Effective Sales Team Structures: How to Choose the Best System for Your Sales Org

The History Channel launched a television series many years ago called “Hell on Wheels.” The series dramatized events in American history when building the transcontinental railroad. In 1862 the Pacific Railroad Act chartered the Central Pacific and the Union Pacific Railroad Companies, who were challenged to build the transcontinental railroad system, linking a massive railway system from east to west across the United States. 

The railway race would become an American engineering feat bringing together a complex transportation system that would set the US up for efficiency and prosperity in the years to come. In fact, before the transcontinental railroad was completed, it cost an average of $1,000 to travel across the country, once completed, that cost was reduced to $150. 

Systems are a set of things working together as parts of a mechanism or an interconnecting network. Everything is made up of systems. Whether it's a sound system, a design system, gaming system, or a transportation system, the only way to scale and make something work well, is to create a system that is intricately designed for a specific outcome. Nothing is ever perfect at the start, but a solid foundation is the first step in building any effective system. 

Sales team structures are no different, starting with a strong foundation, it can be scaled over time. Just like a long-planned project like the transcontinental railway system came to fruition over time, any sales team, regardless of its current state, has to start its system somewhere.  

We all understand the importance of hiring quality sales reps, but how you structure your sales team can have an even bigger impact on how they perform. Using the right sales team structure for your organization can empower your sales reps to excel and drive sales, but a poorly chosen structure can inhibit productivity, alienate customers, or disguise serious problems. The right sales team structures will depend on the specifics of your organization and sales team.

Consider, for example, two sales reps. One is a master at generating leads and initiating contact, but struggles to move their leads all the way through to becoming customers. The other is an expert closer, but has a hard time getting started with a new lead. The right structure would allow these reps to each focus on their areas of expertise, handing off leads at the appropriate time in order to easily secure sales. The wrong structure would have them both languish on every lead.

There are a number of proven sales team structures available to use, and which ones are “best” comes down to your particular needs. Sales teams can be structured according to external and internal operations, and most organizations will use a combination of both.

In this article, we’re going to overview the most effective external and internal sales team structures, explain the pros and cons of each, and help you determine which structures will be the best fit for your organization.

• Understanding sales team structures
• Geography/territory structure
• Product/service line structure
• Industry/vertical structure
• Account size structure
• Island structure
• Assembly line structure
• Pod structure
• Choosing the right structure for your organization

Sales department structure basics

Before we get into the specifics of different structures, let’s consider what we mean by a sales team structure and why it’s important.

What is a sales team structure?

Put simply, the sales team structure (also referred to as a sales department structure or sales organization structure) is how you organize your team. The structure determines things like what hierarchy you use, which sales employees pursue which leads, which products or services they sell, and whether they follow a customer through the whole sales process or hand them off to different team members at certain stages.

It’s important to be purposeful with your sales team structure, as different kinds of structures work better for different organizations. The right structure can speed up onboarding, boost morale and motivation, provide your customers with the quality of service they deserve, maximize efficiency, and drive revenue.

Conversely, using a structure that is ill-suited to your organization can drive high turnover rates, frustrate and alienate customers, tank productivity, and decrease revenue.

As a sales leader, choosing the right structure for your team is one of the most influential decisions you’ll make. And it’s not just important to choose the right structure for new teams. It’s equally crucial to identify when reorganizations are necessary. A willingness to change and adapt your structure can be the key to turn around a struggling sales organization.

The two primary ways to create and understand your team structure

Sales team structures can be divided into two main categories: those that are based on external operations and those that are based on internal operations.

Externally based sales team structures are organized around your customers and the market—what you sell, where you sell it, etc. Internally based sales team structures are organized around the functions and roles different people in your organization fulfill.

You’ll want to consider the relative influence of both internal and external factors in your environment, and depending on the size and nature of your sales organization, you may adopt a structure that incorporates both internal and external divisions.

The different structures from the two categories can be thought of as a matrix, with your own specific strategy being the intersection of the internal and external sales team structure you choose.

We’ll break down what all of these different sales organization structures look like, and we’ll examine why you might consider each one.

Sales department structures by external operations

Structures based on external operations model your team structure in response to your customers and the market. Different teams are assigned to different segments of your customer base, divided by one of a few key factors.

Geography/territory structure

With a team structured by geography/territory, sales employees are grouped according to the regions they sell to. Typically, this will mean having sales teams physically located in each (or at least most) of the regions they sell to. In some cases, the teams may be located in one or a few centralized locations, while having a broader range of designated territories they sell to. For example, insurance companies frequently have local agents in each community they insure to provide personalized service.

Geography/territory structure pros:

• This structure is well suited to businesses that offer geographically specific products or services.
• It’s also helpful when laws, regulations, standard procedures, and languages vary across geographic locations.
• Organization by geography makes for a very simple, familiar structure.
• Giving dedicated focus to a certain region is a great way to grow and succeed in that region. Having a trustworthy and well-connected local sales team can increase both customer retention and customer referrals.
• It allows salespeople to build relationships with local businesses and customers, as well as invest in local competitor research.
• If reps are all located within the regions they sell to, it can cut down on traveling expenses.

Geography/territory structure cons:

• Care must be taken to evaluate the performance of sales employees within the context of the region they sell to, as some regions will inherently generate less revenue than others.
• Reps who are organized solely by geography may need to sell the full range of a business’s offerings, and they may not develop much depth of technical expertise into each offering on its own.
• Reps may end up working in silos where they’re unable to gain cross-functional knowledge.
• This siloing can make it harder to develop team cohesion due to physical separation and local focus.

Product/service line structure

Businesses with multiple product or service lines may organize their sales team structure according to their different offerings. This allows each team of sales reps to focus on the particular products or services they sell, without needing to know everything about the company’s other lines. For example, a manufacturer of consumer electronics might dedicate separate sales teams to selling TVs, PCs, audio equipment, or other categories of electronics they produce.

Product/service line structure pros:

• This structure is well suited to businesses that offer a wide range of distinct products or services that each require a depth of technical knowledge to sell.
• This structure is well suited for organizations that have little (if any) audience overlap between product lines.
• Sales reps can become an expert on the product or service they sell, enabling them to more effectively communicate its benefits, features, and value to potential customers.

Product/service line structure cons:

• If the different product or service lines are not distinct enough, customers may become frustrated at having to deal with different sales reps from the same organization.
• Different orders from the same customer may be unnecessarily processed and shipped separately, even though it would be more efficient to do them together.
• Customers may want to go through a sales rep they know when purchasing products or services that are outside of that rep’s designation, complicating the sales process and potentially resulting in inaccurate information being presented to the customer.
• Sales reps may be motivated to sell something from their own product or service line, even if the customer ideally needs the solution offered by a different line.
• This structure can result in siloed product knowledge across the sales force.

Industry/vertical structure

Sales teams structured by industry or vertical cater to the specific kinds of customers they’re targeting. In some cases, each product or service a business offers will align with one specific vertical, but in other cases, the same products will have very different applications in different industries. For example, commercial 3D printers are used in the automotive industry for rapid prototyping and in orthodontics to create dental models, and the way you’d sell a 3D printer would depend on who you’re selling it to. Organizing by industry allows sales reps to focus on the pitch that is most appropriate for their customers’ intended use.

Industry/vertical structure pros:

• Sales reps are better able to understand and connect with the specific needs of the industry they’re selling to.
• The value proposition of a given product or service may differ by vertical, with certain benefits and features being more relevant to some industries than others.

Industry/vertical structure cons:

• This can be one of the more expensive ways to structure a sales department, as additional resources are needed for each vertical a business chooses to sell into.
• Companies should take care to ensure that each vertical they dedicate sales teams to will generate enough revenue to be worth the differentiation.
• This structure can leave growth opportunities on the table depending on which verticals you have prioritized. 
• An industry/vertical structure can also create disorganization and reduce sales effectiveness when leads come through from a non-prioritized industry.
• With sales reps fully invested in expertise for their target industry, it can take more effort to begin pursuing new industries.

Account size structure

Some organizations structure their sales teams around the size of the accounts they work with. This is often the case for businesses that rely on a few large accounts for the majority of their revenue—many software companies for example—as those enterprise accounts will typically have different needs and requirements than the smaller accounts the business also sells to. While a business might structure all of their teams based on account size, they may simply have a dedicated sales force for large accounts.

Account size pros:

• Structuring sales teams by account size allows businesses to offer more personalized service to the major accounts they rely on for revenue.
• Each salesperson is able to focus on the sales strategies most appropriate for the account size they’re working with.

Account size cons:

• It may become more difficult to manage resources with this structure, requiring close contact and frequent communication with reps.
• While catering to large accounts, businesses must be careful not to allow the quality of service to suffer for smaller customers.
• Special care must be taken when building your compensation plan to ensure reps are being rewarded for their effort, not just the accounts they’re given to work with.

Sales department structures by internal operations

Structures based on internal operations have to do with how you organize your individual sales reps to work with one another, the roles each rep fills, and how competitive or collaborative the sales environment should be.

Island structure

With an island sales team structure, each sales rep is responsible for the whole sales process. They generate and qualify leads, initiate contact, talk them through questions and concerns, close sales, and upsell. For example, personal financial services often use this structure in order to give dedicated service to each customer. Every rep needs to be proficient in each step of the sales process in order to meet their quotas. They have to consistently move leads all the way through to becoming customers.

Island pros:

• This island is a simple and straightforward structure requiring little effort to set up. In fact, if a business hasn’t actively chosen an intentional sales team structure, they’ve probably ended up using the island structure by default.
• It’s often favored by smaller companies on a budget who can’t afford enough specialized sales employees to use a more advanced structure.
• Reps can form relationships with customers, providing a personalized and consistent experience throughout the sales cycle. This also makes it appealing to businesses that rely on renewal revenue.
• Relatively little managerial oversight is required, compared to other structures.
• Sales reps develop a wide range of skills and gain an understanding of the whole sales process.
• With all sales reps performing the same role, evaluations are streamlined, and it’s easy to identify top performers.
• This structure tends to breed competition, which can be healthy in moderation.

Island cons:

• Although some competition is a good thing, too much competition can create a toxic working environment, disincentivizing teamwork, collaboration, and sharing of ideas and strategies.
• When a sales rep leaves, their customers may leave with them, causing problems with customer churn.
• Because each rep is required to do everything, there must be a strong onboarding and training process in place to quickly bring new hires up to speed.
• The high demands placed on sales reps can lead to many of them either failing to keep up or suffering from burnout, causing high turnover rates.
• This structure does not scale easily.
• Because each rep operates on their own, businesses may lose some level of control over how their brand is represented.
• It can be difficult to keep track of sales metrics and benchmarks—at least without the right tools.
• Team members are given a wide range of responsibilities, which means they spend less time working on their strengths, are less likely to develop specialized proficiencies, and may have to take on many tasks they don’t enjoy. 

Assembly line structure

With an assembly line sales team structure, each sales employee is responsible for a specific portion of the sales process. It’s sometimes also referred to as a hunter-farmer structure, reflecting how different people fill different roles.

The number of roles and exactly how they’re divided can vary by organization, but they usually follow a similar pattern. For example, the process typically starts with a lead generation team to identify prospects. They pass the leads on to sales development to qualify them. Then an account executive steps in to pursue and close the sale. Finally, customer success assists customers after the purchase and identifies upsell opportunities.

Assembly line pros:

• Sales employees can be assigned roles according to their skills and experience. If they’re great in one aspect of the sales process, they don’t have to worry about other areas where they don’t do as well.
• The specialization of each role allows employees to focus on and become experts in their designated part of the process.
• When everyone does their part well, this structure can maximize efficiency.
• Bottlenecks or inefficiencies in the process are usually easy to identify.
• Sales forecasting often results in more accurate projections under this model.

Assembly line cons:

• With a more complex structure, there are more chances for something to go wrong. One team’s mistake could potentially lose a sale after other teams executed their parts flawlessly. (This makes your compensation structure more complicated as well.)
• It can be easy to lose sight of the business’s broader goals when each salesperson is narrowly focused on their specific role.
• Some customers may not appreciate being handed off from one sales rep to the next.
• There is often not much collaboration between teams apart from handing off leads.
• Teams may have a decreased sense of ownership in any one account, given that no one team is solely responsible for it.
• The assembly line structure usually requires a larger sales department staffed with more specialized (and thus higher salaried) sales employees. It can therefore be more expensive than the island structure.
• Care must be taken to ensure that the compensation plan doesn’t negatively affect this structure. For example, a team that is rewarded for generating demos may be incentivized to greenlight even poor-quality leads.

Pod structure

The pod structure can be thought of as a hybrid between the island and assembly line structures, drawing on benefits from each while avoiding some of the drawbacks. Sales employees are grouped into “pods,” each of which contain the specialized roles found in an assembly line structure. Leads are generated, qualified, pursued, and converted all within the same pod, but with each sales employee contributing their area of expertise at the appropriate stage of the sales process. Even Google has been reported to use the pod structure because of the benefits it has to offer.

Pod pros:

• Similar to the assembly line structure, the pod structure allows each sales rep to focus on their own areas of expertise, maximizing efficiency across the board.
• Similar to the island model, teams are able to maintain a sense of ownership in their accounts, as a given account will usually remain within the same pod.
• Customers are less likely to feel the effects of handoffs between team members, as sales employees within a pod are used to working together fluidly.
• This is the most collaborative structure, allowing sales employees to work together for the success of the pod, rather than viewing their coworkers as rivals.

Pod cons:

• The increase in collaboration can cause a decrease in the friendly competition that often helps motivate performance. However, competition can still happen between pods, rather than between people.
• It can be more difficult to evaluate the performance of individual sales reps.
• Underperforming reps may go unnoticed. Reps may also be less motivated to hone their skill sets if the rest of the pod can pick up their slack.
• Using a pod structure typically requires more sales employees and resources than either the island or assembly line structures, making it prohibitively expensive for some smaller organizations.

How to choose the right sales team structure for your organization

As we’ve seen, each of these sales team structures comes with their own pros and cons. And which pros outweigh which cons will all depend on your organization’s specific needs. There is no single “best” structure—either in the external or internal categories—but some will work better than others for you.

You may already know that some definitely won’t meet your business’s needs, while others may seem more promising. To further narrow down your decision, here are a few important questions to consider.

Is there a standard structure for your type of business?

For certain business types, a particular sales structure dominates among most major players in the field. For example, organizations in real estate and in financial services tend to use the island structure due to the personal touch it affords to customers. SaaS companies frequently use the assembly line model because of its streamlined efficiency. And many manufacturing companies use an industry/vertical external-facing structure in tandem with either a pod or assembly line internal-facing structure.

Does that mean if you’re in such a business, you have to do the same? Of course not. There’s always room for trying other things if you believe a different structure could work better for your organization. However, it’s definitely worth knowing what other similar businesses are doing, and why they’re using the structure(s) they do. If you have no compelling reasons to reinvent the wheel, it may be worth going with the proven standard.

How big is your organization?

Generally speaking, smaller companies may find the island structure to be most affordable and easiest to manage. But this is far from an absolute. As we’ve already discussed, certain types of businesses tend to use certain types of sales team structures, regardless of the businesses’ overall size. Additionally, startups in particular—despite being small at the outset—often invest up front in using assembly line structure, as it tends to scale better with a quickly growing business.

And as organizations grow, they may have more capacity to divide their sales teams by multiple layers of structures. For example, an international company might structure their sales teams first by geography, with different teams operating in each of the countries they sell to. Then they might further divide those sales teams by the specific products they sell within each country. And then they could divide those teams further still into pods to work through each account for each product in each country.

What are the needs of your customers?

The sales team structure you choose should take into account the customers you serve. What are the dividing lines between your customers that most affect how you sell to them?

Do they have wildly different preferences depending on the regions they come from? Do you find that certain selling points work better for customers in specific geographic areas? Do customers expect in-person visits? If you answered yes to any of these questions, then you might want to consider a geography/territory structure.

On the other hand, if a customer’s industry is the factor that most determines how you approach a sales pitch, or if you have employees with specialized experience working in or selling to specific verticals, then using an industry/vertical structure may be the better approach.

And if you have a few large (and profitable) enterprise accounts that demand a greater level of personalized service than your smaller customers, then you’ll likely want to incorporate an account size structure into your sales teams.

What are the strengths, weaknesses, and personalities of your team?

If you know your reps' personality types, what they prefer, and what they excel at, it can go a long way toward creating a sales team that maximizes performance while ensuring your reps feel taken care of. So it’s worth taking the time to get to know the members of your team.

If your sales employees are highly motivated and competitive generalists who are comfortable tackling the whole sales process by themselves, then the island structure is likely a good fit. If they each have distinct areas of expertise, along with areas where they struggle, then it may be worth dividing them into an assembly line structure to ensure maximum efficiency. And if your team craves a collaborative environment where they’re working with each other more than competing against each other, then a pod structure may suit them well.

Are you able to do some testing?

If your organization is large enough to support it, you may want to consider trialing different types of structures to see what works best. For example, you might set a period of time during which part of your sales force is organized into a set of pods and another part is structured as islands. Then you can compare which structure brought in the most revenue per employee at the end of the test.

If you do this, be sure to keep all other factors as similar as possible between the test groups to ensure an accurate result. For example, you wouldn’t want your pods to come from one territory and your islands to come from another, as that could mean that the end result had more to do with geography than sales team structure.

Gain accurate sales data with any sales team structure

The bottom line when it comes to choosing a sales team structure is to use what works best for your organization. But some sales team structures make it much harder than others to accurately track the performance of individual sales reps, to compare performance across teams, or to see the big picture of how your sales are performing on the whole.

That’s all data you need in order to manage your team, make accurate sales forecasts, set budgets, and maximize efficiency.

But with Performio, this consideration doesn’t have to factor into your decision about which sales team structure to use. That’s because our world-class software does all the heavy lifting for you, meticulously tracking everything from the performance of individual sales reps to the team as a whole, no matter how you have things structured. Our performance and reporting dashboards simplify complex data, pulling out crucial insights to show you exactly what you need to know.

Additionally, each of your reps will be able to see their own progress toward quotas and goals, as well as how much they can expect to earn—meaning they no longer have to resort to “shadow accounting” to track these things for themselves, and can instead stay focused on making sales.

Want to see what Performio can do for your organization? Request a demo today.