Sales organization: How to build the right structure
Unfortunately, a good sales strategy does not work by itself; it has to be implemented by people. This finding applies not only to traditional sales, but also to online sales via own webshops and online trading platforms. You need a powerful sales organization. When we speak of organisation, that is what we mean. The sales function needs to be organized, regardless of whether it is performed in a one-man show or by a large sales team.
Only when the sales process is defined does it make sense for you to deal with the sales structure.
Forms of organisation of distribution
Sales can be organised differently depending on product groups, customer segments and sales process. In principle, the following forms of organisation are possible:
- Distribution to end customers via own businesses
- Area sales to specialist retailers with area sales managers
- Key account management for strategically important major customers
- Sector specific paragraph on commercial agents or agencies
- Multi-stage sales to specialised wholesalers
- Online sales via own shop systems or via web-based sales platforms of third parties
Only when the sales process is defined does it make sense for you to deal with the sales structure. The most important decision regarding the distribution process has to clarify the question of who the company’s direct customers are: are they specialist wholesalers, specialist retailers, craftsmen, industrial companies or end customers? In which geographical target regions would you like to sell? What do you need to be able to sell successfully in these target markets? What technical support, what application advice and what administrative support do the “front men” need?
Example: Mick Jagger would not have been so successful on stage if he had also had to take care of the lighting and ticket sales. And the sound engineer and the event agency wouldn’t have their jobs without Mick Jagger.
This is how effective your sales can be.
Structure follows strategy
Alfred J. Chandler
Do not build a structure around (random) existing employees, but systematically derive your sales structure from your sales strategy and sales process.
Example: A well-known global manufacturer of brick packaging for milk and juices organizes its sales with uncompromising support-oriented orientation. The ongoing sale of packaging material requires the installation of filling machines in customers’ dairies or juice factories. The focus is on what customers expect for their purchase decision. The central contact person for a project client is the account manager. He has access to professionally competent support in the sales organization. For example, the account manager first sends an experienced technician to the customer’s team, who in the team derives suitable filling machines from the customer’s sales expectations with sensible downstream equipment (repackers, palletizers, forklifts, cold storage logistics). A layout designer creates layout plans for the material flow-optimized machine arrangement in the customer’s factory. In the technical back office, a realistic project implementation plan with milestones is created. The project purchasing department inquires about the required system components in its own plants and from specialized suppliers and ensures timely delivery. The project is calculated in the sales back office. The technical service (service desk, trouble shooting, spare parts supply) is planned for the customer. A well-established installation team finally sets up the system at the customer’s premises, conducts training for machine operators and maintainers, and hands over to the customer the plant documentation and a first spare parts package that has been created in the meantime. Until then, the order processing is organised in the sales back office (capacity, language). The Key Account Manager coordinates all these additional tasks and, within the scope of his extensive powers, makes the contractual arrangements with the client. Here, too, he is supported and advised by a project controller.
Banks and insurance companies have now organised their distribution in a similar way. A customer service representative brings back specialists from the back office to his customers as required. He may dispose of the use of these specialists at his discretion. If there were barriers for the account manager to access specialists, it would be difficult for him to provide his clients with high and up-to-date professional advice; distribution would be much more cumbersome and less successful for the financial service provider.
How to build your sales organization effectively
How is your sales organised? Are your “front men” really getting the support they need in the field? How can you organise agile sales at reasonable costs?
Process-oriented sales organisation
In addition to a purely functional structure in departments, there are other options that you could consider. Particularly recommended is the option of a process-oriented structure in which all departments work with sales throughout the process. This avoids silo thinking. The entire organisation works in a sales-oriented manner. The company does exactly what customers value and what they are willing to pay for. You will be amazed at how much blind work you can eliminate from your business process through process orientation. Each employee’s understanding of customer expectations and benefits is growing. With this understanding and involvement in the core of entrepreneurial action, the motivation of all employees to contribute to this success also increases.
Matrix organisation
For a sales-oriented organizational approach, you need a different management structure. In spite of all, partly justified criticism of a matrix organization, it is precisely a matrix organization that can bring about the close networking of operational functions. Combining the organizational form of the matrix with an agile project organization gives you a powerful sales organization.
However, be vigilant that a matrix organization does not develop its own hierarchies with which it undermines operational collaboration between operational functions.
Example: A group of companies with headquarters in Paris and several acquired operational locations in different European countries should be organised more effectively. Until then, each location ran its own business autonomously. In addition, each location had all operational functions. At first, the export share of each location was cut by belonging to the corporate group. Customers abroad should be looked after by the foreign locations. Quite surprisingly, business was lost. So it was decided at headquarters to manage sales centrally. From now on, every sales manager reported to the vice president in Birmingham. Each location should be able to offer any product of the group. It was hoped that this would generate additional sales. In reality, however, it turned out that many products in other countries were not eligible for approval or simply not marketable. In addition, there was some overlap in product portfolios, which the intention was to eliminate by “surviving” some products, while others were to be discontinued. Lack of capacity matching and vanities led to further losses of market share in all countries. Similarly, the functions “Finance”, “Purchasing”, “Logistics”, “Product Development”, “Production” and “Personnel” were all combined under one Vice President in Paris, who together formed the Group’s Executive Team. The previously well-cooperated local teams were torn into functional silos. Coordination at the locations suffered enormously. Sales did not receive adequate support from other functions. Functional process standardization was given a higher priority than market-oriented approach. The Vice Presidents optimized the results of their functional silos, but the Group’s overall result deteriorated steadily. The managers of the local locations were demoted to formal governors, who had to explain the monthly results, which they could no longer influence. They didn’t have a chance to bring the staff together at their locations. Customers no longer received the expected support. The previously good, aggregated business has been massively damaged by the central, functional organisation.
An international matrix organisation can function if local structures are supported and local teams can draw on specialist know-how from the functional lines. The support of multinational client organisations can be coordinated centrally. But responsibility for results should remain local. Above all, emphasis must be placed on maintaining and supporting local teamwork if sales are to work.
The decision on the organisational structure is an important one. Listen to the people at the grassroots, at the sales front, who know what works and what makes the company successful.
Conclusion: An organized distribution is a successful distribution
If you manage to organise your sales continuously and seamlessly connect it to the rest of the organisation, you have fulfilled a very important prerequisite for sales success. Otherwise, you will face major challenges of interlinked collaboration. You may be able to recruit some excellent account managers, but they don’t fit into the organization as primadons. Tensions will slow down sales success and the success of your company. This is one reason why sales must be managed. But management must have been learned. It is not often seen that a hitherto successful sales employee is usually unable to do this. Disappointment is usually great. The appropriate distribution structure depends in particular on the market and on the corporate culture.
Our recommendation: Always start from the process behind the sales strategy. Answer these questions:
- How should value be created in the sales process?
- What are the different tasks involved in this value creation process?
- How are the interfaces between these tasks defined? How are the interfaces between the sales process and other processes defined?
- And finally, what personality traits, abilities, experiences and relationships are needed not only to carry out these tasks, but also to keep the process connected at the internal and external interfaces?