Importance of using the right sales organizational structure

Whether you’re building your organization for the first time or trying to adjust for improved performance, it’s important to find the structure that suits your goals and needs. When you find the right structure for your team, here’s what happens:

• Clear responsibilities. The nature of an organizational structure is to define and formally divide tasks. By creating clear groupings, you spell out who does what and where and how that supports the overall goal.
• More coordination and communication. Silos within a sales organization reduce effectiveness. The right organizational structure increases coordination and communication within your department and with other departments.
• Knowledgeable sales force. With no silos in the way, sales reps get to interact with other departments and get in-depth knowledge about their product, service and customer needs.
• Better decision-making. Organizational structures mean more transparency. When you need to share information or make changes, you increase the buy-in from other departments.
• Fewer disputes and more engagement. With more engagement and information, you have a better chance of achieving your goals and pursuing new opportunities toward that end.

Fundamental sales organizational structures

When looking at your team’s structure, it’s important to understand what changes you need to make and identify the causes of your problems. This could mean that reps are being asked to juggle too much, and as a result, they miss key performance metrics.

Here’s a look at four fundamental structures, including how they can and can’t work.

Territorial/geographic structure

The territorial/geographic structure gives the salesperson the opportunity to learn about businesses in the area, including their competitors. They can build rapport with local companies and really become experts about the region as they track accounts.

While managers can easily evaluate salesperson performance and market potential, one major downside to this structure is that it can create salesperson silos. Sales reps don’t have the chance to develop cross-functional expertise and grow as professionals.

Product sales force structure

In this model, salespeople become experts on a particular product or range of products. This makes them great at understanding and communicating the value of the product as well as the range of uses it can provide for the client. Unfortunately, reps may tend to focus on the features of the product and not necessarily how it offers the best benefits.

Functional structure

In a functional structure, salespeople are specialists in certain tasks or functions. Having teams run by specialties, interests or other factors is one of the reasons why many consider the functional structure to be more efficient. The reality is that it can be problematic in several ways.

When you have salespeople specializing in specific functions or tasks, there needs to be a lot of coordination, which is time-consuming and prone to producing duplicate information. Two specialists handling the same client at the same time can overwhelm the system and generate errors that require valuable time to correct.

Market-based structure

Also known as the industry/vertical structure, sales reps are focused on a specific industry and become experts on what those specific companies need. Salespeople develop strong relationships with current clients and understand how to steward potential clients through the buyer’s journey.

Companies that are focused on multiple industries find this structure ideal because teams can easily move across industries and strategically organize teams to build stronger bonds. One major downside to the market-based structure is that it’s costly. Another problem is that it can be tough to pin down companies with multiple locations. The disparate geography of clients means needing to move sales reps around.

Customer/account size structure

Sales reps are assigned specific account sizes. Those who work on enterprise clients are different from those who work on small-business accounts. There are different conversations that apply to each account size, and reps have the chance to become intimately familiar with how they can meet the needs within specific budgets.

This structure requires constant communications and the ability to manage resources, which can be difficult.

4 components of sales team structures

When looking to make adjustments to or incorporate a sales organizational structure, remember that salespeople resist change. It’s the toughest part of adjusting, but as your business goes through the different phases of its business life cycle, survival means changing based on four key components.

Territory design

Not all sales organizations have the footprint to claim every potentially profitable territory that’s available. They have to be strategic about finding territories where they can get as much profit as possible. Assigning geography is just one piece of the pie. Leaders have to consider the competition, industry and so many other factors.

Lead/account/territory assignment

The key here is getting the right people to work on the right accounts or within the right territories. These reps can deliver success and provide value to the company and the client. As easy as it seems, it’s the most challenging task leaders face.

Sales compensation

Compensation is the easy scapegoat when things aren’t going right. While it is a factor, it affects who you can hire, what sellers can and cannot do and even how motivated they are.

Structure of your sales force

Deciding how to structure your sales force will determine how much revenue and margin you get. Whether you choose to do inside/outside sales or a hybrid of other options, you need to design and define the roles so that sellers know what they need to produce and how they will partner with the marketing team.

Rightsizing your team

One of the critical missteps of sales organizations is sizing their sales forces. Sales staffing tends to be conservative because managers don’t realize that while new salespeople generate small contributions at first, they will generate more as they become veterans.

Throughout its life, businesses need to resize their teams according to their circumstances. When they are starting up and hitting growth, their sales team will need to grow to compensate and speed up expansion. When companies hit a plateau or decline, they may not need to hire and could even lower their staffing needs to compensate. By fostering a culture of change, being able to adjust the structure or size of sales staff won’t be as challenging.