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2011

A Report on

SALES FORCE MANAGEMENT AT NEROLAC PAINTS INDIA


Submitted By: Arvind Upadhyay (B-4) Gaurav Verma (B-13) Aditi Goyal (B-18) Dimple Thandani (B-49) Basant Bagchandani (B-51)

Submitted To: Prof Krunal Joshi


MASTERS OF BUSINESS ADMINISTRATION SHRI JAIRAMBHAI PATEL INSTITUTE OF BUSINESS MANAGEMENT AND COMPUTER APPLICATIONS, SJPI(NICM)

GUJARAT TECHNOLOGICAL UNIVERSITY, AHMEDABAD Sales Force Management/Nerolac/Group8 Page 1

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PREFACE

The India makes high progress on industrial levels. Due to liberalization and globalization industrial and business opportunities are increasing. So to achieve this opportunities demand of competitive management and skilled manager are also being increased. MBA Program is very well for this necessity. Because it is well structure and integrated course of management studies. In MBA practical knowledge is as necessary as theoretical knowledge.

Today in the age of globalization where cutthroat competition is prevailing in the market, theoretical knowledge is not enough beside on this practical knowledge gives experience and presents the true picture of theoretical knowledge.

As a part of the Sales and Distribution Course project we choose to study the Sales Force Management at Nerolac, India. Undergoing this study project at was very interesting and one of the finest experiences during our study.

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ACKNOWLEDGEMENT
Over the year, we have received tremendous support from my teachers, parents, friends and my guides. We am indeed thankful to them. We would take this opportunity to express my gratitude for the sustained support we have received from Nerolac Paints Pvt. Ltd. for providing us an opportunity to carry out this project. Sincere thanks to our faculty and guide Prof. Krunal Joshi helped us throughout the internship and guided in all the aspects of the project. We wish to express my deep sense of gratitude to Mr. Vishrant Gandhi,(Zonal Sales Officer, Industrial Sales) for supporting and guiding me. He was the one without whose cooperation the project would not have been a success. His guidance, encouragement and help were much indeed appreciated. Besides, this project made us realize the value of working together as a team and as a new experience in working environment, which challenges us every minute. Lastly, we offer my regards to all of those who supported us in any respect during the completion of the project. We take sole responsibility for any errors remaining. Any comments, observation, constructive criticism and suggestion for further improvement of the report are welcome.

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TABLE OF CONTENTS

PREFACE ................................................................................................................................................................ 2 ACKNOWLEDGEMENT ............................................................................................................................................ 3 1. INTRODUCTION ............................................................................................................................................. 5 1.1 1.2 1.3 1.4 1.5 1.6 2. HISTORY ................................................................................................................................................ 5 KANSAI NEROLAC PAINTS LIMITED........................................................................................................ 5 CORPORATE VALUES ............................................................................................................................. 6 THE HR PHILOSOPHY ............................................................................................................................. 7 CULTURAL ETHOS .................................................................................................................................. 8 OPEN DOOR POLICY .............................................................................................................................. 8

MEANING & THEORIES OF SALES FORCE MANAGEMENT ............................................................................... 9 2.1. 2.2. 2.3. 2.4. SALES FORCE OBJECTIVES ...................................................................................................................... 9 SALES FORCE MANAGEMENT AT NEROLAC ......................................................................................... 12 SALES STRUCTURE AT NEROLAC .......................................................................................................... 15 RECRUITMENT AND TRAINING ............................................................................................................ 16 RECRUITMENT AT NEROLAC: ...................................................................................................... 17 SELECTION AT NEROLAC ............................................................................................................. 19 TRAINING OF SALES PERSONNEL................................................................................................. 22

2.4.1. 2.4.2. 2.4.3. 2.5.

JOB ANALYSIS & JOB DESCRIPTIONs .................................................................................................... 24 JOB ANALYSIS ............................................................................................................................. 24 JOB DESCRIPTION .................................................................................................................... 24 QUALIFICATIONS, EXPERIENCE AND JOB DESCRIPTIONS AT NEROLAC ...................................... 25

2.5.1. 2.5.2. 2.5.3. 3.

DESIGNING THE SALES FORCE ...................................................................................................................... 27 3.1. 3.2. 3.3. OBJECTIVES OF SALES FORCE AT NEROLAC .......................................................................................... 29 DEFINING THE SALES TERRITORY ......................................................................................................... 30 DETERMINING SIZE OF THE SALES FORCE ............................................................................................ 31

4.

NEROLACS PERFORMANCE APPRAISAL SYSTEM ......................................................................................... 32 4.1. METHODS ........................................................................................................................................... 33 KRA AT NEROLAC ........................................................................................................................ 36

4.1.1. 4.2.

COMPENSATION AT NEROLAC............................................................................................................. 37 PLAN FEATURE ............................................................................................................................ 37

4.2.1.

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1. INTRODUCTION

1.1 HISTORY
It was founded in 1920 as Goodlass Nerolac Paints Ltd. It was formerly known as Goodlass Nerolac Paints Ltd. In 2006, Company changed its name to Kansai Nerolac Paints Limited. It has 5 paint manufacturing plants and about 6-7 contract manufacturers. The Nerolac owned plants are at: Jainpur (Uttarpradesh) Bawal (Haryana) Lote, Chiplun (Maharastra) Chennai (Tamilnadu) Hosur (Tamilnadu)

1.2 KANSAI NEROLAC PAINTS LIMITED


Kansai Nerolac Paints Ltd (formerly known as Goodlass Nerolac Paints Ltd) is largest in industrial paint and second largest decorative paint company based in Mumbai. It is a subsidiary of Kansai nerolac paints, JAPAN. It is engaged in the industrial, automotive and powder coating business. It develops and supplies paint systems used on the finishing lines of electrical components, cycle, and material handling equipments, bus bodies, containers and furniture industries.

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Kansai Nerolac has always believed that the key to its business is : Technology Research & Development Innovations Quality

KNPL has 5 Division : Decorative Industrial Coating. (General Industries & Automotive) Powder Coating High Performance Coating Pre Treatment Chemicals

1.3 CORPORATE VALUES


Vision values and culture: In todays dynamic business environment, no organization can afford to survive without a well-articulated and carefully thought vision stating the overall strategic direction and long-term future of its business. It is our vision to leverage global technology, for serving our customers with superior coating systems built on innovative and superior products and world class solutions, to strengthen our leadership in Industrial coatings and propel for leadership in Architectural coatings, all to the delight of our stakeholders. The company firmly believe that it is not only the vision of where they wish to go which will form a cornerstone of all their further growth, but also their conviction to the fact that the values based proposition has to be ultimate foundation of their business.

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To this end they consciously have internalized and been practicing these values in all their business transactions though human beings:

i) Innovation ii) Entrepreneurial iii) Responsive iv) Simplicity v) Team Orientation

1.4 THE HR PHILOSOPHY


At Nerolac, they recognize their human resources as extremely important and critical assets. They honor the dignity of each individual, irrespective of position and highly value the feelings and emotions of people. Their Human Resource Policy is, to facilitate creation of synergy, mutuality and interdependence between individual and corporate development and growth through total employee involvement and building an enabling work culture in the organization. Informality in interactions, transparency and openness in communications at all levels, and an enabling work environment supporting high autonomy of work, transparency and an objective subjectivity of Performance Management System, fair dealing, tremendous care and concern for people are a few of the softer aspects of permeable people management environment which represent the organizational climate and culture.

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1.5 CULTURAL ETHOS


Vision driven organization Employees feel pride in being part of the organization Recognition of human resources as extremely important and critical assets High level of human dignity Transparency and openness among employees at all hierarchical levels Performance-linked reward system Management and employee commitment to organization values is high Autonomy in work is high High commitment to quality products

1.6 OPEN DOOR POLICY

Working together requires that we have a friendly atmosphere based on trust and respect amongst all of us. At Nerolac we follow an Open Door policy. Any person is free and welcomed to share good idea, suggestion, doubt, problem about job or work place, or uncertainties about ones future in the organization. An open and transparent communication is appreciated.

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2. MEANING & THEORIES OF SALES FORCE MANAGEMENT


"Sales force management is a distinct process, consisting of planning, organizing, staffing, directing and controlling the selling effort by use of sales force to determine and accomplish the sales force objectives". In our present context: 1. Planning implies determining sales force objectives, formulating a strategy and scientific and systematic estimation of sales force requirements over a period of time. 2. Organizing means determining the necessary component tasks to achieve sales force objectives and grouping and assigning responsibilities to them. 3. Staffing involves recruiting, selecting, training and compensating salespeople and making plans for meeting future staff needs of the organization. 4. Directing means guiding, motivating and supervising the sales people. 5. Controlling involves those evaluative activities that are essential to ensure that objectives are accomplished as planned.

2.1. SALES FORCE OBJECTIVES


Companies must carefully define the specific objectives they expect their sales force to achieve. The old idea was that the sales force should sell, sell, and sell. Salespeople have sales quotas, and the better salespeople met or exceeded their quotas. Later, the idea arose that sales representatives should be skilled in customer problem and propose a solution. More recently, some industries have begun to insist that the sales force engage in commitment selling. Under this concept, salespeople do not initially try to sell a specific product or solve a specific problem. Rather, they show a customer-prospect how their
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company can help the customer improve its profitability. They seek to join their company with the customers company as partners for profit. Regarding of the selling context, salespeople will have one or more of the following specific tasks to perform:

PROSPECTING: Sales representatives search for prospects, or leads. TARGETING: Sales representatives decide how to allocate their time among prospects and customers.

COMMUNICATING: Sales representatives skillfully communicate information about the companys products and services.

SELLING: Sales representatives know the art of sales - approaching, presenting, answering objections, and closing sales.

SERVICING: Sales representatives provide various services to the customers-consulting on their problems, rendering technical assistance, arranging financing and expediting delivery.

INFORMATION GATHERING: Sales representatives conduct market research and intelligence work and fill in call reports.

ALLOCATING: Sales representatives decided which customers will get scare product during product shortages.

Companies typically define the specific objectives they want their sales force to achieve. To maintain a market focus, salespeople should know how to analyse sales data, measure market potential, gather market intelligence, and develop marketing strategies and plans. Sales representatives need analytical marketing skill and these skills become especially important at the higher levels of sales management. Marketers believe that sales forces will be more effective in the long run if they understand marketing as well as selling.

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On a whole it includes Designing the sales force, setting out the objectives of the sales force, chalk out a strategy for the sales force, to define the structure and compensation, and also the recruitment and training of the sales force. Integral part for success of marketing strategy is management of the sales force.

The management of sales consists of following :-

1) Recruitment is at the centre of an effective sales force. Companies develop selection procedure where behavioral and management skills are tested. 2) Training is essential to remain ahead of the competition. Sales force needs training before entering the market as well as training at different stage of the product life cycle. 3) Supervision on sales force is decided on the profile of product portfolio. A general supervision is maintained with respect to sales people dealing with potential clients. Supervision is related to efficient time management from preparation of client call to closing of the deal. 4) Motivation is a key aspect for management of the sales force. Here compensation plays an important part in driving up the motivational level. Compensation can be assigned based on sales quota. Other motivational tools are social gathering and family outing. 5) Evaluation is essential to management of a sales force. Sales reports sent by the sales force serve a good starting point of evaluation. 6) Art of negotiation and relationship marketing these two are the important aspects of successful sales representative and long term benefit for the company.

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2.2. SALES FORCE MANAGEMENT AT NEROLAC


The face of any organization is the sales force. Sales personnel are the companys link to the customers. Any companys survival and existence depends on the market and hence the sales force which maintains that link deserves the deepest thought in terms of setting objectives for it, strategy for it and structuring it. Companies spend a considerable amount of time and money on sales force rather than on any other promotional activity. However, sales force is expensive and companies are looking forward to managing them in an efficient and effective manner. Sales Management which is concerned with the direction & control of sales force refers to the management of sales personnel. Sales force management is the planning, direction & control of personnel selling, including recruiting, self selection, training (equipping, assigning, routing), supervising, paying & motivating as these tasks apply to the personal sales force management. In addition to other responsibilities, controlling & guiding the sale force is one of the important activities of management. Managing the sales force involves the implementation of personal selling strategy. The sales force management has two key personal selling strategic decisions Sales force size Selling style These decisions results from planning how to achieve the sales volume & related company goals. The decision on selling styles determines the range and nature of activities required for personal management or management of sales force. The decision on sales force size determine the magnitude of these activities. Implementing these strategic decisions is sales management responsibility.

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Sales force management is specialized type of personal management. The personal management focuses upon sales, production or office workers but sales force management focuses only upon sales personnel. Sales personnel work away from their co-workers and superiors, so it is difficult to develop a spirit of identity with and loyalty to the company and to manage them into a unified team. Sales personnels necessity is to give freer rein then production or office workers. Up to a large extent they are relied upon as individuals to plan and control their own activities. Most sales personnel visit their home office only infrequently and centralize direction of their activities mainly by phone and mail.

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The steps in sales force management are the same as those in general personnel management. Sales force management work, starts with job analysis-determining the job objectives, the component duties and responsibility, performance criteria, and reporting relationships. The output of job analysis is the written job description that is used in deriving the necessary qualifications (job specifications) of the employee. Qualified job applicants must be found, and this requires decisions on recruiting sources and methods. From the supply of applicants, those meeting the job specifications are selected. After hiring applicants undergo initial training and throughout their entire careers with the company-receive continuing training through diverse delivery systems. Compensation plans are designed to provide appropriate levels and methods of compensation. When the salesperson is assigned to the field, other personnel activities come into play. The salesperson is motivated to plan and make productive use of working time. To improve the effectiveness of sales calls, salespersons are counseled on working habits and methods controlling sales personnel require analysis of selling records and evaluations of sales performance.

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2.3. SALES STRUCTURE AT NEROLAC


If the company sells one product line to one end using industry with customers in many locations, the company would use a territorial sales force structure. If the company is selling many products to many types of customers, a product specialized or market specialized sales force structure may be more appropriate. The structure needs to be changed by established companies as they expand and economic conditions change.

Chairman And BOD

Managing Director

Vice President

General Sales Manager

Divisional Sales Manager

Area Sales Manager

Assistant Sales Manager

Sales Officer

Sales Executive

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2.4. RECRUITMENT AND TRAINING


Recruitment is the process of identifying that the organization needs to employ someone up to the point at which application forms for the post have arrived at the organization. Selection then consists of the processes involved in choosing from applicants a suitable candidate to fill a post.

Training consists of a range of processes involved in making sure that job holders have the right skills, knowledge and attitudes required to help the organization to achieve its objectives.

Recruiting individuals to fill particular posts within a business can be done either internally by recruitment within the firm, or externally by recruiting people from outside.

At the stage of selection companies have to make sure they get the right persons that subscribe to the companys objectives and value.

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2.4.1. RECRUITMENT AT NEROLAC:


There are two types of Recruitment sources followed by NEROLAC:

Internal Sources. External Sources.

INTERNAL SOURCE
Internal sources include personnel already on payroll of the organization filling a vacancy. It can be done by means of promotions which increase the general level of moral of existing employees and make them to provide more reliable information about the capable candidates.

Following are included in this source:-

i. Present Permanent Employees. ii. Employee Referrals. iii. Former Employees.

EXTERNAL SOURCE
These source lie outside the organization, in Nerolac they consider following sources Recruitment

1) Advertisement. 2) Campus Interview 3) Employment Exchange 4) Unsolicited Application


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Advertisement
For the recruitment, Nerolac consider this particular source. They give Advertisement in local newspaper and other newspaper for the post in the sales department with complete job description.

Campus Interview
This is second option that Nerolac consider. Recruiters are sent to educational institution where they find suitable candidate. Nerolac go through this option. But this type of recruitment is done for the upper level positions i.e. Assistant managers, managers etc.

Employee Exchange
An employment exchange is an office set up for bringing together as quickly as possible Candidates searching for employment and employees looking for prospective employees.

Employee Referrals
Nerolac also considers this option for recruitment. Friends and relatives of present employees are also a good source from which employee may be drawn.

Unsolicited Application
Some candidates send in their application without any invitation from the organization. A Recruiter can use these unsolicited applications for appointment and when vacancies arise.
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2.4.2. SELECTION AT NEROLAC


Selection either internal or external is a deliberate effort of the organization to select a fixed number of personnel from a large number of applicants. The primary aim of employee selection is to choose those persons who are most likely to perform their jobs with maximum effectiveness and to remain with the company. Thus, in selection, an attempt is made to find a suitable candidate for the job. In doing so naturally many applicants are rejected. This makes selection a negative function.

Following are the steps followed are as under: Application Initial interview of the candidate. Employment tests. Interviews. Checking references. Physical or medical examination. Final interview and induction.

During this, various steps like Education, Experience, Personal Detail, Aptitude Test, Interest Test, Intelligence Test, Performance Test, and Personality Test are considered. Different types of interviews are conducted like: Preliminary interview. Extensive interview. Stress interview. Discussion interview. Structured interview. Non -structured interview. Group interview. Final interview.

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The Selection Process in NEROLAC is as under

Vacancy In Any Department:

When there is any vacancy in any department of the organization, they give advertisement in the newspapers.

Approval From M.D:

When there is any vacancy in any department, first step is to take approval from M.D to give advertisement in newspaper. After getting approval the process goes further.

Advertisement:

After getting approval from M.D, advertisement is given in local newspaper for the related post in the sales department.

Collection of Application:

All the direct applications are collected.

Securitization of applications:

After collection, applications are scrutinized in detail and incompatible applications are rejected. Others are kept for further process. During this process, suitable applications are considered on basis of criteria decided by Nerolac.

Interview:

Interview is being carried out by a panel of 3 to 4 members consisting of head of Sales Department, M.D. and Manager of Administration. This panel will be rating on different aspects
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such as personality, knowledge of that particular field, general knowledge, written test etc. They will be having a rating sheet consists of all such headings mentions and each panel member giving marks and then after ranking will be done.

Selection:

At the end they give the appointment letter to the person and he/she is informed about his/her Joining in the organization.

Induction:

Induction is introducing an employee to the job and to the organization. The primary purpose of induction is to give information about organization about organization so that he/she works comfortably.

Generally induction conveys three types of information:-

1) General information about the daily work routine. 2) A review of the organization history, objectives, operation, products, visiting different department. 3) Detail information of the organization policies, work rules and benefits given to employee.

After a detailed induction program of a months duration, the trainees go through onthe- job training for a year. They get placed at assistant manager level to start with.

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2.4.3. TRAINING OF SALES PERSONNEL

Now that the selection has been made, the organization provides adequate training so that the applicant really becomes suitable for the job. Gone are the days when people thought that "salesmen were born and not made". Research has clearly indicated that the person can be trained to become a good salesman. Researchers have clearly indicated that the following are some of the factors which exist in case of a good salesman, i.e. a salesman properly trained as against one who was not so trained: He makes a more enthusiastic presentation. He has the ability to clinch the order. He has greater product knowledge. He pays closer attention to ensure that services are rendered to the customers. He has superior territory organization. He answers objections better. He can obtain more customer interviews.

The objectives of training are to give the following types of information to the salesmen, namely: Knowledge of the company, its background and history. This will give him a perspective as to how he fits into the organization structure of the company. Knowledge of the Company's products and more particularly the `selling points' or advantages that he can emphasize with a view to close the sale. Knowledge of customers, i.e. details about the types of customers and how they should be handled. Knowledge of sales and other procedure which is prescribed, such as how to get orders, what forms to fill up, the sales reports required, etc.

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Training in the art of selling or salesmanship.

Specific skill development programs are conducted for employees in sales. They also nominate their employees for external training programs and seminars.

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2.5. JOB ANALYSIS & JOB DESCRIPTIONs


2.5.1. JOB ANALYSIS
Job analysis is the process of examining jobs in order to identify the key requirements of each job. A number of important questions need to be explored: the title of the job to whom the employee is responsible for whom the employee is responsible A simple description of the role and duties of the employee within the organization.

2.5.2. JOB DESCRIPTION

A job description will set out how a particular employee will fit into the organisation. It will therefore need to set out: the title of the job to whom the employee is responsible for whom the employee is responsible A simple description of the role and duties of the employee within the organization. A job description could be used as a job indicator for applicants for a job. Alternatively, it could be used as a guideline for an employee and/or his or her line manager as to his or her role and responsibility within the organization.
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2.5.3. QUALIFICATIONS, EXPERIENCE AND JOB DESCRIPTIONS AT NEROLAC

2.5.3.1.

SALES OFFICER- INDUSTRIAL

Ideal candidates will be B.Sc/ M.Sc in Chemistry,BE/B.Tec Chemical (MBA Preferred) with 2-4 years of experience. The incumbent should have an experience in paints/ lubricants / auto industry / Powder Coating / Protective Coating/High Performance Coating. Job Description: The candidate shall be responsible for: Achieving sales & collection targets, Developing new business, Maintaining the stock norms, Generating information reports on market share, new products, upcoming business opportunities etc.

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2.5.3.2.

AREA SALES MANAGER

The ideal candidate should be a Graduate, Preferable MBA with 3-6 years of experience.

The incumbent should have an experience in Profitable Sales with market share gain. Job Description: The incumbent shall be responsible for:

Achievement of sales (volume / value) as per budget. Manage accounts receivables as per norms. Manage and control inventories and SMNM stocks as per budgets through proper forecasting.

Managing the business in his division through a team of 30-40 people. Training and development of sales and admin team and develop successors for self and ASM.

Monitor, evaluate & provide feedback on performance of ASMs / PSMs Implement channel incentive scheme and ensure control measures and cost controls.

Channel management and expansion as per need of the business. Implement marketing plan and promotion, pricing, product mix & distribution policies of the company in the division

Gather information on competitors activities in the region and act upon it for KNPLs benefit.

Control entire accounting and all audit related queries

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3. DESIGNING THE SALES FORCE


Sales force is linking between companies and customer. Therefore, companies have to be careful in designing and structuring sales force. 1. The first step is setting out an objective for sales force. Earlier companies had a single objective increasing sale making it objective also for sales people. Sales people are asked to perform a search for prospective clients or lead. Sales people are asked to balance time between a prospective customer and current customer. Effective communication of product and services is essential to close the deal. Sales people also play an important role in after sales service and can make a difference for the company. Sales people are eyes and ears of the company in the market gathering information about competition and customer changing demands.

2. The second step is use sales people strategically. Sales people have to combine efforts with other team members to achieve the objective. Sales people should be aware how to analyze market data been provided and convert them into marketing strategies.

3. The third step is deciding the structure of the sales force. The structure of the sales is dependent on the strategy followed by the company. Common sales force structures are as follows:

Territorial structure is used where every sales representative is assigned specific geographical area. This structure is preferred for building relationships with locals.

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Product structure is used for complex and un- related product portfolio. Here the sales people are directly associated with research and development of the products.

Market structure is used if the companies are operating different industry or market segments. Every sales force specializes in a definite market and helps push a product efficiently across the given market. However, the disadvantage would arise if customers are located over a wide geographical area.

Complex structure is used when companies are in business of selling complex product to different customer across a large geographical area. Here sales force structure is a combination of other structures discussed.

Once the structure is designed companies need to make a decision with respect to the size of the sales force. The size of the sales force is dependent on the market size and number of customers. 4. The next step is to design compensation for the sales force. Compensation plays a big motivational factor for sales people. Companies follow a structure of a fixed amount plus a variable amount depending of success achieved in the market. Allowances play an important factor in the salary owing to continuous travel and market visits.

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3.1. OBJECTIVES OF SALES FORCE AT NEROLAC


Market mapping. ( Overall growth & to define market size) Competitors movement ( To keep red eye on every movement of competitor) Technical Approval( To get technical approval of Nerolac Products from customer ) To develop & maintain relationship with Applicators/ Contractors/ Pre Engineering Building Constructors / Dealers / Consultants To keep sales expense under control To keep track on upcoming project in the allocated zone. To forecast the requirement of every SKU's in terms of volume on every 22nd of month. To see through that the material is dispatched well in time for every order as per customer's instruction. To track that the forecasted material has been taken by plant for manufacturing. To keep the inventory as minimum as possible. To keep account receivable number of days as minimum as possible. To develop new customer.

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3.2. DEFINING THE SALES TERRITORY


For this the following process is followed:

MARKET SIZE MAPPING

Number of Applicators/Consultants/Contractors/OEM/Projects in the market.

Available capacity to meet the requirements

From the above approximately the centre area is selected which can cater to entire region,

For example in Gujarat Nerolac has Sales Office at Surat/Baroda(H.O)/Ahmedabad/Rajkot/Gandhidham.

Baroda region covers Nadiad, Anand, Vidhyanagar, Baroda, Manjusar, Savli, Jambusar, Halol, Por, Karjan, Ankleshwar, Bharuch, Dahej etc.

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3.3. DETERMINING SIZE OF THE SALES FORCE

MARKET SIZE MAPPING

Number of Applicators/Consultants/Contractors/OEM/Projects in the market.

Available capacity to meet the requirements

For every 3 Cr of business 1 Sales Person is allocated.

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4. NEROLACS PERFORMANCE APPRAISAL SYSTEM


A performance appraisal, employee appraisal, performance review, or (career) development discussion is a method by which the job performance of an employee is evaluated (generally in terms of quality, quantity, cost, and time) typically by the corresponding manager or supervisor. A performance appraisal is a part of guiding and managing career development. It is the process of obtaining, analyzing, and recording information about the relative worth of an employee to the organization. Performance appraisal is an analysis of an employee's recent successes and failures, personal strengths and weaknesses, and suitability for promotion or further training. It is also the judgment of an employee's performance in a job based on considerations other than productivity alone. Generally, the aims of a performance appraisal are to:

Give employees feedback on performance Identify employee training needs Document criteria used to allocate organizational rewards Form a basis for personnel decisions: salary increases, promotions, disciplinary actions, bonuses, etc.

Provide the opportunity for organizational diagnosis and development Facilitate communication between employee and employer Validate selection techniques and human resource policies to meet federal Equal Employment Opportunity requirements.

To improve performance through counseling, coaching and development.

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4.1. METHODS
A common approach to assessing performance is to use a numerical or scalar rating system whereby managers are asked to score an individual against a number of objectives/attributes. In some companies, employees receive assessments from their manager, peers, subordinates, and customers, while also performing a self assessment This is known as a 360-degree appraisal and forms good communication patterns. The most popular methods used in the performance appraisal process include the following:

Management by objectives 360-degree appraisal Behavioral observation scale Behaviorally anchored rating scales

Trait-based systems, which rely on factors such as integrity and conscientiousness, are also used by businesses but have been replaced primarily by more objective and results-oriented methods. The scientific literature on the subject provides evidence that assessing employees on factors such as these should be avoided. The reasons for this are twofold: 1) Trait-based systems are by definition based on personality traits and as such may not be related directly to successful job performance. In addition, personality dimensions tend to be static, and while an employee can change a behavior they cannot change their personality. For example, a person who lacks integrity may stop lying to a manager because they have been caught, but they still have low integrity and are likely to lie again when the threat of being caught is gone. 2) Trait-based systems, because they are vague, are more easily influenced by office politics, causing them to be less reliable as a source of information on an employee's true performance. The vagueness of these instruments allows managers to assess the employee based upon subjective feelings instead of objective observations about how the employee has performed his or her specific duties. These systems are also more likely to leave a
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company open to discrimination claims because a manager can make biased decisions without having to back them up with specific behavioral information

Nerolac had a workforce of 1900 professionals and distribution network of 11,000 dealers serviced by 66 company depots spread across the country in 2004. Apart from its focus on brand building and distribution, Nerolac also focused on instituting suitable HR policies and systems to attract and retain employees of all divisions, including the sales and marketing divisions. As part of its HR strategy, Nerolac devised an effective performance appraisal system based on Key Result Areas (KRA's) for its sales professionals. The compensation was linked with the assessment of employee performance based on the KRA's. In this kind of performance appraisal system, every employee was asked to specify the Key Result Areas based on the job profile. These KRA's were reviewed by the respective superiors to arrive at the final KRA's. Employee performance was assessed in terms of KRA's on a quarterly basis. At the end of each year, the compensation and rewards were decided in accordance with these appraisals. Apart from the KRA's-based performance appraisal, Nerolac also implemented various other performance measurement systems designed for different levels of employees. Nerolac launched the 360-degree feedback initiative. However, this technique was different from the conventional techniques followed by the corporates. Nerolac followed the self-evaluation method instead of the usual process of management evaluating the employees. The objective behind this initiative was to empower the employees and bring in transparency to the assessment of employee performance. In this technique, employees were allowed to evaluate themselves on their performance. The company then conducted open meets called 'feedback-sharing initiative' at which employees could share their problems and solutions.

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For example, if one employee admitted an inability to communicate, the other employees tried to develop an action plan to help him/her overcome that inability. The company also consolidated and uploaded this feedback onto a knowledge portal developed for employees. Nerolac introduced a flexible compensation structure called 'Corporate commission for corporate performance. Generally, the managers' commission was decided based on the achievement of individual targets. Apart from such performance-linked variable pay, they were also entitled to commission based on the company's overall performance. The company planned to accomplish two objectives by this initiative. First, it wanted to make the employees aware of the larger interests of the company while performing their duties. Second, this structure provided another measure of performance that linked the individual performance to the overall performance of the department.

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4.1.1. KRA AT NEROLAC As part of its HR strategy, Nerolac devised an effective performance appraisal system based on Key Result Areas (KRA's) for its sales professionals. In this kind of performance appraisal system, every employee was asked to specify the Key Result Areas based on the job profile. These KRA's were reviewed by the respective superiors to arrive at the final KRA's. Employee performance was assessed in terms of KRA's on a quarterly basis. At the end of each year, the compensation and rewards were decided in accordance with these appraisals. Quantitative KRA: KRA Value and Volume Collections Key indicators Achievement of Budgeted Sales Value for segment Achievement of min 50% C EI or any Specific target given from HO. whichever Is higher. Qualitative KRA: KRA Systems Customers Key indicators Regular updation and usage of CRM (a) Early identification of issue which could lead to dissatisfaction along with resolution (b) Identify & develop new accounts in and around. Generation of Customer opening form Closure of unlinked items in the system Statement of Accounts sent by 10th every month Balance Confirmation - once every 3 months and c Forms collections" Weightage 25% 50% Weightage 50% 50%

Customer Administration

25%

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4.2. COMPENSATION AT NEROLAC

A well-balanced system of compensation with rewards linked to performance has created an effective performance orientation all through the organization. It is sustained perpetually with conscious, proactive systems such as Balanced Scorecard, Performance commission dependent upon key Result Areas, Corporate Commission for corporate performance Annual awards to technical personnel for excellence etc.
Well, there is hierarchy and organization structure based on functional responsibilities. But there is an excellent amount of informality, cordiality and flexibility all through the organization .

4.2.1. PLAN FEATURE

Design, Communication, And Administration Methodology

Sales compensation design begins with tying sales compensation goals to the business objectives of the company in a direct way. The selling job is subsequently carefully defined in terms of responsibilities, accountabilities, and goals. Communication and administration is the responsibility of Sales supervisor with frequent executive sales performance audits conducted.

Application Of Performance Yardsticks

Both qualitative and quantitative performance measures are used to communicate performance priorities for upcoming performance period. Often profit is used as a supplementary yardstick to revenues.

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Measures directly extend corporate sales goals to sales job and tie sales representative into the overall business plan of the company. Team measures are often used to reward cooperation and team selling.

Mix of Fixed and Incentive Compensation

Prime emphasis is on the economics of the selling task rather than competitive compensation. Incentives offer very high cash compensation for excellent selling performance. Little emphasis on competitive compensation and base salary or draw is measurably below competitive compensation for industry, emphasizing on paying for sales success.

Actual Total Cash Compensation Paid

Total cash compensation varies dramatically based on sales performance. Over 25% of sales representatives earn more than competitive cash compensation and 20% earn less than competitive.

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