ROUSH
PERFORMANCE
HOW TO DESIGN A SALES FORCE
COMPENSATION PLAN
GROUP - 7
AKSHAT GUPTA | H23127
RACHNA PATNAIK | H23164
R SHWETA | H23163
SHIVAM GARG | H23170
OBJECTIVE DILEMMA
“To find ways to better motivate salespeople, the Holliday assumes that changing the incentive
primary means of Roush’s go-to-market strategy” policy for the field sales force to achieve greater
since the “sales culture was thought to be stagnant sales will achieve the objective. However, is
and sales compensation had remained unchanged sales really the problem? Is that the correct
over the past 25 years.” assumption Holliday has made?
KEY CONSIDERATIONS IN
OUR ANALYSIS
1. Top two sales people generated about 43% of the total field sales revenue => Would motivation really solve the objective?
2. Although automobile dealerships generated about half the sales, only 2-3 new accounts had been established each year
=> WHY? Is that reasoning good enough?
3. “Several dealers had ended ties with the company” => Need to investigate this statement more.
4. Shift in market demand” => This is an uncontrollable factor but can make changes within the company for optimization
5. Revenues by channel, which were on a rise till 2017 have really dropped in 2018 => What is the real change that has affected
this?
6. Distribution of the vehicle portfolio was exclusive through the Ford dealership network => Why? What was the impact of this?
HR POLICIES
1.Compensation and Reward Policies: 3. Recognition and Incentives:
Variable Pay Structure: RSMs compensated based on Immediate Recognition: Monthly commissions and bonuses
100% variable pay. for sales performance.
Monthly Commissions: 4% of revenue on vehicle sales, Promotions Fund: Up to $5,000 for RSMs to promote
2.5% on parts sales. products locally.
Monthly Lump-Sum Bonus: Based on the number of Year-End Bonus: Additional $10,000 for top-performing
vehicles sold. RSM.
2. Training and Development: 4. Employee Retention:
Quarterly Sales Training: Covering sales figures, new High retention of long-tenured employees with profound product
products, market trends, and best practices. knowledge.
On-Site Training: Quarterly sessions at the company
headquarters. 5. Performance Measurement:
Promotions Fund: Allocating funds for RSMs to promote RSMs compensated based on sales performance with a "no
products in their local markets. sales, no pay" approach.
PROBLEMS
Problems Faced by Sales Representatives:
Income Instability for Junior Sales Representatives: The 100% variable pay structure creates significant financial instability for junior salespeople. They face the stress
of establishing themselves in new territories with the added pressure of a 'no sales, no pay' approach. This can lead to dissatisfaction and a high turnover rate among
newer sales staff.
To add on to this issue, a fixed commission of 4% was given for all bands and all amount of sales. Why shouldn’t more sales be rewarded more? the core issue here
is maybe employees thought they need to reach a certain benchmark and that’s it. there was no incentive anymore as such. Too much freedom was given!
Discontent Among Senior Sales Representatives:
While more established, senior sales representatives might be comfortable with the current compensation model due to their established client networks and better sales
figures, they could still feel demotivated due to a lack of new incentives or recognition for long-term relationships and market development.
Complacency and short-sightedness among Sales Force:
Lack of Motivation for Long-term Growth: The current pay structure incentivizes immediate sales over long-term relationship building or market development activities.
This has led to a complacent attitude among sales representatives, who may focus more on short-term sales with existing accounts rather than seeking new opportunities
or markets.
BDRs duplicated work: Since “Roush was in process for developing BDRs” the sales force could have been thinking that the other team will be working leading to
bias and a consequence of equity theory. This duplication could have naturally led to lesser incentive, reduced workload, and increased dissatisfaction.
PROBLEMS
Competition:
Competitors with Different Strategies: Competitors like Shelby American and Saleen offer different value propositions and sales strategies. For instance, Shelby pursues
a scarcity strategy and focuses on vintage and high-end cars, while Saleen has entered the performance truck segment and offers online purchasing options.
Pressure to Innovate: The presence of these competitors, with their varied market strategies and product offerings, puts pressure on Roush Performance to innovate
and adapt to stay competitive.
Problems Caused by Variable Pay Policy:
Uneven Income Distribution: There is a significant disparity in earnings between top-performing and lower-performing salespeople, which can lead to demotivation
and dissatisfaction.
Lack of Incentive for New Market Development: Sales representatives are not incentivized to develop new markets or tap into emerging trends, such as the growing
interest in SUVs and electric vehicles.
Limited Relationship Building: The current pay structure does not encourage salespeople to invest time in building lasting relationships with dealers, which is crucial
for sustained business growth.
Process:
Took an average of 6 months. Consumers were shifting their purchases online to retail offerings focused on Ford such as a American Muscle. Took a month to book
the deal. Delivery in two weeks. Modicfication took another two weeks. The lead time was too much. Maybe the customers were finding alternatives for their choices
and therefore revenues dropped.
Non-sales efforts were “beyond their job descriptions” + inconsiderate towards the dealers to increase revenues which (obviously) lead to attrition => would
compensation structure really resolve the issue?
RECOMMENDATIONS
Not happy with any of the solutions proposed in the case.
If we assume that the two people of the nine who generate 43% of the revenues were involved in generating revenue for the Mustang which had
decreased revenue by 25% then re-routing them into generating revenue for the trucks could lead in increasing revenues in total.
Expand the network. Don’t only stick to Ford. Reduce the dependency. Don’t let the power structure take control over the revenues.
Do a market research on customer experience for making an order. Other companies like Shelby offer a smooth process, does Roush offer the same?
this way we can eliminate the possibility that customer experience could be a problem.
Sales personnel should be given benchmarks on how to behave and maintain relations with the dealers and should be penalized if legit complaints are
received to stop dealer attrition.
DECISION: Base pay with quota & commission
Remove the 100% variable structure. Commission incentivises. Quotas motivates. Provides that extra benchmark to improve and reach goals.
We say give awards also to account type for new accounts. Additionally for subjective assessment, like dealer satisfaction need to be given metrics
and be ranked on a bell curve.
THANK YOU
