SALES

ORGANIZATIONS
Unit 4

Designing Organizational
Structure

Organizing

The process by which managers establish

working relationships among employees to
achieve goals.

Organizational Structure
Formal system of task and reporting
relationships showing how employees use
resources.

Factors Affecting Organizational

Structure

The Organizational Environment

The Organizational Environment
The quicker the environment changes, more
problems managers face.
Structure must be more flexible (i.e.,
decentralized authority) when environmental
change is rapid.

The Organizational Environment

Strategy
Different strategies require the use of different
structures.
A differentiation strategy needs a flexible
structure, low cost may need a more formal
structure.
Increased vertical integration or diversification also
requires a more flexible structure.

The Organizational Environment

Technology
The combination of skills, knowledge, tools, equipment,
computers and machines used in the organization.
More complex technology makes it harder for
managers to regulate the organization.

Technology can be measured by:

Task variety: the number of new problems a
manager encounters.
Task analysability: the availability of programmed
solutions to a manager to solve problems.

The Organizational Environment

Human Resources
Highly skilled workers whose jobs require
working in teams usually need a more flexible
structure.
Managers must take into account all four
factors (environment, strategy, technology
and human resources) when designing the
structure of the organization.

The Organizational Environment

The way an organizations structure works
depends on the choices managers make
about:
1.
2.

3.

How to group tasks into individual jobs

How to group jobs into functions and
divisions
How to allocate authority and coordinate
functions and divisions

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Fundamentals of
Organisation principles
Span of control
Unity of command

Hierarchy of authority
Stability and continuity

Co-ordination and integration

Objectivity

Steps in setting up a SO
Define the objectives
Define the necessary activities
Grouping activities into jobs / positions
Assigning personnel to positions
Providing for co-ordination and control

Sales Organisation

Basic Types of Organisations

Line Org
Line & Staff Org
Functional Org
Horizontal Org

Sales Organisation - Line org

Nature : Simplest form. Authority flows from top
to bottom.
When used: small firms or within a small dept in
a large firm
Relative merits: low cost, quick decision, highly
centralised. No replacement as the top position is the
owner of the firm.
De-merits: Sales Manager gets no support from
subordinates w.r.t specialised skills on advtg and
promotion. Inadequate time to do planning and analysis.

Sales Organisation - Line & Staff Org

Line

& Staff Org

Nature: Line Org + Staff ( specialist in diff areas of mktg). Staff have
advisory relationship with Sales Mgr and salesmen .

When used:

Sales force is large

Market is regional or national
Line of products is varied
Number of customers is large

Relative merits / demerits

Cost can be high

Benefits of division of labour
decision making slow.
Strong Staff executives eager to take up line function

Sales Organisation - Functional Org

Functional organizationis a type of

organisation structurethat uses the principle of
specialization based on function or role.

It allows decisions to be decentralisedsince

issues are delegatedto specialized persons or
units, leaving them the responsibility of
implementing, evaluating, or controlling the
given procedures or goals.
When used; Varied product lines and or markets.

Functional Org, contd

Merits
The merits of functional organisation are as
follows:
(1) SpecialisationIt ensures a greater division
of labour and enables the concern to take
advantage of specialisation of functions.
(2) More efficiencyEfficiency of workers is
increased as the workers and other have to
perform a limited number of operations and they
get suggestions and instructions from specialists.

Functional Org, contd

Demerits
The demerits are:
(1) ConfusionThe operation of functional organisation is too
complicated. Workers are supervised by a
number of bosses. This results overlapping of authority and
thus creates confusion in the organisation
(2) Lack of coordinationUnder this, the work is divided into
parts and sub-parts. It poses difficulties in
coordinating the functioning of different parts. Thus difficult to
take quick decisions.
(3) Difficulty in fixing responsibilityBecause of multiple
authority, responsibility for poor performance cannot be fixed
easily on a particular person.

Sales Organisation -

Horizontal Org

A horizontal organizational chart usually has two or three

levels, and the business owner typically holds the top position
on the chart. The second level includes managers or team
leaders, and the third level includes teams overseen by a
corresponding manager or team leader.

Advantages:

Employee-Centered Approach
Emphasises on the collective goal of the company. Focus is on the
processes and procedures that directly affect products rather than
individual jobs.

When teams work independently, they are not in direct

competition. They have different business goals and challenges.

Advantages of horizontal org structure

Coordination is established:
All the persons working within a department are specialists of
their respective jobs. It makes coordination easier at the
departmental level.
Managerial Efficiency is increased:
It helps in increasing managerial efficiency because of performing
the same work again and again. Further, this results in increased
profit.

Minimal Duplication of Efforts:

Duplication of efforts is eliminated.
Training is facilitated:
It facilitates the training of personnel as the focus is only on
a limited range of skills

Advantages contd,

Connected to customers
Ensures teams are closely connected to market conditions

Performance Incentives
Since structure emphasizes the group, when a group works well everyone benefits. Rather than a power-struggle, the focus group
is working toward achieving the goal. Economic incentives can be
tied to performance.
Workplace Culture
Increasing worker job satisfaction has shown to increase worker
motivation, which in turn, increases productivity. Increases job
satisfaction. Value is placed on openness, cooperation and
collaboration

Disadvantages Horizontal org

a)There may be conflict between departments

as the responsibilities are interdependent.
b)Because the responsibility is spread out over
project leaders and team members, there is
very little real authority. This can result in a
loss of control
c)It maximizes supervision cost.
d)It is non responsive to environmental
change.
e)It does not promote innovation and
creativity.

Sales Organisation -

Horizontal Org

When used:
By large and small firms seeking greater
efficiencies and customer responsiveness.
Keen to establish long term relationship.
Various cross functional teams work with the
customers.

New Organisation Options

Strategic
A/C
mgmnt

Independe
nt
Reps

New
Org
options

Team selling

Ecommerc
e

Key account sales

Criteria for key or national account:

Purchase a large volume

Customer to purchase more of the profitable products
Customer requiring high level of customer service
Customer may be price sensitive
Customer may desire long term relationship with supplier

First task is to identify who are the profitable customers and those who are
not. Basis whale curve.
Objective of key account management is to become the preferred or sole
supplier
Assign each customer or group of customers to a selected sales manager
ably supported by a group of sales men.
Objective for each salesman build long term relationship CRM.

Number of sales people

Affordability method:
Suitable for small firms
Adv: - costs in line with sales
Dis adv: does not consider customer needs and
demand patterns

Number of sales people

Incremental method:
Based on marginal analysis theory of economics.
Basic concept is profit will increase when additional
sales people are added if the incremental sales
revenue exceed the incremental costs
Scope of new business is low; generate sales from
existing customers
Add a new salesman when likely revenue generated
by him exceeds his costs

Number of sales people

Workload method:

Assumption made are all sales people will have

equal work load and that the total work load in
covering the market includes the customer size,
customer sales volume potential and travel time.

Quote
We used pencils when we were small but now
we use pens .. Do you know why?
Because mistakes in childhood can be erased
but not now.