Work based assignment: Sales force management - Case study of a medium sized company operating in the German market

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Work based assignment:

Sales force management

- Case study of a medium sized company

operating in the German market -

(Word-count: 10143 words)

Author : Matthias Schneider

Program : Diploma in Management Studies

Year of Program : 2003/2004

Table of Contents

Summary 4

.1 Terms of reference 4

.2 Summary 4

2 Introduction 5

2.1 Objectives, scope and structure of the report 5

2.2 Background of Studies 6

3 Relevant information and academic theories 6

3.1 Management 6

3.1.1 Definition of management and leadership 6

3.1.2 Human resource management 8

3.1.3 Management by objectives, Performance management and motivational theories 8

3.2 Marketing 10

3.2.1 Definition and development 10

3.2.2 Channels of distribution 12

3.3 Primary Research - The telephone interview 13

3.3.1 Objective and Method 13

3.3.2 Covering Letter (email) and questionnaire 15

3.3.3 Results and Summary 15

4 Analysis of the current situation of the company under review 17

4.1 Sales strategy, sales organisation and economic situation 17

4.1.1 The sales strategy 17

4.1.2 The organisation and structure of the sales force 18

4.1.3 The economic situation of the relevant market 19

4.2 Planning of the Sales organisation 22

4.2.1 The Planning Process 22

4.2.2 Planning of sales figures and activities 24

4.2.3 Budgeting of the sales organisation 24

4.3 Organisation 26

4.3.1 Recruitment and Training 26

4.3.2 Management and organisation of the selling process 27

4.3.3 IT-support of the selling process 29

4.4 Controlling, Monitoring and perfomance management 30

5 Conclusions and Recommendations 32

5.1 Internal and external strategic issues 32

5.1.1 Internal issues, business ethic and corporate responsibility 32

5.1.2 Environmental issues and environmental management 33

5.2 The Management process 35

5.2.1 Planning, budgeting and organisation 35

5.2.2 Controlling, Monitoring and performance management 37

5.2.3 IT support for the selling and management process 42

5.3 The importance of management and leadership in a sales organisation 43

6 Appendices 45

7 Bibliography 45

Summary

.1 Terms of reference

.2 Summary

The Subject of the following report is management of a sales force with focus on the management practices and available resources. The investigation is carried out on a medium sized company, located in Germany and operating in the construction sector. A short introduction of the company under review is given in the following chapter.

At the beginning of chapter 2 relevant information for the understanding of the Report is investigated and described. Furthermore primary research should give more information about the company and their practises concerning sales management. The main part is dealing firstly with the strategy of the sales organisation to sell their product via an exclusive mix between direct selling and franchise organisation and the geographical and hierarchical structure of the sales organisation. Followed by an analysis of the economic situation in Germany and the industry the company is operating in. The next chapter is analysing the management process and describes the management functions planning, organising and controlling in depth. As it turned out, the IT support is from extraordinary importance and is a crucial part of the dissatisfaction in the sales organisation.

As described in the analysis of the Report, dramatic changes took place in the last ten years and the company has already gone through a lot of changes but there are still a lot of opportunities to improve the performance of the sales force and the management. The recommendations and conclusions from my point of view are given in chapter 5. I am describing strategic issues the organisation faces now and in the short-term future before I give conclusions and recommendations regarding the management process in depth and finally I come back to the issue "management and leadership".

2 Introduction

2.1 Objectives, scope and structure of the report

A team of stars does not guarantee a star team. CHELSEA spent Roman Abramovich's first 111 million GBP on star players. But are stars really all that a winning team needs or does it depend on the companies' long-term performance, even survival, more on the unsung contributions of the "B players" than on star performers?1 In the article of The Times David Bolchover is discussing what the most important factor is to achieve success in management. Management especially sales management must engage the traditional management tasks of planning, implementing, and controlling activities to accomplish the organisation's goals. In addition, the sales manager has to hire, train, assign, motivate, evaluate, coach the sales force and has to use leadership skills to be successful. Another aspect a sales manager has to deal with, is the firm's politic and economic situation, competition and strategy.

Therefore the focus of this report lies on the traditional management task, how the company recruits, selects, trains, organises, supervises, motivates and evaluates their sales force. Furthermore it is a critical review of a company's sales strategy within a changing environment and the importance of leadership.

The objective is to give recommendations about the improvement of the sales force management but as well to improve the sales performance itself.

Regarding the structure of the Report I am going to give a short overview about the company which is covered in the following chapter 2.2 "Background of Studies" before I examine the relevant information in chapter 3 for a better understanding of the Report. In conformity with the objective of the report I am going to describe the sales strategy and structure in chapter 4 before I am analysing the economic situation in Germany and the industry the company is operating in, followed by the analysis of the existing selling and management process. In chapter 5 recommendations and conclusions are given about improvement of processes and systems.

2.2 Background of Studies

3 Relevant information and academic theories

3.1 Management

3.1.1 Definition of management and leadership

This essay, which deals with the complex subject of managing a Sales force does combine many different areas like management, in specific human resource management, marketing and finance. Due to the limited volume of this report I am only going to describe the most important information in context to the topic.

"Managing" or "Management" is certainly one of the most used terms in business with innumerable definitions and variations. One more traditional approach understands management as "the process of planning, organising, leading and controlling the efforts of organisation members and of using all organisational resources to achieve stated organisational goals"2 Fayol defined Management in terms of five functions:

> Planning - a course of action for the organisation to meet its goals

> Organising - to ensure the availability and co-ordination of the material and human resources of the organisation to put the plans into effect

> Commanding - to provide direction to employees

> Co-ordinating - to ensure that the resources and activities of the organisation work together to achieve the desired goals

> Controlling - to monitor the plans and ensure they are being achieved.3

"Leadership is different from management, but not for the reasons most people think. Leadership isn't mystical and mysterious. It has nothing to do with having "charisma" or other exotic personality traits. It is not the province of a chosen few. Nor is leadership necessarily better than management or a replacement for it. Rather, leadership and management are two distinctive and complementary systems of action. Each has its own function and characteristic activities. Both are necessary for success in an increasingly complex and volatile business environment."4 In my research I found an interesting article by John P. Kotter published in the Harvard Business Review about the difference between Management and Leadership and he defines that Management is about coping with complexity. Companies manage complexity first by planning and budgeting - setting targets or goals for the future (typically for the next month or year), establishing detailed steps for achieving those targets, and then allocating resources to accomplish those plans. Finally, management ensures plan accomplishment by controlling and problem solving. Leadership, by contrast, is about coping with emotional intelligence, vision and change. Achieving a vision requires motivating and inspiring - keeping people moving in the right direction, despite major obstacles to change, by appealing to basic but often untapped human needs, values, and emotions. 5

3.1.2 Human resource management

The human resource management (HRM) practices are crucial to develop sustainable competitive advantages, especially in Sales. Therefore a short explanation of the subject is given.

Although the term "human resource management" is only fifteen years old, there are various definitions of this term. As basis for this Report I chose the definition from Bratton, John/Gold, Jeffrey who see HRM as "A part of management process that specialises in the management of people in work organisations. Their definition emphasises that employees are critical to achieving sustainable competitive advantage, that human resource practices need to be integrated with the corporate strategy, and that human resource specialists help organisational controllers."6

Over time, two main directions came through: on the one hand there are believers in the "soft" version of HRM, which emphasizes on the importance of high commitment, workplace learning and enlightened leadership. On the other hand there are believers in the "hard" version of HRM, which emphasises on the calculation, quantitative and strategic management aspects of managing the workforce in a rational way.

3.1.3 Management by objectives, Performance management and motivational theories

"For decades the difficulty of motivating salespeople has been frustrating sales and marketing managers. (...) The more successful sales executives recognize that motivation is largely a result of a combination of effective recruiting practices, sensible pay plans, and good management."7 Traditional motivation theories like, Maslow, A. H 'Pyramid of Needs'8 or McGregor, D.: 'Theory X and Theory Y' 9 allow to understand basic concepts of motivation, but provide only limited answers to verify issues of performance improvement in today's business life. A recently published articel in the Harvard business review quotes: "Good leaders motivate people in a variety of ways. First, they always articulate the organization's vision in a manner that stresses the values of the audience they are addressing. This makes the work important to those individuals. Leaders also regularly involve people in deciding how to achieve the organization's vision (or the part most relevant to a particular individual). This gives people a sense of control. Another important motivational technique is to support employee efforts to realize the vision by providing coaching, feedback, and role modeling, thereby helping people grow professionally and enhancing their self-esteem. Finally, good leaders recognize and reward success, which not only gives people a sense of accomplishment but also makes them feel like they belong to an organization that cares about them. When all this is done, the work itself becomes intrinsically motivating."10

HRM uses various technologies to direct employees' behaviour towards objectives and tasks that deliver approved organisational performance. Many organisations try to frame these 'levers' within an overall performance management system, and attach incentives and rewards to the achievement of objectives and targets within this.11 These systems are e.g. based on management by objectives. Management by objectives (MBO) is seen as "A process whereby the superior and the subordinate managers of an organisation jointly identify its common goals, define each individual's major areas of responsibility in terms of the result expected of him and use this measures as guides for operating the unit and assessing the contribution of each of its members.12

The underlying basing of a system of MBO is:

> The setting of objectives and targets;

> Participation by individual managers in agreeing unit objectives and criteria of performance; and

> The continual review and appraisal of results.13

Bratton / Gold uses the following definition: A performance appraisal is an "analysis of an employee's capabilities and potential drawn from assessment data of past and current work behaviour and performance allowing decisions to be made in relation to propose - i.e. Human Resource Development needs."14

"The reason for performance review given in a survey by Phil Long (1986) are to:

> Assess training and development needs

> Help improve current performance

> Review past performance

> Assess future potential and promotability

> Assist career planning decisions set performance objectives

> Assess increases or new level in salary"15

3.2 Marketing

3.2.1 Definition and development

The significance of marketing, especially the marketing mix, for the daily business of the sales force has encouraged me to have a short look at the subject as the sales team is in direct contact with the customer and has to offer a product at a given price every day.

The term "marketing" is certainly a business term with the most and various definitions. As basis for this WBA I choose the definition of Kotler. He is one of the first people to recognise that marketing is a central business function. His major contribution to marketing and marketing management is to have analysed and defined the basic concepts and functions involved in the discipline.16 He sees Marketing as "a social and managerial process by which individuals and groups obtain what they need and want through creating, offering, and exchanging products of value with others".17 Dibb, Simking, Pride and Ferrell define Marketing as follows: Marketing consists of individual and organisational activities that facilitate and expedite satisfying exchange relationship in a dynamic environment through the creation, distribution, promotion and pricing of goods, services and ideas."18 However, they are indicating the following basic priorities of marketing19:

> Satisfying customers

> Identifying / maximising marketing opportunities

> Targeting the "right" customers

> Facilitating exchange relationships

> Staying ahead in dynamic environments

> Endeavoring to beat or pre-empt competitors

> Utilising resources / assets effectively

> Increasing market share

> Enhancing profitability

As mentioned above the marketing mix as well has an impact on the sales force. Kotler, Armstrong, Saunders and Wong define marketing mix as the "set of controllable tactical marketing tools that the firm plans to produce response it wants in the target market. [...] The many possibilities gather into four groups of variables known as the 'four Ps': product, price, place and promotion."20
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3.2.2 Channels of distribution

"A channel of distribution is a group of individuals and organisations that direct the flow of products from producers to customers. Channels of Distribution make the products available at the right time, in the right place and in the right quantity.21 "Traditional channel strategies proceed directly from market segmentation. A company that is targeting a brand at, for instance, suburban women in their thirties, will rely on a certain channel to deliver its products and related service and sales activities. Another company will choose a different channel to appeal to affluent retirees. One ...

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