MANUEL V GALLEGO FOUNDATION COLLEGES, INC.

INSTITUTE OF ACCOUNTANCY AND BUSINESS

SALES MANAGEMENT MGT

317
SALES MANAGEMENT (MGT317)

MODULE 5: ORGANIZING THE SALESFORCE

This module talks about the organization of the salesforce and the basic type of
organizational structures aligned with the goals of the business. This will also talk about the
major stages of salesforce staffing process and the various steps involved in planning and
recruiting people involved in the salesforce.

INTENDED LEARNING OUTCOMES:

1. Analyze the salesforce staffing process.

2. Create sales organizational charts with detailed job specifications.

COURSE CONTENT

CONCEPT OF SALES ORGANIZATION

- The aim is to arrange the activities or jobs in such a manner that the people involved
can perform effectively and efficiently and act together rather than individually. The
basic concepts include:
a. Degree of Centralization – centralization or decentralization.
b. Degree of Specialization – general or specialized approach.
c. Line or Staff Position – line managers have line authority or power to direct and
control immediate subordinates. Staff management positions have staff authority,
which means advising and recommending roles in their respective areas of
specialization.
d. Market Orientation – variety and complexity of the market.
e. Effective Coordination – harmonious interaction to promote smooth workflow.
f. Span of Control – number of individuals who report to each manager.

BASIC TYPES OF SALES ORGANIZATIONAL STRUCTURES

Accounts and opportunities can be divided by:

1. Geography/territory
2. Product/service line
3. Customer/account size
4. Industry/vertical segment

Sales Team Structures

1. Geography/Territory Org Structure

Organizing your sales team by geography or territory allows each salesperson to develop
familiarity with a specific geographic location. They can build rapport with local businesses,
get to know regional competitors, and track target accounts.
It can also be easier to evaluate your reps by taking into account the performance and
market potential of a specific geographic location. One consideration of geography and
territory org structure is that it can lead to sales reps working in silos, inhibiting their ability to
develop cross-functional expertise.

Prepared by: Mr. Justine Ralph M. Portugal, LPT Page 1 of 8

 MANUEL V GALLEGO FOUNDATION COLLEGES, INC.
INSTITUTE OF ACCOUNTANCY AND BUSINESS

SALES MANAGEMENT MGT

317

2. Product/Service Line Org Structure

If your company sells several different products or services, it can help to align salespeople
to those products and services. Similar to geographical expertise, it allows your reps to
become the expert on a specific product you sell, thereby better able to communicate its
value and use case for individual clients.

A potential downside of implementing this structure is that reps may focus more on the
features of the products they are selling, and not the best solution for the customer.

3. Customer/Account Size Org Structure

Organizing your sales org by account size is another popular structure. The skills a rep
needs to sell to an SMB are different than those of selling to an enterprise account.

These businesses have different goals, will ask different questions, and have very different
budgets. By allowing reps to become familiar with the intricacies of these accounts, you'll
better meet the needs of the customer and your reps.

Prepared by: Mr. Justine Ralph M. Portugal, LPT Page 2 of 8

 MANUEL V GALLEGO FOUNDATION COLLEGES, INC.
INSTITUTE OF ACCOUNTANCY AND BUSINESS

SALES MANAGEMENT MGT

317
With this org structure, teams should be aware that it may be more difficult to manage
resources. To be successful, this structure requires constant communication with team
members to ensure all clients receive the same quality of service.

4. Industry/Vertical Org Structure

Different industries will use your product/service in different ways. Make sure your reps are
well-versed in how to position your offering to these various verticals by organizing your
sales team accordingly.

This can be one of the most expensive ways to structure a sales team.

SIZE OF THE SALESFORCE

In most companies, the sales force is the most critical part of the business; thus determining the sales
force size is critical in planning for sales governance. Although the corporate sales team is one of the
most valued assets of the company, it can also be expensive to maintain. Increasing the size of the sales
force may increase sales volume but at a higher cost to the company. It is therefore necessary to
determine the optimal sales force size. The size of the sales force will also affect territory design.

The three most commonly used methods to determine sales force size are as follows:

Prepared by: Mr. Justine Ralph M. Portugal, LPT Page 3 of 8

 MANUEL V GALLEGO FOUNDATION COLLEGES, INC.
INSTITUTE OF ACCOUNTANCY AND BUSINESS

SALES MANAGEMENT MGT

317
Breakdown Method

This is the simplest method among the three. In this method, each member of the corporate
sales team is assumed to possess the same level of productivity. In order to determine the
size of the sales force needed, the total sales figure forecasted for the company is divided by
the sales likely to be generated by each individual.

However, this method fails to account for differences in the ability of salespeople and the
difference in potential of each market or territory. It treats the sales force as a function of the
sales volume, and does not take profitability into account.

Formula used is: N = S/P (1+T)

where N=Number of salespeople needed,or salesforce size

S=Annual sales forecast for the company in value.

P=Estimated productivity of the average salesperson in sales

T=Estimated percentage of annual salesforce turnover

Advantages: Simple and straight forward

Disadvantages: Conceptually weak; lead time needed for a new salesperson to reach
average productivity.

Workload Method

The workload method is also known as the buildup method. In this method, the total
workload (i.e., the number of hours required to serve the entire market) is estimated. This is
divided by the selling time available per salesperson to forecast the size of the sales force.
This method is commonly used since it is easy to understand and to recognize the effort
required to serve different categories of customers.

However, this method also has some shortcomings. It assumes that all accounts in the same
category require the same effort. Other differentiating factors such as cost of servicing, gross
margins, etc. are not considered after the accounts are categorized. It also assumes that
sales persons are equally efficient, which is generally not true. One way to overcome this
shortcoming is to adjust the sales force size, determined in the last step, for efficiency. The
sales force can be classified into different categories based on their efficiency and the actual
number of sales persons required can then be calculated with this adjusted number.

Assumption: All salespeople have equal workload

• Steps involved to calculate salesforce size are:

1) Classify customers as per their sales potential

2) Decide time per sales call and call frequencies for each class of customers

3) Calculate total market workload = (1) x (2) in hours

4) Decide total work time available per salesperson

5) Divide total work time available by different activities per salesperson in hours

Prepared by: Mr. Justine Ralph M. Portugal, LPT Page 4 of 8

 MANUEL V GALLEGO FOUNDATION COLLEGES, INC.
INSTITUTE OF ACCOUNTANCY AND BUSINESS

SALES MANAGEMENT MGT

317
6) Calculate total number of salespeople needed total market workload (3) = total selling
time available per salesperson

Advantages: simple method, conceptually sound, used for all types of selling situations
Disadvantages: Neglects sales productivity & salesforce turnover.

Incremental Method

The incremental method is the most precise method to calculate the sales force size. The
underlying concept is to compare the marginal profit contribution with the incremental cost
for each sales person. The optimal sales force size as per the incremental method is when
the marginal profit becomes equal to the marginal cost and the total profit is maximized.
Beyond the optimal sales force size, the profit reduces on addition of an extra sales person.
Therefore, sales people need to be added as long as the incremental profit exceeds the
incremental cost of adding sales people. The main shortcoming associated with this
approach is that it is difficult to estimate the additional profit generated by the addition of one
salesperson and is therefore difficult to develop.

Thus sales force needs to be properly organized, motivated and compensated in order to
have the right size to do the workload, alignment to cover all needs, and keeping them
happy and selling. At the end of the day, they are the ones who get the customer to give up
their money for the company’s product or service.

It is based on marginal analysis theory of economics. Basic concept: Net profits will increase
when additional salespeople are added, if the incremental sales revenues exceed the
incremental costs.

Merit: Conceptually accurate, as it quantifies relationships between salesforce size, sales,

costs, profits

Demerit: Can not be used if historical data on sales and costs are not available

SALESFORCE STAFFING PROCESS

It is one of the most challenging and important responsibilities / activities of sales

management it includes following stages:

1 .Planning Stage - It consists of three steps:

a. Establish responsibility for staffing process - Company management decides

responsibilities for various stages / activities of staffing process. Generally in a medium /
large size company, middle and senior levels H.R. and sales managers are responsible.
Proper coordination needed between sales, marketing, and HR executives.

b. Decide the number of salespeople needed - Steps followed by each territory

sales manager to plan requirement of sales people:

b.1. Decide optimum salesforce size.

b.2. Add number of promotions, retirements, transfers out, terminations, resignations
expected from existing salespeople.
b.3. Subtract expected transfers into the territory and existing salesforce.
b.4. Make a total of new salespersons needed - Territory sales managers submit their
requirements to national/general sales manager, who calculates the total number of new
salespersons to be hired.

Prepared by: Mr. Justine Ralph M. Portugal, LPT Page 5 of 8

 MANUEL V GALLEGO FOUNDATION COLLEGES, INC.
INSTITUTE OF ACCOUNTANCY AND BUSINESS

SALES MANAGEMENT MGT

317
c. Outline Type of Salespeople Needed - The steps involved in the process are:

c.1. Conducting a Job Analysis - it is done by a person from sales / H. R.

department, or a consultant. It consists of two tasks:

c.1.1. Analyze environment in which the salesperson would work – e.g. nature
of customers, competitors, products.

c.1.2. Determine duties and responsibilities of the salesperson. Obtain

information from sales managers, customers, etc.

d. Preparing a Job Description - It is a written document developed from the job

analysis. The detailed job description is a useful tool for recruiting, selecting, training,
compensating, and evaluating salespeople. Some of the points it generally covers are: Job
title, reporting relationship, types of products / services sold, types of customers, duties and
responsibilities, location and geographic area to be covered.

e. Developing Job Qualifications / Specifications - These are generally based on job

description. Job specifications / qualifications include education, sales experience, skills, and
personality traits. Many studies done, but no generally accepted job qualifications for
selecting salespeople, due to many types of sales jobs. Some methods used for developing
job specifications are as under: Studying job descriptions and analyzing personal histories of
salespersons.

2. Recruiting Salesforce - Recruiting include activities to get individuals who will apply for
the job. The general purpose of recruitment is to get enough qualified candidates, to enable
company select the right persons. H.R. and sales managers must update information on
government employment regulations. Recruiting stage / process includes following activities:
a. Finding the sources of sales recruits.

b. Evaluating and selecting recruiting sources.

c. Contacting candidates through the selected source.

Finding the Sources of Sales Recruits - For identifying prospective candidates, firms use
internal and external sources. They include:

- Internal Sources External Sources

- Employee referral
- Advertisements in programs newspapers and journals
- Current employees magazines
- Promotions and transfers
- The Internet (job sites)
- Educational institutions
- Employment agencies
- Job fairs
- Other companies

Prepared by: Mr. Justine Ralph M. Portugal, LPT Page 6 of 8

 MANUEL V GALLEGO FOUNDATION COLLEGES, INC.
INSTITUTE OF ACCOUNTANCY AND BUSINESS

SALES MANAGEMENT MGT

317
Evaluating and selecting Recruiting Sources - Recruiting sources are evaluated based on the
database built over number of years. Evaluating factors are:

a. Performance rating of salespeople, after 2 years working.

b. Percentage of salespeople retained, after 2 years working.
c. Total cost of recruiting.
d. Selecting most effective source of recruiting at least cost .
e. For a new company, selection depends on cost.
f. Contacting candidates through the selected source is done by H. R. department.

3. Selecting Salesforce - Selection process consists of seven major selection steps / tools •
Companies differ in using selection tools, depending on expenditure budget and time
available Major selection tools / steps are:

a. Screening Resumes - It is done when the company receives many resumes. This step /
tool not required, if somebody else like employment agency does initial screening. Initial
screening of resumes are done by comparing with job specifications.

b. Application Blank Widely used - It is a methodical way of collecting relevant information

from the applicant. Advantages of using application blank (also called “formal application
form”) are: (1) Easy comparison of many applicants (2) Useful for asking question during
interview sessions.

c. Interviews - Widely used selection tool. A good predictor of the candidate’s performance.
Initial interviews are used for screening candidates. Intensive interviews are conducted to
get in-depth view of candidates.

Interview structure / type of interviews:

- Structured / patterned / guided interviews.

- Unstructured / non-directed / informal interviews.
- Semi-structured interviews
- Behaviour and performance based interviews
- Stress interviews

Testing - Many firms use tests as a selection tool.

Purpose of testing: To find whether applicants have traits / characteristics that lead to
success in sales job.

Type of selection tests:

- Aptitude tests measure ability for selling and learning.

- Intelligence tests find out mental intelligence or intelligence quotient (IQ).
- Interest tests find out level of interest in a sales career.
- Knowledge tests measure knowledge of products, markets, etc.
- Personality tests find out attitude or traits like empathy, self-confidence.

Prepared by: Mr. Justine Ralph M. Portugal, LPT Page 7 of 8

 MANUEL V GALLEGO FOUNDATION COLLEGES, INC.
INSTITUTE OF ACCOUNTANCY AND BUSINESS

SALES MANAGEMENT MGT

317
- Tests must have reliability and validity. Tests should be one of the selection tools and
not the only tool.

Reference Checks - They are important due to possibilities of resume frauds and false personal
information. They are done by letters / e-mails, telephones, or personal visits. Instead of
candidate’s references, previous employers / customers to be included for reference checks

Physical Examination - Objective is to find a physical problem that may prevent job
performance of an applicant. Most companies want their prospective employees to undergo physical
examination.

4. Hiring Stage - After completing selection process, a list of candidates to be hired is

made. In hiring stage, two activities are performed:

(1) The company making the job offer.

(2) Persuading the applicant to accept it.

5. Socialization Stage - It is the process through which new salespeople learn values,
norms, attitudes, and behavior of people working in the firm. Socialization process starts
before the new salesperson accepts the job offer and continues until the person is
assimilated into the company culture • Assimilation is the second stage of socialization
process. Companies have this process, in order to retain new salespeople.

LEARNING ACTIVITIES:
1. Lecture discussions via zoom meeting, Self-managed learning

Guide questions:
1.1.What are the concepts in salesforce organization?
1.2. How are organizational structures selected in sales? Is it different from the typical
organizational structures? How?
1.3. What are methods for selecting salesforce size?
1.4. What are the steps in the salesforce staffing process?

ASSESSMENT

Answer the following questions.

1. As an organization, our institute has an organizational structure. Look for the

organizational structure and analyze the degree of specialization and adequacy of control.
Assuming the institute’s effectiveness, what changes in the structure would you
recommend? Explain.

2. Sales mangers feel that motivation for hard work is the key factor that decides whether
applications for sales positions will be successful in selling. Which tests can measure
motivation? How should sales managers find applicant’s motivation for hard work?

3. Some sales and human resource managers feel that background/ reference check is not
an effective selection tool. What are your views on this? What are the setbacks of this
selection tool? Why is still used despite its drawbacks?

References:

 Sales and Distribution Management (Havaldar, Cavale, 2011)

Prepared by: Mr. Justine Ralph M. Portugal, LPT Page 8 of 8