Selection Sales Force: Meaning, Process and Stages Selection

 Q. What do you understand by selection of sales-force ? Explain various stages involved in the selection of sales force.

Ans. Meaning of Selection of Sales Force: Selection is the process of determining whether an applicant meets the qualification for a specific job and choosing the applicant who is most suitable to the organisation. Selection is a process by which qualified personnel are chosen out of applicants who have offered their services to the organisation for seeking employment. It is a negative process of employment by which few are selected and others are rejected. A well organized selection procedure involves many steps and a decision to reject a candidate can be made at any of these steps. Selection process attempts to reject unsuitable candidates, leaving only the best to be taken in the organisation.

In the words of Dale Yoder, “Selection is the process in which candidates for employment are divided into two classes those who are to be offered employment and those who are not.”

In brief, selection is the process of rejecting unfit candidates from the large number of candidates provided by recruitment process.

Selection Process – Selection process may have following steps: 

(1) Receiving Applications: The first step in the selection process is receiving applications from prospective candidates. The application form usually contains information like name of applicant, date of birth, sex, address, educational qualifications, experience, minimum acceptable salary, marital status, references etc. (References – for character viewpoint. References should not be in blood relations.) Application form gives a preliminary idea of the candidate and helps the interviewer in formulating questions. Application form should be simple and it must have all such points for which preliminary information is needed. On the basis of such information, the management screens out the undesirable applicants.

(2) Selection Tests: After eliminating undesirable applicants, the selection tests are conducted to evaluate different types of skills and qualities of applicants.  Basic assumption of these tests is that individuals differ in their abilities and skills and these skills can be accurately measured by various tests such as mental ability test, aptitude test, achievement test, interest test, etc. At this stage, the candidates with poor performance in the tests are eliminated. These tests help to know applicant’s mental ability, word fluency, speed of perception, ability to learn new jobs, etc.

(3) Interview: The main objective of interview is to obtain additional information which is not available in application form or selection tests. The purpose of the interview is to determine the suitability of applicant for job and of the job for the applicant. For recruiting sales personnel, interview is a very important step of selection process as we come to know the conversation capabilities, speech fluency, confidence and personality of candidates. Interview must be conducted in a friendly atmosphere and candidate must be made to feel at ease. Unwanted questions should be avoided. It is better to ask questions mainly based on job-specification. The interviewer should also verify the information supplied by the interviewee in the application form. The place of the interview should be comfortable and free from interruption. After all the candidates have been interviewed, a panel of selected candidates is prepared according to their merit. In this stage also undesirable candidates are rejected. The interview can be of following types:

(a) Structured Interview: Interviewer prepares a list of questions to be asked in advance on the basis of job specification.

(b) Unstructured or Free Interview: In this method, no list of specific questions is prepared in advance. The applicant is encouraged to talk freely. Experts opine that this technique is better for probing individual’s personality in depth. 

(4) Reference Check: Generally candidates are asked to give names of two or three references in their application forms. The references are contacted to know the character, conduct, behaviour of prospective candidates. The reference should be reputed persons holding reposible position. Moreover certificates/degrees are also checked from the records of colleges/universities/professional institutes. The experience of candidates can be checked by contacting previous employers. This step also helps to drop unsuitable candidates supplying wrong information or employees of doubtful character and conduct.

(5) Medical or Physical Examination: Certain jobs require more strength, travelling and involve tough working conditions. Physical examination reveals whether or not a candidate possesses these qualities. Those who are physically unfit are rejected. Medical examination prevents the employment of those candidates who suffer from some type of contagious disease. The medical examination tests can be with regard to weight, height, heartbeat, blood pressure, mental-balance, ENT, eyesight, etc. A person with poor health remains absent more frequently than a healthy person. It is important to select salesman possessing good health because he has to travel for long periods and has to make numerous sales calls.

(6) Selection and Placement: If the candidate is found suitable in above stages, then he will be selected, first on probation basis, and if his performance remains satisfactory in that period then either his probation period is extended for future review or further training is provided or he may be dropped. 

After initially selecting a person, he will be inducted in the overall organisational structure, and he is explained regarding history, customs and traditions of the company. He is introduced to his colleagues, he is told about his authority, responsibility, superiors and subordinates. He is also shown the necessary facilities such as canteen, rest-room, etc. The selected employee should be properly inducted before starting his work.

Procedure for incorporation of a public Company.

 Q. Explain the steps to be taken or a procedure to be followed for the incorporation of a Public Company. 

Ans. Incorporation is the second stage of company’s formation, which is done by getting the company registered with the Registrar of Companies. The required fee for registration is paid and the certificate of Registration is obtained from the Registrar of companies. The company becomes an entity only after it is registered. It is, therefore, said that floatation is the conception of a company whereas the incorporation is its birth when it takes on the form of an artificial person. So long as a company is not incorporated, it cannot be called a ‘company’ from the legal viewpoint and it has not entity as such. After completing the promotional work and before getting the company registered, the preparatory steps are as under:

Procedure for incorporation of a public Company.

1. Preliminary Activities: Before a company is incorporated, the promoter has to do the following: 

(i) To decide where the registered office of the company will be located: The promoters, as a first step, must decide in which state will the headquarters of the company be located. It is necessary to do so because the company must be registered with the Registrar of Companies of the state where it has its head office.

(ii) To decide the name of the company: Before it is given a name, it is necessary to ascertain from the Registrar of Companies whether the proposed name of the company is available or not, and whether the name is acceptable. Although a company can be given any name, yet it must conform to the provisions of the Indian Companies Act — i.e., the company’s name should not be similar to that of an existing company and should be appropriate as per the directives of the Central Government. The word ‘Limited’ must be used at the end of the company’s name. For the acceptance of the company’s name, the promoters need to make an application, through the Registrar of Companies, to Company Department of the Central Government. For the availability of name, it is mandatory to sen̈d at least three names for approval of any one of them.

(iii) To make appointments: It is also required to appoint underwriters, brokers, bankers, solicitors, auditors and signatories on the memorandum of the company. 

(iv) To get the important documents prepared: The preliminary activities include preparing the memorandum and articles of association of the company and getting them printed.

(v) To send the application to the Registrar: After completing the above mentioned formalities, the promoter makes an application to the Registrar of Companies of the state in which the company is to established for the registration of the company. The documents that need to be filed with the application are as under:

2. Documents to be Filed with the Registrar: 

(i) Memorandum of Association: This is a very important document. No conce company can be incorporated without having a Memorandum of Association. A company’s memodandum of association is its charter and under the provisions of the act defines its rights and obligations. The memorandum defines the basic objectives for which the company is allowed to be incorporated.  For a public company, a minimum of seven and for the private company, a minimum of two persons need to be signatories, i.e. subscribers to the memandum of association. Each signatory must give his address, description and occupation etc. and number of shares subscribed by him. The subscribers must sign these documents in the presence of atleast one witness who shall attest the signature. The documents should also bear the date.

(ii) Articles of Association: This document defines the rules that the activities of the company in the attainment of its objectives. The document must be properly stamped, duly signed by the signatories of the memorandum and witnessed. The articles must be printed and in paragraphs. The articles of association are optional in the case of a public limited company with limited liability, which may adopt Table A, the model set of articles, in its entirety. If the company adopts Table A, the fact must be specified by writing ‘Registered without Articles’ on the memorandum.

(iii) Information about the Head Office of the company: The address and location of the company’s registered office must be communicated to the Registrar of Companies. This information can also be given within 30 days of the registration of the company.

(iv) List of Directors: A list of persons who have agreed to function as the first directors of the company must also be communicated to the Registrar. The list of directors must have their names including surname or family name. Director Identification Number, residential address, nationality, proof of Identification etc.

(v) Written Consent of Directors: Not only is a list of the directors mandatory, it must also be sent by the secretary of the company along with their written consent to act in that capacity. The written statement must be signed by each director who has agreed to work in that capacity. An affidavit from each of the subscribers to the memandum and from persons named as the first directors, if any, in the article, that he is not convicted of any offence in connection with the promotion, formation or management of any company, or has not been found guilty of any fraud or misfeasance or any breach of suty to any company under this Act or any previous company law during the preceeding five years and that all information filed in the documents with the Registrar for registration of the company is correct and true to the best of his knowledge and belief.

(vi) Statutory Declaration: A declaration in the prescribed form by an advocate, chartered accountant, cost accountant or company secretary in practice, who is engaged in the formation of company, and by a person named in the articles as directors, managers, or secretary of the company, that all the requirements of this act and rules made thereunder in respect of registrations and matters precedent or incidental thereto have been compiled with. 

(vii) Payment of Prescribed Fee: A filing fee has also to be deposited along with the aforesaid documents. 

If, having received the above documents and having scrutinised them, the Registrar is convinced that the necessary formalities required by law have been compiled with and the prescribed fee has been deposited, he will enter the name of the company in the Register of Companies maintained by him and issue a certificate of Incorporation under his signature testifying that the company has been officially incorporated and that it is a ‘limited’ public or private company. 

The Registrar of Companies issues (allocates) a Corporate Identity Number (CIN) to each registered company.

It must be stated that if the documents are in order and the object of the company is legal, the Registrar has no discretion in the matter and he must grant the certificate of incorporation.

If the documents produced before the Registrar are returned for rectifications of certain defects and the applicant instead of rectifying the defects, drops the matter, he cannot claim refund of fees paid for registration.

How to determine financial requirements of business?

 Q. How you will determine the financial requirements of a business? Explain. 

Ans. Determining the financial requirements of the business is one of the main objective of financial planning. Before raising funds, it is essential that requirement of funds be correctly estimated. In the absence of correct estimates the firm may suffer either from inadequate or from surplus funds. If the funds are short of its requirements, the firm will not be able to meet its day-to-day expenses and pay the short-term and long-term liabilities on time. On the other hand, if the funds are an excess of the requirements of the business, they will remain idle and will reduce the profitability of the business. Hence, the estimate should be made in a way that all financial requirements are properly satisfied. 

Funds requirements of business can broadly be classified into two main categories.They are:

(i) Fixed Capital Requirements, and

(ii) Working Capital Requirements.

Assessment of Fixed Capital Requirements: Fixed capital is the capital which is meant for fulfilling the permanent or long-term term needs of the business. Fixed Capital is the funds required for the acquisition of those assets that are to be used over and over for a long period. 

Fixed capital is required for acquiring fixed assets. Fixed assets may include the following:

(i) Tangible assets such as land, buildings, plant and machinery, furniture etc.

(ii) Intangible assets such as goodwill, patents, copyrights etc. 

Certain amount of fixed capital is also required for meeting certain expenditures not leading to creation of asset like research expenses, promotional expenditure incurred for the establishment of business, share issue expenses, underwriting commission etc. Requirement of funds for these expenditures is long-term and hence the funds required in respect thereof is also included under fixed capital.

Every business needs a fair amount of fixed capital to be invested in fixed assets so as to create production or business facilities. For a new business, the fixed capital is needed in the beginning because fixed assets are needed at the time of promoting or establishing the business. For an existing business fixed capital is required for development and expansion of business. Hence, it is essential to have adequate amount of fixed capital in the business.

The assessment of fixed capital requirements for a new business can be made by preparing a list of fixed assets needed by the business. The list is prepared by the promoters by studying the similar units and by taking advice from technical experts. The estimation of cost of land can be made from property dealers, estimation regarding cost of building can be made with the help of building contractors and the cost of machinery can be ascertained from the suppliers of the machinery. Similarly, the amounts to be paid for goodwill, patents, trade-marks etc. can also be estimated. 

Factors Affecting the Estimation of Fixed Capital/Fixed Assets Requirements: Factors which affect the estimation of fixed capital or fixed assets requirements can be : (a) Internal Factors, and (b) External Factors.

(a) Internal Factors

(i) Nature of Business: Certain types of business require heavy investment in fixed assets, while others do not. Usually, the manufacturing concerns require more fixed assets than the trading concerns. Similarly, public utility undertakings like railway, electricity, water supply etc. require huge funds to be invested in fixed assets.

(ii) Size of Business: Larger the size of concern, greater will be the requirement of fixed capital. Also, in larger concerns most of the activities are preferred with the help of automatic machines. As such, they require huge investment in fixed capital.

(iii) Types of products: A concern which manufacturers simple consumer products such as soap, oil etc. will need lesser amount of fixed capital in comparison to a concern which manufacturers complicated products such as motor cycle, cars etc.

(iv) Activities Undertaken by the Enterprise: A concern which is engaged in the manufacturing of all parts of a product by itself will require greater amount of fixed capital as compared to a concern which gets most of the parts manufactured from outside and merely assembles them. Similarly, if a concern itself manufacturers and markets its products, it will require more amount of fixed capital as compared to a concern which is engaged only in the manufacturing or only in the marketing activities.

(v) Mode of Acquisition of Fixed Assets: If some of the fixed assets are available on lease or on hire, lesser amount of fixed capital will be required. On the contrary, if all the fixed assets are to be purchased on immediate cash payment, larger amount of fixed capital will be needed.

(vi) Acquisition of Old Assets: In certain industries, old plant and machinery may be available at sufficiently reduced prices and which can be used satisfactorily. It would reduce the requirements of fixed capital to a great extent. But the old plant and machinery should be used in the industries where the technological changes are moderate or slow.

(vii) Availability of Fixed Assets at Concessional Rate: In some areas, the Government provides land and other equipment at concessional rates to promote balanced industrial growth. In such a case, the requirement of fixed capital is reduced.

(b) External Factors 

(i) General Economie Outlook: If the economy is recovering from depression and the level of business activity is expected to rise, the requirement of fixed assets will also rise and hence the need for fixed capital will also rise.

(ii) Technological Changes: If rapid technological innovations are taking place in an industry, the need for fixed capital will be larger because the old and out-dated machinery will have to ɓe replaced by new ones.

(iii) Degree of Competition: Degree of Competition also affects the fixed capital requirements. If there is a lot of competition in some industry, the need for fixed capital will be more because if some firms go on adopting the new technology, the others have to follow them.

(iv) Shift in Consumer Preferences: If the consumer preferences go on changing in some industry, the need for fixed capital will be more because the firm will have to produce new varieties accordingly, which require more investment in fixed assets.

Assessment of Working Capital Requirements: The capital which is needed to conduct/carry day-to-day operations of a business enterprise is called Working Capital. The term ‘Working Capital’ is used in two ways. In one sense it denotes the ‘total current assets’ whereas in another sense it is regarded as the excess of current assets over current liabilities. 

Total amount of working capital can be estimated by estimating the needs of working capital for the following:

(i) For maintaining adequate stock: Every industry undertaking is required to maintain a minimum stock of raw materials, work in progress and finished goods. The requirement of stock is determined by various factors like volume of production, the length of production cycle and the period for which the finished goods have to remain in warehouse before they are sold.

(ii) For Receivables: Finished goods may be sold on cash or on credit.  Credit sales take the form of receivables (i.e., debtors and bills receivables). The a mount is tied up in receivles until cash is realised from them. The amount tied up in receivables until cash is realised from them. The amount tied up in receivables depends upon a number of factors such as quantum of credit sales, credit period allowed, efficiency of debt collection system etc. For example, if a firm changes its credit period from 30 days to 60 days, the amount tied up in debtors will go up and consequently the need for working capital will also increase by a similar amount.

(iii) For Paying Day-to-Day Expenses: A firm has to carry some minimum cash balance to make payment for wages, salaries and other expenses throughout the year. A proper cash balance is also maintained to avail of the cash discounts facilities offered by the suppliers.

(iv) For Contingencies: A minimum cash balance is also maintained for meeting unseen contingencies so that the business successfully sails through the period of crisis.

Thus, the overall financial needs of a business can be determined by assessing the needs for fixed capital and working capital separately and then by adding the two.