Tag: Business Ethics

Henri Fayol, a French mining engineer and management theorist, is renowned for his development of the 14 Principles of Management. These principles form a significant part of his administrative theory, which aimed to establish a comprehensive framework for effective management in organizations. In his 1916 book General and Industrial Management, Fayol argued that managerial practices are universal and can be applied to all types of organizations.

Fayol’s principles provide a foundation for modern management, emphasizing the role of planning, organizing, leading, and controlling within an organization.

1. Division of Work

The principle of division of work emphasizes specialization and efficiency. Fayol argued that by dividing tasks into smaller, more manageable units, workers can develop expertise in a specific area, leading to increased productivity and better performance. Specialization allows employees to perform tasks more efficiently, reducing time and effort, while also improving accuracy and skill development.

For example, in a manufacturing environment, workers who specialize in specific production processes, such as assembly or quality control, can complete their tasks more effectively than generalists who perform a variety of roles.

2. Authority and Responsibility

According to Fayol, authority and responsibility go hand in hand. Authority is the right to give orders and expect obedience, while responsibility refers to being accountable for fulfilling assigned duties. Fayol argued that managers must have the authority to issue commands but must also bear the responsibility for ensuring that their directives are carried out effectively.

Effective management requires a balance between authority and accountability to maintain discipline and achieve organizational goals.

3. Discipline

Discipline is essential for the smooth functioning of an organization. Fayol believed that discipline involves obedience, respect for authority, and adherence to established rules and regulations. Clear and fair policies, consistent enforcement, and mutual respect between employees and management help maintain discipline.

Organizations with strong disciplinary systems tend to have more engaged employees and efficient operations.

4. Unity of Command

The principle of unity of command states that each employee should report to only one superior. Fayol argued that if an employee receives orders from multiple sources, it leads to confusion, conflict, and inefficiency. This principle ensures that communication is clear and that employees understand their specific responsibilities.

By maintaining a clear chain of command, organizations can avoid contradictory instructions and reduce the likelihood of misunderstandings.

5. Unity of Direction

Unity of direction emphasizes that all members of the organization should be aligned toward the same objectives, with a common plan for achieving them. This principle ensures that everyone in the organization works together toward shared goals, avoiding fragmentation and inefficiency.

For example, in a marketing department, all team members should work toward increasing brand awareness, rather than pursuing individual or conflicting objectives.

6. Subordination of Individual Interests to General Interest

Fayol believed that the interests of the organization should take precedence over the interests of individual employees. While individual goals and aspirations are important, the collective success of the organization must be prioritized. Fayol stressed that managers must align individual interests with organizational goals to ensure that personal ambitions do not interfere with the company’s success.

This principle fosters a sense of collective responsibility and encourages employees to work for the greater good of the organization.

7. Remuneration

Remuneration refers to fair compensation for employees’ efforts. Fayol argued that wages should be equitable and based on factors such as skill, effort, responsibility, and performance. Fair remuneration serves as a motivator for employees and contributes to job satisfaction and organizational loyalty.

Fayol also believed in offering both financial and non-financial rewards to motivate employees.

8. Centralization

Centralization refers to the degree to which decision-making authority is concentrated at the top levels of management. Fayol recognized that the optimal level of centralization varies depending on the organization’s size, nature, and circumstances. In highly centralized organizations, top management retains most decision-making authority, while decentralized organizations delegate authority to lower-level managers.

The key is to strike the right balance between centralization and decentralization to ensure that decisions are made efficiently while maintaining overall organizational control.

9. Scalar Chain

The scalar chain refers to the hierarchy or chain of command within an organization. Fayol argued that a well-defined hierarchy ensures that authority flows from the top levels of management to the bottom, and that communication follows a clear path. This structure provides a framework for decision-making and accountability.

Fayol also advocated for “gangplank” communication, allowing for direct communication between employees at the same level to avoid delays caused by following the scalar chain rigidly.

10. Order

Order refers to the organization and arrangement of resources, including people and materials, in the workplace. Fayol believed that every resource should have a specific place and function, ensuring that everything is in its proper position. This principle promotes efficiency by reducing confusion and delays in operations.

In a well-ordered organization, the right person is in the right job, and materials are placed where they are easily accessible when needed.

11. Equity

Equity involves treating employees fairly and with respect. Fayol believed that fairness should govern all managerial actions, as employees are more motivated and loyal when they feel valued and respected. Equity encourages a harmonious workplace, where employees are treated justly in terms of pay, opportunities, and recognition.

Managers must strive to create an atmosphere of kindness and justice, ensuring that all employees are treated equally regardless of rank or position.

12. Stability of Tenure of Personnel

Fayol emphasized the importance of retaining employees for a stable workforce. High employee turnover can be disruptive and costly for organizations, as it requires time and resources to train new workers. By promoting stability in the workforce, organizations can benefit from employees’ accumulated skills and experience.

Long-term employment contributes to improved productivity, as employees become more proficient in their roles over time.

13. Initiative

Fayol believed that managers should encourage employees to take initiative and contribute their ideas to the organization. When employees are allowed to express their creativity and take initiative, they feel more engaged and motivated. This principle fosters innovation, as employees are more likely to suggest improvements to processes and products.

Managers should create an environment where employees feel empowered to propose new ideas and take ownership of their work.

14. Esprit de Corps

Esprit de corps refers to promoting team spirit and unity within the organization. Fayol argued that a strong sense of camaraderie and mutual respect among employees leads to higher morale and greater productivity. Managers should focus on building a sense of community within teams and fostering a positive work culture.

By encouraging teamwork and open communication, managers can create a cohesive and motivated workforce that works together toward shared goals.

Management refers to the process of planning, organizing, leading, and controlling resources—such as people, finances, and materials—to achieve specific goals efficiently and effectively. It involves setting objectives, developing strategies, coordinating tasks, and making informed decisions to guide an organization or group toward success. Management also entails motivating employees, resolving conflicts, and ensuring that resources are used optimally. It plays a critical role in both day-to-day operations and long-term strategic planning, aiming to balance productivity with innovation and adaptability in a constantly changing environment.

Characteristics of Management:

1. Goal-Oriented Process

Management is primarily a goal-oriented activity. It is focused on achieving specific organizational objectives, whether they are financial, operational, or related to employee welfare. Managers set clear, measurable goals and work systematically to achieve them. Without defined goals, management lacks direction and purpose. The entire process of planning, organizing, leading, and controlling revolves around achieving these objectives efficiently and effectively.

2. Pervasive Function

Management is a universal function present in every type of organization—business, government, education, and non-profit institutions. Regardless of the size or nature of the organization, management is necessary to ensure that resources are used efficiently and objectives are met. It exists at all levels of the organization, from top-level strategic decision-making to operational management at the ground level. This pervasive nature makes management a critical function in every organization, regardless of industry or purpose.

3. Multidimensional

Management is multidimensional in nature, involving the management of work, people, and operations. First, it includes managing the work or tasks that need to be accomplished. Second, it involves managing people, which requires interpersonal skills, communication, and leadership to guide and motivate employees. Lastly, it covers managing operations, which includes processes, technology, and the physical resources required to produce goods or services. These dimensions are interconnected and require managers to be versatile and skilled in multiple areas.

4. Continuous Process

Management is not a one-time activity but an ongoing process. Managers continuously plan, execute, and evaluate strategies and operations to ensure that the organization stays on course to achieve its goals. As internal and external environments change, managers need to revisit and adjust their plans to accommodate new challenges and opportunities. This dynamic nature makes management a continuous process, requiring ongoing attention and adaptation.

5. Dynamic Function

Management is dynamic because it must adapt to the ever-changing business environment. Economic conditions, technological advancements, customer preferences, and legal requirements are always evolving. As a result, management practices need to be flexible and adaptable to respond effectively to these changes. A static management approach would fail in a competitive and volatile environment, so managers must continuously innovate and adjust strategies to stay relevant and successful.

6. Group Activity

Management is inherently a group activity. It involves coordinating and guiding people to work together towards a common goal. Effective management ensures that the collective efforts of individuals are aligned with organizational objectives. This requires fostering collaboration, communication, and teamwork among employees, as well as aligning individual goals with the organization’s mission. Management also ensures that the roles and responsibilities of each team member are clearly defined to avoid confusion and promote accountability.

7. Intangible Force

Although management produces tangible results, the process itself is intangible. It cannot be physically seen, but its presence is felt through the smooth operation of the organization. The quality of management is reflected in organizational success, employee morale, and the achievement of objectives. A well-managed organization will have a positive work environment, efficient operations, and satisfied stakeholders, even though management as a process remains unseen.

8. Decision-Making Process

Management heavily relies on decision-making. Managers are constantly required to make decisions, whether they are related to resource allocation, employee management, strategy implementation, or customer relations. Effective decision-making involves analyzing data, assessing risks, weighing alternatives, and choosing the best course of action. Decisions impact every aspect of the organization, making it crucial for managers to be skilled in making informed and timely decisions that contribute to organizational success.

9. Interdisciplinary Nature

Management draws knowledge and concepts from various disciplines such as economics, psychology, sociology, finance, and information technology. A manager needs to be familiar with these fields to handle the diverse range of challenges faced by modern organizations. For example, understanding human behavior helps in managing employees, while knowledge of finance is essential for resource allocation and budgeting. This interdisciplinary nature makes management a broad and versatile field that incorporates multiple areas of expertise.

Administration

Administration refers to the process of formulating policies, setting objectives, and overseeing the overall governance of an organization or institution. It involves high-level decision-making, focusing on strategic planning, resource allocation, and the establishment of guidelines to ensure smooth functioning. Unlike management, which deals with the execution of plans, administration is concerned with defining the framework within which management operates. Administrators are responsible for setting organizational goals, maintaining control over operations, and ensuring that the organization adheres to legal, ethical, and policy-based standards while achieving long-term objectives.

Characteristics of Administration:

1. Policy-Making Function

Administration primarily deals with the formulation of policies and plans for the organization. Administrators set the overall direction by deciding the goals and guidelines that govern how the organization will operate. These policies provide a framework for the management team to execute day-to-day tasks. Thus, the core function of administration is to establish a long-term vision and develop the rules and procedures to achieve it.

2. Top-Level Activity

Administration is a top-level activity, typically carried out by the highest-ranking executives or board of directors. This level of responsibility involves overseeing the entire organization and making decisions that affect its overall direction. While management focuses on operational tasks, administration focuses on strategic planning and ensuring that the organization moves in the right direction to meet its goals.

3. Strategic in Nature

Administration is strategic, focusing on the long-term growth, development, and sustainability of the organization. It involves decisions related to overall organizational policies, resource allocation, and the external environment. Administrators consider factors like market trends, governmental policies, and economic conditions to set a strategic course for the future. This strategic nature distinguishes administration from management, which is more tactical and operational.

4. Goal Setting

One of the core responsibilities of administration is to set the organization’s objectives. Administrators determine what the organization aims to achieve in the long run, such as financial goals, market expansion, or social impact. Once these goals are established, they guide the organization’s operations and serve as benchmarks for success. The clear definition of goals ensures that all activities align with the overall mission of the organization.

5. Coordination of Resources

Administration involves the coordination of all resources—human, financial, and material—to achieve organizational objectives. Administrators ensure that resources are allocated efficiently across departments and projects to meet strategic goals. This requires balancing priorities, managing budgets, and ensuring that the right resources are available at the right time.

6. Decision-Making

A critical characteristic of administration is decision-making, particularly at the strategic level. Administrators make high-level decisions that shape the future of the organization, such as mergers, acquisitions, new market entry, or changes in organizational structure. These decisions are based on an analysis of internal capabilities and external factors like competition and regulatory requirements. Effective decision-making in administration ensures the long-term success of the organization.

7. Bureaucratic Framework

Administration typically operates within a bureaucratic framework, meaning it is characterized by formal rules, hierarchies, and structured procedures. This framework ensures that policies are implemented consistently throughout the organization. A clear chain of command and defined roles make it easier to enforce policies, maintain accountability, and ensure that administrative functions are carried out systematically.

8. Control and Regulation

Administration is responsible for maintaining control over organizational processes by ensuring adherence to policies and standards. It sets up monitoring and evaluation systems to assess performance, ensure compliance, and implement corrective measures when necessary. The control function of administration ensures that all departments and activities align with the organization’s strategic goals and regulatory requirements.

9. Interdisciplinary Approach

Like management, administration draws from various disciplines such as economics, law, political science, and sociology. This interdisciplinary approach is necessary because administrators deal with complex and diverse issues that require knowledge from multiple fields. For instance, understanding legal frameworks helps administrators comply with regulatory policies, while knowledge of economics aids in budgeting and resource allocation.

Key differences between Management and Administration

Management is a multidimensional field that incorporates principles from both science and art, while also evolving into a recognized profession. This classification reflects its systematic, creative, and increasingly specialized nature.

Management as a Science:

Science is characterized by systematic knowledge, organized principles, and a cause-and-effect relationship. It involves the use of logical, rational approaches to problem-solving and decision-making. For management to be considered a science, it must meet certain criteria: it should be based on universally accepted principles, derived from empirical evidence, and capable of being tested under various conditions.

1. Systematic Body of Knowledge

Management, as a science, is built on a systematic body of knowledge that includes established theories, models, and principles. These principles guide managers in decision-making and organizational operations. Concepts such as Frederick Taylor’s scientific management, Henry Fayol’s administrative theory, and Max Weber’s bureaucratic management reflect the application of scientific principles to manage people, resources, and processes efficiently. These principles have been tested in various organizations and situations, yielding predictable outcomes, much like scientific experiments.

2. Universal Principles

Management is based on universally accepted principles such as division of labor, authority and responsibility, and unity of command. These principles, when applied correctly, tend to produce similar results regardless of the industry or geographical location. For instance, the principle of specialization (division of labor) has been shown to improve productivity in factories, service industries, and even in high-level corporate settings.

3. Empirical and Evidence-Based

Like science, management relies on observation and experimentation. Management theories are derived from real-world experiences and research. For example, scientific management evolved from studies on productivity in the industrial era. Similarly, the contingency theory of management arose from empirical studies showing that no one-size-fits-all approach works for every organization. Managers rely on data and analytics to make informed decisions, indicating that management has a strong scientific foundation.

Limitations as a Science

While management has many scientific aspects, it is not a pure science like physics or chemistry, where outcomes are certain. In management, human behavior is unpredictable, and organizations operate in dynamic environments. Therefore, while management uses scientific methods, the presence of variables such as emotions, culture, and leadership styles can lead to different outcomes, reducing its precision compared to the natural sciences.

Management as an Art:

Art is the expression of creativity, intuition, and subjective judgment. It focuses on achieving desired results through personal skills, insights, and expertise. Management, as an art, requires a creative and personalized approach to dealing with people and situations. Successful managers often rely on their experience, judgment, and intuition to navigate complex environments.

1. Personal Skills and Creativity

Management, as an art, requires personal expertise, creativity, and innovation. Managers must adapt general principles to specific situations, crafting strategies tailored to their organization’s unique needs. This is where creativity comes into play. For instance, while the principle of motivation may be universal, how a manager motivates a sales team versus a research team may differ significantly. Leadership styles, communication techniques, and conflict resolution strategies all require an element of art in their execution. Effective managers blend the science of management with personal style, emotional intelligence, and people skills.

2. Judgement and Intuition

In art, individuals apply their judgment and intuition, which cannot be replicated or standardized. Similarly, managers often rely on their gut feeling or intuition when making decisions, especially when facing uncertainty. For example, when a manager decides to enter a new market or hire a particular candidate, scientific principles might guide their thinking, but ultimately, the decision may hinge on the manager’s personal judgment or intuition.

3. Flexibility and Adaptation

Management is not a rigid practice. Managers must be flexible and adaptive, tailoring their approach to fit the changing dynamics of the business environment. In art, creativity lies in interpreting and expressing in varied ways. Likewise, in management, a successful manager must innovate and adapt strategies to suit the specific context, whether it’s handling a crisis, managing a diverse workforce, or steering through market disruptions.

Limitations as an Art:

The artistry in management comes from personal experience and innate skills, but it also means that results may vary greatly. Not every manager will apply the same principles with the same level of success. Hence, management as an art lacks the replicability and consistency of a science. Furthermore, reliance on intuition and creativity alone can sometimes lead to unsystematic or inconsistent decisions.

Management as a Profession:

Profession is defined by specialized knowledge, formal education, a code of ethics, and social recognition. As management has developed over time, it has increasingly taken on the characteristics of a profession.

1. Specialized Knowledge

Management has become a formal discipline with its own body of knowledge, methods, and tools. This knowledge is imparted through formal education and specialized training programs, such as MBA (Master of Business Administration) degrees, which aim to develop managerial skills in areas like finance, marketing, human resources, and operations.

2. Formal Training and Qualification

Management is now recognized as a field that requires formal training and education. Business schools, universities, and professional associations offer programs designed to equip aspiring managers with the skills needed to succeed. The rise of certifications like Project Management Professional (PMP) or Chartered Manager (CMgr) demonstrates the growing demand for professional qualifications in management.

3. Code of Ethics

Many professional management bodies, such as the American Management Association (AMA) or the Institute of Management Consultants (IMC), require their members to adhere to a code of ethics. Ethical behavior is increasingly becoming a cornerstone of managerial practice. Managers are expected to demonstrate responsibility, fairness, and transparency in their decision-making, ensuring accountability to both their organization and society.

4. Social Recognition

Over time, management has gained recognition as a profession with an important social role. Managers play a critical part in shaping organizations, economies, and even societal progress. The demand for skilled and ethical managers in every sector underscores management’s professional status.

Limitations as a Profession:

While management has many characteristics of a profession, it is still evolving. Unlike professions such as medicine or law, there is no strict licensing requirement for managers. Although formal education is highly valued, it is not mandatory, and many successful managers thrive based on experience and innate skills rather than formal qualifications. Additionally, management lacks a single unified professional body that governs all aspects of the field.

Control

The last but not the least significant phase is control of sales force operations. In any sphere of activity, supervision and control of salesmen is essential with a view to achieve the maximum success. The sales operations are to be materialized as per plans laid down, followed by scientific control of efforts and resources. A plan is necessary when you construct a building. In the same way, in business also a chalked out plan is a sine-qua-non and the plan to be under a successful control is essential.

What is control? It simply means a check, a means of controlling or testing. Control involves such functions as checking, verifying, standard selling, and directing or guiding. One may say, “Control means watching results and translating them into positive action.” Control is a process to establish the standard of performance measuring the work done. Through control salesman’s performance can be appraised.

All the organisations must have the operation of control, as a tool, for their progress and successful working. It is an act of checking or verifying the performance as per the plans. “Control consists in verifying whether everything occurs in conformity with the plans adopted, the instructions issued and the principles established. Its objective is to point out weaknesses and errors in order to rectify them and prevent their recurrence. It operates on every thing-things, people and actions.”

Is Control Necessary?

The manager exercises the control over the activities of salesmen through supervision. The planned sales operations are to be carried out systematically in order to get success over the aimed result.

Salesmen are human beings; the need for supervision arises because of:

• Salesmen may be working independently and may be at a longer distance from the sales manager. There may arise a problem of co-ordination, of salesmen’s effort with the other sales efforts i.e., publicity, sales promotions etc. To ensure co-ordination, control is a must.
• The sales effected by each salesman should be known to the sales manager, who compares the actuals with the targets, to find negative variation, which should be rectified by corrective actions. There may be mistakes in the approach of a salesman, laziness in activities etc.,. These must be traced out and the salesman guided in order to channelize his efforts into desired path.
• Efforts of the salesman have to be directed to maximize profits to firm in the light of progressive ideas and techniques to ensure the proper utilization of men and materials.
• “Of all the assets customers are the most valuable.” To build a sound public relation, complaints of different types of customers are to be redressed. Thereby, it is possible to build a good image in the minds of the public. The salesman is guided by the sales manager, who tries to satisfy the customers through salesmen.

Prerequisites of Control

• The sales manager should know what exactly he expects a salesman to do. (through fixing the sales quota).
• Salesman should be given an idea of what he is expected to do. (through training).
• Sales manager should know that the salesman is doing exactly what he is expected to do. (through reports).
• Salesman should be made to know that the sales manager knows what he does, (through personal talk and reports).
• Salesman should know that the sales manager appreciates what he does, (through reports).

Elements Involved in Control

The following steps are involved in the process of control:

1. Analysis of Performance

All controls involve the setting of a standard and the measurement of performance against their standard. The performances are analysed and compared with reference to the objectives, budgets and standards. This will reveal the variances between the performance and the standard.

2. Analysis of Variance

After finding out the variance, the first question is whether this variance is significant. If the variance is significant, the next question is usually, “What went wrong with the performance?” and possibly a better question will be “What is wrong with the standard?” Effective sales control should reveal poor execution of sales policies or indicate when sales policies need changing.

Sales Control may not, however, disclose the reasons for poor execution. For instance, poor execution may be due to ignorance of sales policies, inability to perform the tasks, resentment, discontent etc. The significant variances are considered carefully to enable the authority to take corrective steps.

3. Measures to Deal with Unfavorable Variance

The function of control is to identify the weakness and errors in the sales efforts. Reasons and causes are found out and their remedial measures are formulated in order to correct the weakness and errors in a speedy manner. These enable the sales manager to guide the individual salesman when necessary. All these are done in order to improve the sales programme performance.

Methods of Control

Control is essential in order to secure optimum performance from salesmen. Sales managers effect controls, by common methods, through personal contacts, correspondence and report.

1. Personal Contact

Personal contacts are more effective than other methods. Sales manager himself or through branch managers or field supervisors, exercises controls over the salesmen. Salesmen can be assisted and inspired, and corrective steps can be taken.

2. Correspondence

This method is commonly accepted and is economical. Through correspondence, instructions are passed on to the salesmen and replies received from the salesmen. The salesmen are supervised or controlled through letters.

3. Report

They are not in the form of letters. Printed report forms are used by the salesmen to make reports to the sales manager. In certain cases, the report may be oral.

Bases of Control

The control of salesman is based on:

• Reports and Records
• Sales Territories and Sales Quotas
• Determination of salesman’s authority
• Field Supervision and
• Remuneration Plans.

Importance of Supervision and Control in a Sales Organization

In an organization, the success of planning largely depends on the efficient supervision and control of the sales force. It is an important aspect of the management of the sales force.

In fact, the activities of the salesmen have to be supervised and controlled to ensure that the job is done properly and efforts are being made towards the achievement of the sales objectives. Supervision and control of salesmen is essential for the sales organization to achieve maximum success.

An organization may have a talented and efficient sales force with adequate training and the compensation plan may be attractive, but unless the activities of the sales force are properly supervised and controlled, it is hardly possible for the organization to achieve the sales targets.

Therefore, an effective method of supervision, direction and control of the sales force is extremely important in order to secure the most productive and economical performance from them. The establishment of sales territories and sales quotas are the specific control devices by which the sales manager exercises control on the salesmen.

Control is the process of trying to achieve conformity between goals and actions. Controlling is an act of checking and verifying an act to know whether everything is taking place in accordance with the predetermined plan. In other words, control covers the direction and guidance towards securing desired objectives.

To M.C. Niles, ‘controlling is maintaining of a balance in activities directed towards a goal or a set of goals.’ Therefore, control consists of the steps taken to ensure that the performance of the organisation conforms to the plans. The process of control consists of a few steps, namely

• Establishing standards or measures for performance,
• Measuring and recording of actual performance
• Comparing actual with the planned measures to find out the deviations
• Taking corrective measures, if needed. Thus, control is one of the important ingredients for the success of the sales department.

Reports and Records

Report

Every sales manager needs accurate and up-to-date information, on the basis of which he formulates policies for future business. Formulation of policies may not be practical in the absence of information. For the growing needs of the organization, expanding the professions, widening activities of the business etc., it has become essential to look for the information.

A report is a presentation of facts on the basis of activities. Salesmen’s reports-daily, weekly, monthly, provide valuable information relating to the salesmen’s activities for a sales organization. Salesmen, who are the primary source of information, being the eyes and ears of the selling firms, are asked to send reports periodically.

Advantages of Reports

• Salesman’s report is a good guide and indicator for building future plan-a barometer.
• Competitors’ attitude can be known.
• Sales manager does not waste time in formulating the policies for future, because of the brevity in reports.
• Salesmen takes little time in writing the reports.
• The report is a good form of control as it reveals the weakness and strong points of the salesmen.
• The changes in demand and attitude of the consumers can be known.
• It is a tool by which the activities of the salesmen can be sharpened.
• Sales manager is able to divert his attention to the situation warranted on the basis of importance.
• Salesman himself develops the habit of self-activity analysis.
• The two-way communication assures employee morale.

Sales Territories and Sales Quotas

Sales manager must try to know the sales field well in advance, before the production starts. He must know the area of demand for the products and for this he should know the habits and economic position of the customers; and the type of demand and quality of products usually in demand. In short, a detailed study of consumers is important. The sources of information are year books, census reports, publications, professional organisations etc.

Sales Territory

Almost all the firms divide their markets, after the sales field is located into different territories. Sales territory is a particular grouping of customers and prospects assigned to a salesman. A sales territory is a geographical area which contains present and potential customers, who can be served effectively and economically by a single salesman.

Its aim is to facilitate management’s task in matching sales efforts with the sales opportunities. An efficient salesman can successfully discharge his duties and responsibilities if the territory allotted to him is of workable and suitable size. A good sales planning is based on sales territory, rather than taking the whole market area.

That is, the market of a firm’s product is divided into small segments or territories or areas, so that each territory can be allotted to each salesman.

When allotting perfect sales territories, which have been planned carefully, the following objectives are aimed for the reasons thereof:

• Sales effort can be fruited more effectively in the assigned territory.
• It is possible to have increased market coverage, not losing the orders to competitors. He meets the competition wisely as it is pre-planned, because he knows the local condition.
• It prevents the duplication or overlapping sales efforts.
• Headquarters of each sales territory can be located in a place, where greater number of customers are located.
• Work load for each salesman can equitably be distributed, in terms of sales volume.

Sales Quota

Apart from the allocation of sales territories, salesmen are further controlled by fixing sales quota. Almost all the companies use quota system of defining and evaluating the task expected of the salesmen. Sales quota may be defined as the estimated volume of sales that a company expects to secure within a definite period of time.

Quota is the amount of business, in terms of value or in terms of units of sales, which is fixed for every salesman. It may be fixed for a geographical area to be achieved within a definite period of time, a month or a year. Shorter the period, the better it is. It is a target or a standard of performance that the salesman has to attain. The quota is fixed on the basis of sales forecast. For an effective control, smaller area and shorter period are preferred.

A sales quota, to be effective, practical and successful, should satisfy the following:

• Sales quota must be attainable and fair.
• It must be scientifically calculated. It should not be too small or too big.
• It must provide definite incentive to salesman.
• It must be flexible.
• It must be simple and must be fixed in consultation with the salesman.

Sales quota brings the following benefits

• The sales quota can be used as yardstick to assess the performance of the salesmen.
• It is a measuring rod with which the sales operations are directed and controlled to more profitable channels.
• It is possible and easier to locate strong markets and weak markets.
• It is a device to adopt more effective compensation plans.
• It fixes the responsibility on each salesman and so they work hard to attain the goal. The salesmen never allow the sales to fall below the quota.
• It facilitates sales contests and is a base.

Weaknesses

• In many cases the sales quota is fixed arbitrarily.
• If situations are changed, the quota fixed may become ineffective.
• If the quota is too small, the salesman will relax and if the quota fixed is too large or unattainable, the salesman loses initiative.
• It is difficult to set an accurate quota.

Bases Necessary for Fixing Quota:

• Purchasing power of the prospects.
• Past sales figures compared by analysis.
• Demand trend for the products.
• Position and degree of competition prevailing.

At the end of the quota period, it is a must to measure the effectiveness of quota by comparing the performance of salesman, in relation to the quota. To keep salesmen’s effort on the right path, quotas can be used as a control mechanism. Departure of sales activities from the projected quota is a main problem to the sales management. If sales volume is not satisfactory, the fault may lie with quota plans. Quota, as a diagnostic aid, cautions the authority to take corrective steps and especially, when the sales volume takes a negative departure from the past sales.

In all fairness, quota should be aimed at equitable distribution. It should be equal for all salesmen. Should all the salesmen have the same quotas? The answer depends upon the territories, which are not the same in respect of competition, extent, customers etc. the ability of the salesman is also different. The ‘better’ salesman with ‘better’ territory exceeds the quota and ‘poor’ salesman with ‘poor’ territory fails to achieve even the quota. By considering all these, fairness of the quote decision takes place.

Types of Quotas

• Sales volume, in value or units by product line, consumer type etc.
• Salesmen activity, such as calls, new accounts, demonstrations, display arranged etc.
• Expenses quota, either in value or percentage of sales obtained.
• Gross Margin from sales obtained etc.

Quota can be used as a management tool, if it is set scientifically.

Salesmen’s Authority

If the sales manager goes for doing all the works of a firm, it is very difficult to conduct the business Moreover, he lacks time. Therefore, the job is divided and entrusted to the salesmen. When the authority is passed on to the salesmen, there is transfer of power to the salesmen i.e., delegation of power. Delegation is the required authority to the salesmen to discharge their assigned job.

When one is delegated the authority, it means permission is given to do the duties. When authority is conferred on salesmen, they know their responsibilities. Customers may not be willing to deal with a salesman having no authority.

There are no hard and fast rules as to how much authority be given to a salesman. In modern time, the degree of authority is reduced. The authority and freedom of salesmen varies from firm to firm. To what extent the authority is given to a salesman depends upon the size and nature of the firm.

Since the salesmen are representing the firm and deal with customers, who have no direct contact with the firm, the salesmen’s authority be well-defined. Generally, catalogue, price lists advertisements etc., reveal the prices, guarantees, quality and other details of the products. And the salesmen are being relieved of these botherations.

However, salesmen may be conferred with certain measure of authority in dealing with the matters, such as special concessions, discount rates, granting credit, settlement of claims, settlement of damages, defective, unsalable items etc. But it is important that salesmen are watched in their acts which must be in accordance with the instructions by the sales manager and their activities are subject to the approval of the sales manager.

Field Supervision

Performance of a function or service by an individual is called duty; activities that an individual is required to perform are a duty on him. Authority is a right or power required to perform a job on the basis of duty assigned to one. An authorized person is empowered to do the assigned job Responsibility must always be followed by corresponding authority or power. Authority and responsibility move in opposite directions.

Authority always moves from the top downward, whereas responsibility moves upwards. Authority is derived from sales manager to whom the salesmen are responsible for proper performance of their activities. The individual responsibility and freedom of the sales personnel vary from firm to firm. A good degree of control is essential over the activities of the salesmen.

Generally the sales manager or any senior sales personnel or field supervisor; are appointed to check the activities of the salesmen so as to:

• Know whether the salesman is doing his job in best way
• Find out deficiencies if any
• Make suggestions for further improvement
• Check the procedure of orders taking
• Evaluate the performance of salesman
• Provide spot motivation to salesman
• Secure maximum coverage of the market

Control aims at appraisal of salesman’s performance. It must be done periodically and on continuing basis as to determine the compliance of policies and attainment of targeted quota in respect of job. Supervision and control are different. Supervision aims at direction for working and control includes supervision and evaluation of past performance.

Routing and Scheduling

Time must be used wisely while a salesman travels in his respective territorial area. Salesman will be encouraged to get maximum sales by reducing the wastage of time. Routing and scheduling is one of the techniques of controlling a salesman’s day to day activities. A planned routing of the salesman will facilitate easy communication, maximum territorial coverage and thereby reduce the waste time.

Management has a closer control. A clear tour plan is there and reveals route, location of customers, transport facilities, maps etc. The planned routes and schedules are to be followed by the salesman. The reports sent by the salesman can be compared with the planned routes and schedules and this reveals the deviations.

Strategic decision-making is the process of charting a course based on long-term goals and a longer term vision. By clarifying your company’s big picture aims, you’ll have the opportunity to align your shorter term plans with this deeper, broader mission giving your operations clarity and consistency.

Strategic decision making involves the following 3 things:

• The long term way forward for the company
• Selection of proper markets for the company
• The products and tactics needed to succeed in the targeted market.

Features of Strategic Decision Making

1. Strategy is at many times at tangent with Marketing Decisions

Where marketing decisions are short term, strategic decision making might consider a long term initiative, such as launching a very new and innovative product, or changing the existing product lines radically. Technology or innovation is at the crux of strategic decision making.

The reason that marketing decisions and strategy decisions are difference is because marketing is focused on retaining the existing customer base with the existing technologies. But the customer base is sure to get tired soon of the existing products and the innovators and adopters will keep searching for new products in the market. And hence, through strategic decisions, the firm has to stay in a place of continuous development.

2. There is immense risk involved while taking strategic decisions

Naturally, when you are implementing plans which will show positive or negative results only after 4-5 years, the risk in strategic decision making is huge. Think about the time and energy, not to say natural resources wasted to implement a plan which failed after 4-5 years.

Yet, even after the risk involved, companies have to implement risky strategic decisions from time to time just because the directors thought a unique product had demand in the market, or that another product is required in the market. Strategic decisions involve necessary risk and success is not guaranteed.

3. Strategic decisions involve a lot of Ifs and Buts

Think of a mind map and the number of branches and nodes that can form the complete mind map. When a brain starts thinking, the central thought might have further branches, and these branches will have even more nodes (or sub branches if you want to call them)

Similar to the mind map, a business can face many problems in the course of its run. A competitor can crop up, the market can become penetrative, the external environment can change, and many other unforeseen situations can happen. The strategic decision making has to consider all these alternatives, whether positive or negative. And the plan has to also include the action that the firm will take, if any of the above business problems or factors come into play.

4. Strategy implementation timelines

Whenever we make a schedule in our personal lives, we always start things when we have enough time in our hand. For example you will plan a holiday, when office work is not hectic. You will not plan it when there is a product launch nearby. Similarly, when in business, timelines are very important.

If a product is to be launched, the launch date is decided at least a year back, the sales phase has to be implemented at least 2 months before the actual launch so that you have sellers in place when the product is launch. Moreover, the service network is also to be planned before the launch, so that service issues are sorted out when there are problems after the product launch. If these concepts are not implemented, the marketing strategy and hence the product can fail miserably.

5. Preparing for the competition’s response

Whenever you change the market equilibrium, the competitors, whose businesses you have directly challenged, are sure to respond. When they respond, the market changes and you have to change your strategy accordingly.

In general there are 2 ways that a company directly affects the competition and the market.

• The company creates a completely new operating norm in the market itself.
• It raises customer expectations and thereby changes the market equilibrium.

Most strategic decisions will call for radical changes in the way the company operates in the existing market. Accordingly, the perception of competitors and customers will change for the company. The company has to in turn be prepared for the response of competitors in such a case.

Implementation of strategic decisions While implementing strategic decisions, you need to have eyes at the front as well as the back of your head. You need to look at what was decided at the start, as due to short term pressure, it is very much possible to deviate from the path which was already set.