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types of structures and functions – SKB Kontur

The organization of the sales department usually depends on the specifics of the activity and the size of the company. But there are other factors that influence this: customers, distribution channels, the product itself, the level of competition, staff skills, and much more.

Sales are essential to a business. It is not for nothing that a separate group of specialists is engaged in this area. They invest joint efforts to achieve qualitative and quantitative goals that are related to the volume of sales, profitability and market share of the company.

In this article, we will deal with the following issues:

• Basic principles of the sales department
• Criteria for an effective sales force
• Structure of the sales department
• Basic types of sales organization

Basic principles of the sales force

Some experts rightly compare the sales force to a power plant. It also generates energy, which is then spent on advertising and selling certain products. Until the moment when the product finds its buyer, there is a huge loss of energy. Therefore, there is an urgent need to plan, organize and control all stages of the marketing process.

Any sales department is built on several principles:

1. The sales department is one of the areas responsible for sales.
2. Consists of a group of professionals who set themselves common goals in sales.
3. There are formal and informal relationships between these people.
4. Sales success depends on the coordinated efforts of sales people.
5. The sales system operates under the direct control of the head of the sales department.

In order for the sales process to be effective, you must first define the expectations of the sales team. To do this, you will have to formulate corporate goals – qualitative and quantitative, and then decide how to achieve them and with what resources.

It is equally important to classify sales by areas and figure out who reports to whom. Then appoint suitable specialists to the positions. The structure of the sales department, which will turn out in the end, should be balanced and flexible.

It is believed that in a well-regulated sales system:

• the functions of departments are carefully coordinated to transfer the product into the hands of customers;
• all efforts are under control and spent so that every function runs smoothly.

Criteria for an effective sales department

There are at least seven such criteria.

1. Control range

Control refers to the number of subordinates that the sales manager can control.

2. Uniformity of orders

The principle of unity of command states that an employee should interact with no more than one manager. Although this principle is too rigid for modern business: horizontal communications now play an important role, especially in multidisciplinary organizations.

3. Stability and Continuity

Managers should allocate job responsibilities according to the specialization of salespeople if they have the knowledge and skills to perform certain tasks. This is important for maintaining the stability and growth of the business.

4. Centralization and decentralization

This criterion refers to the degree of control and authority that top management has.

Centralization means that authority and control are concentrated at the top of the organization, while decentralization means the distribution of control between the highest and other levels.

There is no absolute centralization and decentralization in any company. Typically, some activities are centralized and others decentralized.

5. Line and functional components

In a line sales organization, managers control a number of employees and report to higher-level managers.

Functional organizations are not directly subordinated. People are trusted to manage certain functions such as recruitment and selection, training, sales promotion, service, etc.

Both line and functional elements can coexist in the same organization.

6. Coordination and integration

Traditionally, companies have adopted communication with customers directly – through the sales department, which in such cases acts as a front office. And then communication becomes unidirectional, there is no coordination between functional areas.

Most modern organizations prescribe different roles for different departments. For example, the sales department is responsible for solving customer problems. Communication in such companies is a two-way process between the sales department, which studies the needs of customers, and other departments.

It is also important to integrate all lines of business in order to develop an offer that meets the expectations of customers.

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7. Specialization

The sales department is a combination of various activities related to sales and marketing. Therefore, it requires the presence of managers and sales personnel with specialization in the relevant areas.

It is believed that a sales manager should be able to create call plans and work schedules for salespeople. And sellers must communicate effectively with customers and solve their problems.

If we take, for example, a financial company, then it needs salespeople with knowledge in the field of accounting and finance. And a technology company will need people with technical qualifications.

The essence of specialization is to use the experience and knowledge of sales managers. This allows the company to better understand the needs and expectations of customers, professionally solve their problems and provide quality after-sales service.

What is the structure of the sales department

In order for sales to be effective, different directions are often created within the sales department. This division occurs depending on the product, customers, geography, functions, or a combination of several factors.

Product-based structure

When several products are introduced to the market, the department is divided into product-specific divisions. Each product is assigned to a specific department under the leadership of a manager. For general control and coordination of the situation, a lead sales manager is appointed.

In general, this product-based sales force structure is suitable for companies that:

• have many products;
• product prices are higher than those of competitors;
• is a complex product in terms of technical specifications.

Based on the product, two types of departments can be formed:

1. Sales department with linear authority, divided into areas depending on the products (one manager for all products).

In this case, there is a line control and a reporting system. The Lead Sales Manager reports to the Head of Marketing. Employees report to the lead sales manager. Administrative authority for all products remains with one person. But each product is subject to linear control. Namely, there is a sales manager for product A and a sales manager for product B.

Specialists are appointed based on the functions assigned to them.

• Sales department divided according to competencies (each employee is responsible for a specific product).

Employees are assigned separately for each product, as the product differs in complexity and technical features.

Customer-specific sales department structure

This structure is found in companies that work with different types of customers. So, for example, different departments can be created for the sale of industrial and consumer goods.

In this structure, the authority of specialists for all types of clients is similar.

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Structure of the sales department based on the market

The sales geography is divided into segments, and a separate sales department is created for each division. Responsibility for each department is entrusted to the manager. A lead sales manager is appointed to coordinate and control the activities of the departments.

This structure is suitable in cases where the company operates in large markets and each market has its own specifics. In this case, products can be differentiated in quality depending on the market, and this will positively affect sales.

Structure of the sales department based on functions

Directions differ depending on the functions performed: sales planning, personnel management, sales and promotion, advertising and sales promotion, sales analysis, marketing research, etc.

When creating divisions, each aspect of the trading activity is carefully considered, so profits can increase.

This structure is suitable for small companies with a limited number of products.

Combined structure

A large business that produces diversified products and operates in large markets uses a combined sales department. This allows you to specialize the approach at each stage of marketing activities. For this purpose, products, markets, etc. are usually combined.

Main types of sales organizations

Can be distinguished:

• formal and informal organizations;
• horizontal and vertical organizations;
• centralized and decentralized organizations;
• line and functional organizations.

Formal organizations are characterized by clear structures and subordination, which often leads to a slow exchange of information.

Informal organizations do not have a rigid hierarchical structure, regulated communication channels or clear subordination.

A vertical organizational structure is a traditional management structure based on authority. It involves more hierarchical levels.

A horizontal organization is one in which both management levels and departmental boundaries are greatly reduced.

A decentralized organization is an organization in which each division has its own sales force.

Linear

This is the simplest form of sales organization. As a rule, it is typical for small companies whose activities are limited geographically or sales managers deal with a narrow line of products.

This structure is widely used in companies where all sales personnel report directly to the sales manager. In such companies, management is actively controlling and has little time to work in tandem with other managers.

The simplicity of the linear type is the main reason why many companies are interested in it. Since here each specialist reports directly to one boss, problems with discipline and control are practically excluded. In addition, the reporting order is so clear and logical that there are no problems when making the necessary changes to the sales policy.

But there are also disadvantages: line managers usually do not receive sufficient support from subordinates with specialized knowledge, and they have little time for planning or analysis. Much depends on the head of the department – he must be well versed in all aspects of sales management in order to ensure smooth operation.

For large companies, a linear structure is unacceptable, since only a small part of managers are really capable of managing large organizations alone.

Line-functional type

Similar structures are commonly seen in large and medium-sized companies with many sales managers, and they tend to sell diversified product lines in large areas.

The difference between linear and functional types is that in the latter, the senior manager interacts with a group of specialists who are experts in various areas of sales and marketing, such as dealing with dealers and distributors, sales analysis, sales planning, sales promotion, etc.

It is these experts who help senior management focus on various strategic issues, and not just on day-to-day tasks and control. At the same time, employees of the sales department do not have the right to give instructions and orders. The necessary recommendations voiced by them, after the approval of top management, are implemented according to the principle of linear subordination.

Some of the benefits of this type of organization are effective marketing decisions and good sales figures. A group of experts provides assistance in various narrow areas, planning activities are distributed among employees, thus decisions are made more deliberate.

There are also disadvantages: possible problems in collaboration, slow decision-making and work conflicts, high costs for attracting specialists.

Function Type

Such organizations are based on the principle that each person in the organization should have as few responsibilities as possible. Specialization matters.

Distribution of duties and delegation of authority is carried out in accordance with the functions. Each narrow specialist has linear responsibility for the sales department.

The functional type of organization can be observed in large companies dealing with different products or market segments. In this case, salespeople receive tasks from several managers, but this concerns different aspects of their work.

One of the advantages of such structures is high performance. Here, qualified professionals lead sales, and these organizations are simple in terms of administration.

But there are also disadvantages: since the seller receives tasks from several sources, this often creates confusion and causes conflicts. In addition, due to the sheer size of teams in many large companies, any sales operations become too centralized.

Horizontal type

This type of structure does not imply management levels and any boundaries between departments. It is typically used by companies that partner with customers.

The main advantages of the horizontal type are minimal control, reduction of unnecessary tasks and costs, and increased efficiency in handling customer requests and complaints.

10 steps – SKB Kontur

To create a sales system in a company, you need to adhere to several principles at once: analyze expenses and income at each stage of the transaction, make sure that the system scales and makes a profit. We share with you step-by-step instructions on how to build a sales department from scratch – from the first employee to a ready-made mechanism that works smoothly.

Content:

• Step 1. Create a sales plan
  • How to forecast sales
  • Three plans instead of one
• Step 2: Consider the organizational structure
• Step 3. Build a sales funnel for employees
• Step 4. Write down the motivation. Gingerbread and whip
• Step 5: Implement a CRM system
• Step 6. Perform ABC and XYZ Analysis
• Step 7. Understand what prevents you from selling
• Step 8: Set up a recruitment process
• Step 9: Create a learning system
• Step 10. Generate checklists to test effectiveness
• Scale department further

Step 1: Create a Sales Plan

There are several opinions in the business world about a sales plan. Someone does not use planning at all, limiting themselves to controlling the working hours of employees and the number of their calls. Others set goals based on subjective feelings about the capabilities of managers. Try to plan based on real numbers.

How to predict sales

It is impossible to accurately predict sales – there are too many factors to take into account. Therefore, any planning in this area is possible only at the level of hypotheses – correct the plan, having received new data, confirmation or refutation of ideas.

If the business is already running, it will be easier. According to Konstantin Petrov, author of the book “Sales Department Management”, two methods of forecasting should be used to assess future sales:

• Objective – usually this is analytics of previous periods and forecasting taking into account additional factors.

For example, you sell air conditioners. Last year, when it was quite warm, you made 100 deals. This year, weather forecasters promised an early spring and a dry summer – we should expect an increase in demand.

Three Plans Instead of One

Once you’ve figured out your sales forecasts, see how your company can grow. Let’s say you think that it is quite realistic to increase the flow of money by 30% over the reporting period. This will be the “norm” plan.

The revenue required to find a business at the break-even point is the “minimum” plan at which it is worth sounding the alarm, because the organization does not develop and any risk situation or banal inflation can eat up profits.

The third plan is “maximum”. This is an excess of the norm by a certain number of percent. After completing it, employees can count on an additional bonus. It is important that the “maximum” plan is realistic: if its indicators cannot be achieved, employee loyalty suffers.

Why is it important to set sales growth as the norm? It’s not just about business indicators, but also about people’s psychology. For example, Nikita Zhestkov, the founder of the In-scale marketing agency, is sure that it is important for sales managers to constantly see new goals in front of them, otherwise they relax and earn a certain minimum for which it is comfortable to exist.

The sales plan is constantly reviewed, including in the process – this is not a rigid document that must be followed, but a flexible system that helps motivate employees

• Subjective – the opinion of the sellers and the manager is taken into account.

For example, you ask a consultant how much he has sold in the last three months and how much he plans to sell in the next. This method works in a situation where potential buyers are processed for a long time, and the company has not yet accumulated sales data for a long time.

If you’re just planning to start a business, you’ll have to make even more assumptions. Look for research in your field, study competitors, focus on the ability of sellers and test.

Step 2: Think about the organizational structure

Making a plan will determine how many sales managers you need to achieve the norm. If you don’t plan to micromanage, consider hiring executives as well. On average, for every 5-10 salespeople, a manager is needed – a manager or a senior salesperson.

The organizational structure can be stepped when there is a leader and subordinates. Or in the sales department, you can create several teams that will compete with each other – perhaps in your case this approach will be more effective.

Step 3. Build a sales funnel for employees

Formalize processes in the sales department. Structure the manager’s actions – from the “first contact” stage to “closing the deal”. Depending on the sphere, the funnel can be of different lengths. Since the work structure is not necessarily linear, you can use mind map services or tables in Excel to visualize processes.

An example of creating a funnel for a new sales department

This structuring will help you understand how to analyze the work of employees and will allow you to see the problem stages that most potential customers find themselves in.

Step 4. Write down the motivation. Carrot and stick

KPIs need to be implemented after the sales processes are explicitly formalized. Otherwise, employees will not understand how to fulfill the plan and reach the desired level of income.

When creating KPIs for the sales department, you should focus not on micro-activities like controlling “how many minutes late”. It will be more efficient to prescribe a system of several indicators. For employees, select indicators from the sales funnel that they can directly influence. For the whole team, those that depend on the work of the team, for example, the amount of revenue.

Monetary motivation can be implemented using coefficients. Each of the KPIs is given a specific weight. For example, N first calls made is 0.2. Closed N deals — 0.5. All indicators are added up and added to the general formula. Like this:

Employee income = Salary + % of turnover * (KPI ratio)

Step 5. Implement a CRM system

A CRM system is a program that helps you track and analyze your customer relationship system. Starting work on a client, the manager puts a mark at what stage of the sale he is.

All data is collected, at the right time the manager can assess the situation in the company.

Modern CRM offers hundreds of types of reports. The Pipedrive CRM blog lists three key reports that can help you figure out how to build an effective sales team and keep things under control:

• Once a day, analyze the number of employee actions in the sales funnel. This will help to keep track of which of the managers is working hard and who is only working out the established norm. With a certain amount of data, you can make adjustments to KPI – if you understand that on average a manager can make 10 calls a day, not 5.
• Once a week, evaluate how managers were able to move customers through the sales funnel closer to a deal. Study the conversion of calls to meetings, meetings to presentations and contracts. Your task is to find bottlenecks in this funnel and deal with the problem.
• Monthly report will help in evaluating sales – this is a long enough period to collect data on the number of new customers, average bill and revenue.

The introduction of CRM and the practice of studying reports will help develop the sales department and keep employees in good shape.

Increase the conversion of the sales department by segmenting the base by 40 parameters

Step 6. Conduct ABC and XYZ analysis managers’ time is inefficient.

To do this, use analytics – either build tables manually in Excel (here is template ) or use ready-made reports in CRM.

First, do an ABC analysis: take customer data for a specific period and find out which of them bring more profit. You can calculate by revenue or, if you have a lot of products with different margins, by total profit. Then divide the customers into groups: those who bring in 80% of the profit, 15% and 5%. Usually the picture is something like this:

In our example, 3 out of 13 clients bring in most of the profit. Another 15% is provided by four clients. And 6 customers account for the entire balance of profit. It is logical that more attention should be paid to clients from groups A and B.

You can go further and conduct additional research. XYZ analysis is done according to the same principle – you need to select three groups of customers. Sort either by the number of transactions for the same period, or by the amount of time spent, which is even more efficient. Accordingly, X is the most profitable category, Z is the most costly in terms of applied forces.

By connecting the letters of the categories, you will get a breakdown of customers into categories according to the overall indicator of profit and time spent. The best clients are the “AX” category. The most disadvantageous are “CZ”.

Now you have the opportunity to reformat your customer base and focus more on profitable customers. Plus, gradually reorganize the work in such a way as to completely abandon unprofitable CZ.

Step 7: Understand what’s stopping you from selling

If the sales force you’ve built isn’t performing well, check to see if it has problems from this list:

• The plan does not correspond to reality – this happens with the subjective method of planning. For example, the amount of a deal in your area simply does not allow managers to make enough revenue. In this case, it is worth adjusting the plan, starting from the average indicators of specialists.
• Difficulties with management – check if managers are provided with the necessary resources, if their bosses are loading them with additional responsibilities so that they do not have time to sell.
• Lack of motivation and competencies – perhaps there is a problem with the selection of personnel or the climate in the organization itself. Talk to employees, check if they want to work, if they are satisfied with the conditions. Check if there are resumes of your employees on job search sites.

Step 8: Set up a hiring process

When you’re building a sales force, it’s important to set up a continuous hiring process at the same time. The influx of new employees into the organization is useful not only in terms of business scaling:

• This is healthy competition. The “oldies” do not lose motivation and do not relax when they see newcomers, who, as a rule, try to show themselves and work more energetically in the first months.
• Additional motivation. The constant expansion of the staff means the possibility of growth, because with the influx of new people, leaders are also needed, which become experienced specialists.

Instructions on how to build a sales force from scratch rarely talk about scaling, even though it’s the process that helps people grow. Build the business economy so that it can constantly grow.

Step 9. Create a learning system

When creating a turnkey sales team, it is important to take into account not only analytics and the overall organizational system, but also to establish continuous learning. Develop grades for employees – it is important for people to see what knowledge they need to have in order to get a promotion.

Provide access to training materials, conduct trainings and invite experts to seminars. Motivate employees to participate in specialized conferences. All this together will help the department to develop:

• Employees will feel stable because the business is investing in their development.