district offices (or both) causes additions to other fixed operating costs.

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With growth, the advantages of decentralized sales force management increasingly
outweigh the higher costs. Among these advantages are:

1. More intensive cultivation of the market and, consequently, a higher sales

volume to absorb the higher fixed costs
2. More effective control, improved supervision, and increased sales
productivity resulting from the addition of at least one intermediate level of
sales executives, and from reduction of geographical separation of
executives and sales personnel
3. Improved customer service stemming from more effective control of sales
personnel
4. Reduced need for and costs of territorial break-in time, since more sale
persons are recruited from the areas to which they are assigned
5. Improved sales force morale – there are more frequent contacts with
executives, reductions in travel time, and fewer nights away from home
6. Lower travel expenses – salespeople are dispatched from decentralized
points, and fewer field trips by home office sales executives are required
7. A built-in management development program – branch and district offices
not only provide realistic training but serve as proving grounds for future
high-level sales executives

SCHEMES FOR DIVIDING LINE AUTHORITY IN THE SALES

ORGANIZATION

As marketing operations expand, line authority and responsibility eventually

become excessively burdensome for the top sales executive. There are an
increasing number of people to supervise. Ordinarily, the first remedial step taken
is to add a general line assistant, for example, an assistant general sales manager.

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As the burden of line administrative work continues to grow, it is necessary to
provide additional assistants. These new subordinates are given line
responsibilities narrower than those of the assistant general sales manager.
Although they work with a variety of matters, their assignments cover a limited
area of operations.

Tasks of line administration are subdivided among these new assistants in one of
three ways:

 by geographic area,
 by products, or
 by customers or marketing channels

 Geographic Division of Line Authority

The large firm with far flung selling operations is likely to subdivide line authority
geographically. This is particularly so if the characteristics of large numbers of
customers vary by geographic location, if different selling problems are
encountered in different areas, or if certain products are more strongly demanded
in some regions than in others. But there is an even more compelling reason for
dividing line authority geographically as more customers are added and as a wider
area is cultivated, the size of the sales task increases enormously. Setting up
geographic divisions is a way of cutting the sales task down to manageable
proportions. When centralized administration becomes too great a burden for the
top sales executives, secondary line executives are delegated authority to conduct
sales operations within smaller areas. Geographic division is usually made first
into regions or divisions. This may or may not be broken down further into districts
or branches.

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 Chief Marketing Executive

Marketing
Advertising General Sales Sales Promotion
Research Sales Analyst
Manager Manager Manager
Manager

Western
Eastern Regional
Regional Sales
Sales Manager
Manager

District Sales District Sales

Manager Manager

Salesperson Salesperson
each with own each with own
territory territory

 Advantages
1. When line authority is divided geographically, local problems are handled
speedily. It is not necessary to wait for decisions from the home office;
many questions of importance to customers can be answered by executives
personally acquainted with local conditions
2. Shortening the lines of communication makes possible closer supervision of
salespeople, which, in turn, helps in improving customer service. Local
markets can be cultivated intensively, and tactics of local competitors can be
met and countered in the field.
 Weakness
1. However, this system calls for multiple offices, so administrative expenses
increase
2. Top sales executive faces coordinating several regional operations. Unless
this coordination is effective, conflicting policies may develop in different
regions.

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  Product Division of Line Authority

A second scheme for dividing line authority is to split the sales task among sub-
ordinate line executives, each of whom directs sales operations for part of the
product line. When authority is so divided, more than one sales force may be
required. Some companies’ product lines are too wide to be distributed
economically by a single sales force. Others sell both highly technical and non-
technical products; thus some salespeople need specialized training and some do
not. In still others, economies of a single sales force are reduced or eliminated
because different products are marketed to different types of customers

Chief Marketing Executive

Marketing Customer
Advertising General Sales Sales Promotion
Research Relations
Manager Manager Manager
Manager Manager

Sales Manager Sales Manager Sales Manager

Product A Product B Product C

Salespeople Salespeople Salespeople

Product A Product B Product C

The decision to use the product type of sales organization should rest on whether
the benefits of product specialization outweigh the additional expenses. If they do
not, it is wiser to organize the sales force on some other basis. Gains associated
with specialized salespersons, who concentrate on selling specific products, must
be outweighed against increased expenses. Maintaining more than one sales force
results in higher administrative and travel expenses. There are almost certain to be
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times when two company sales personnel selling different products make calls on
the same customers. Although specialized salespeople may give more “push” to
individual products, many customers object to multiple calls from the same
company. The benefits of specialized sales forces are greatest for companies
selling broadly diversified lines, reaching different markets with different products,
and encountering unique selling problems for the various products.

 Customer (or Marketing Channel) Division of Line Authority

The third scheme for subdividing line authority is by type of customer. This is
appropriate when nearly identical products are marketed to several types of
customers and the problems of selling to each type are different. When the same,
or similar, products are sold to a number of industries, they often find different
applications in each industry. Customers not only have different needs, they are
influenced by different buying motives. Thus, special sales forces sell to each
major type of customer.

Chief Marketing Executive

Customer
Advertising Sales Promotion
Marketing Relations
Manager General Sales Manager
Research Manager
Manager
Manager

Sales Manager Sales Manager Sales Manager

Transportation Steel Industry Production
Industry Industry

Salespeople Salespeople Salespeople

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  Dividing Line Authority on More than One Basis

Few companies use a single basis for subdividing line authority. Most use a
combination, subdividing the selling task more than once, to permit greater
specialization. Nearly every large sales department subdivides authority on the
geographic basis at some level of organization, but this is done visually in
combination with either the product or type-of-customer system. If geographical
differences are more important than those of product or type of customer, the
primary subdivision is geographical, and the next is at a lower organizational
echelon according to one of the other bases. If geographical differences are of
lesser importance, the procedure is reversed. The factor most important to the
marketing success of the company should form the basis for the first subdivision,
and less important factors should determine subsequent breakdowns at lower
organizational echelons.

There is growing recognition of the need to apply sound principles of organization

to the sales department. Organizational planning is a continuing activity, and the
sales department structure is adjusted to changing market needs. This has evolved
as less emphasis has 0been placed on securing orders and more attention has been
paid to control of costs and expenses and the realization of net profits. These are
trends of great importance. As they continue, an increasing number of sales
organizations are structured more logically. Selling activities are performed with
less waste effort, and total effectiveness of the sales effort is enhanced. These
advances result in significant benefits to the firms achieving them, and to their
customers.

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