Roush Performance Case Study: Sales Compensation Plan Analysis Report

This case study analysis report delves into the challenges faced by Roush Performance following the implementation of a new sales compensation scheme intended to boost employee motivation. The report identifies key problems such as decreased performance, high turnover among new hires due to the 100% variable pay structure, and undervalued relationships with dealers. It proposes necessary changes, including a deeper understanding of customer and dealer needs and the implementation of a more balanced compensation structure. The recommended solution involves a base salary combined with commission pay and quota-based bonuses. This approach aims to create a fairer and more motivating environment for employees, ultimately improving sales performance and dealer satisfaction. The analysis also emphasizes the importance of training RSMs and providing comprehensive customer service to support sales efforts and foster long-term relationships.

Running head: CASE STUDY ANALYSIS REPORT
Case Study Analysis Report
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1CASE STUDY ANALYSIS REPORT
Executive Summary:
The case analysis report focuses on the key issues faced by the company named Roush due to
the implementation of a new compensation scheme for increasing the motivation in their
workers. However, the plan does not go well since the performance level is seen to lower
down than usual and new joiners are seen to quit the job unable to take the pressure of a
100% variable pay. The possible changes needed for the rectification of the situation is
mentioned in the report along with recommendation to implement a better payment structure
like that of a base pay with commission pay and in addition to that the quota bonus pay. This
structure would help the company get back in form for the business.

2CASE STUDY ANALYSIS REPORT
Table of Contents
Introduction:...............................................................................................................................3
Case Study Analysis:..................................................................................................................3
Key Problems:........................................................................................................................3
Possible Changes Needed:.....................................................................................................4
Recommendation of Best Solution:.......................................................................................5
Conclusion:................................................................................................................................6
References:.................................................................................................................................8

3CASE STUDY ANALYSIS REPORT
Introduction:
Being a company that is driven by engineering, Roush Performance had its focus on
its effort to build engineering technology with competency and had aimed to diversify its
product’s portfolio so that the sales would have a growth (Cerasoli et al. 2014). Many
engineers who were working for the company seemed proud to be associated on the forefront
side of the technological innovation with company. In a contrasting ide, the marketing and
sales division of the company Roush, had a passive role to play in the market system. As a
result, the culture of the sale was thought to be stagnant and the sales compensation was seen
to remain unchanged for the past 25 years.
Jacqueline Holiday, the Vice President of Marketing of Roush Company therefore
proposed some changes in the arena of sales force compensation scheme so that the
salespeople can be provided with adequate amount of incentives to keep them motivated in
their field of work. However, some key problems regarding the change have emerged for
which some potential changes are needed in order to make the scheme a successful one.
Case Study Analysis:
Key Problems:
The regional sales managers or the RSMs of Roush were given compensation that was
based on 100% of the variable pay, after the implementation of the new scheme. They were
receiving a commission per month proportionate to the sale of their product types. Moreover,
there was 4% revenue given on the vehicle sales and more 2.5% revenue on the part sales. In
addition, the company even paid a bonus amount on a monthly basis for the number of
vehicles that were sold. The top performing employee in Roush was awarded with an extra
amount of 10,000$ at the end of the year (Shields et al. 2015). The scheme was framed in
such a way that most of the senior RSMs were happy and satisfied with the new

4CASE STUDY ANALYSIS REPORT
compensation scheme imposed by Holiday; however, there were several key issues that
started arising once the scheme was implemented for a certain period of time. These key
issues that arose from the new scheme of sales compensation has the potentiality to make the
graph of employee satisfaction and the graph of sales compensation be stagnant for the years
to come, till possible changes are not implemented.
The first key issue that arose from the new scheme is that, although the senior RSMs
were happy regarding the changes, yet the junior ones, most importantly the new-joiners were
very uncomfortable with the variable pay structure of 100%. They expressed the extreme
stress and strains they had to experience at the job in the course of the endeavour to establish
their territories. As a result, performance and productivity of the new and junior employees
were not up to the mark (Elnaga and Imran 2013). The second key issue was related to the
first issue mentioned above. Due to the extreme stress provided by the new scheme structure,
the performance level took a hit and there was visible lack in performance and as a result
payment suffered. The third issue revolves around the undervalued importance that the RSMs
were recognised with in their inability to maintain a long-term relationship with the dealers
(Marks and Badovick 2015). The fourth issue states that sometimes these RSMs are provided
with jobs that are completely out of their job description which is why they are unable to
perform at a satisfactory level. The final issue that arose was the aggressive push that the
RSMs imposed upon the dealers so that unnecessary products can be ordered and monthly
revenues could increase. This resulted in the increment at the attrition rate of the dealers.
Possible Changes Needed:
The issue of dealer attrition, lack of performance and inability to find job satisfaction
was not good news for the Roush Company. Necessary changes were required at certain
fields to keep the situation under control. There is a need of deeper understanding of the
needs of customers as well as the dealers. The main problem that Roush has is that they have

5CASE STUDY ANALYSIS REPORT
only two elements that has the capability to determine the salesforce pay check of the Roush,
which are vehicles and parts; this scenario needs to be altered if the company desires
favourable outcomes. There is also the need of implementing commission based on varied
account types or product categories, frequency of order, conversion rate, sales opportunity or
even on-time delivery to the dealers. The company has the tendency of overlooking the
significance of customer demand, dealer’s satisfaction and also the market competition
(Harunavamwe and Kanengoni 2013). The company also needs to change its way of
approach towards motivation; in fact, it needs a systemic approach with which it can motivate
the employees and this is how they can have a better performance in their productivity scale
(Kuvaas et al. 2016). Most importantly, there is a need of change in the compensation
structure of the company that was recently implemented. Although it is evident that the
alternatives done in the compensation structure will lead to many potential changes and some
of which may not seem favourable to some salespeople, yet the structure of the scheme
should be such that it would be simple and fair to all.
Recommendation of Best Solution:
The President of the company Mr Thompson had structured an alternative
commission plan in order to cope up with the stress that took over the company. Such a
change in the structure that would be fair to all the employees is highly recommended. The
compensation structure should consist of a base salary along with a commission pay and on
top of that they should also provide the quota-bonus plan (Griskevicius and Kenrick 2013).
This commission structure may seem too complicated and costly to implement, but keeping
in mind the traditional model of the company, it can be seen that the model is simple. If this
commission structure is implemented for all the employees of Roush, there would be no such
need to maintain other smaller elements of compensation like the bonus per month on the

6CASE STUDY ANALYSIS REPORT
basis of the number of vehicles that were sold or even the annual contest of the best-
performing salesperson bonus.
For the issue of the lack in satisfaction in dealers and consumers, deeper
understanding and analysis is needed as mentioned before, in addition to this a whole team of
warranty and customer service can be allotted to look after their queries and demands. This
step would help the salespersons to get to know their customers’ and the dealers well enough
to execute their sales plan (Kamm 2013). The RSMs should be provided the training for the
job that they are expected to do, even if it is not in their job description; it should be
mentioned to the new RSMs that they need to maintain goodwill with the dealers or that a
weekend car show is necessary to attend in order to entice new customers, they should also
be provided training for helping dealers in managing their inventories even though it is not
stated in their job description yet the company expects them to fulfil these duties as well.
When the employees will know what is expected from him/her, he/she will perform well in
definite terms rather than the times when he/she is allotted some task that they never knew
they had to do in their job profile.
Conclusion:
Roush company had a payment structure for the compensation of the employees that
was unfair to the new RSMs and they were even faced with unexpected jobs that were never
stated in their job profiles. The payment structure created such a stress and pressure on the
minds of these employees that they had trouble to keep up with their personal livelihoods
since the basic pay was also variably depended on their performance level. This initiated the
act of quitting in many workers. There were other issues of interaction with the consumers
and dealers and lack of performance in the workers. All these issues needed changes to alter
the path of the business of Roush. It can be concluded that with proper steps and as per the

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recommendations provided in the analysis report, the company can do better with an alternate
payment structure for compensation. If the commission structure of basic payment with
commission pay along with quota bonus plan is implemented, it might be complicated to
impose it, yet simple and fair enough to satisfy the workers that will motivate them in better
ways.

8CASE STUDY ANALYSIS REPORT
References:
Cerasoli, C.P., Nicklin, J.M. and Ford, M.T., 2014. Intrinsic motivation and extrinsic
incentives jointly predict performance: A 40-year meta-analysis. Psychological
bulletin, 140(4), p.980.
Elnaga, A. and Imran, A., 2013. The effect of training on employee performance. European
Journal of Business and Management, 5(4), pp.137-147.
Griskevicius, V. and Kenrick, D.T., 2013. Fundamental motives: How evolutionary needs
influence consumer behavior. Journal of Consumer Psychology, 23(3), pp.372-386.
Harunavamwe, M. and Kanengoni, H., 2013. The impact of monetary and non-monetary
rewards on motivation among lower level employees in selected retail shops. African journal
of business management, 7(38), pp.3929-3935.
Kamm, J.W., Versata Development Group Inc, 2013. Virtual salesperson system and method.
U.S. Patent Application 13/487,523.
Kuvaas, B., Buch, R., Gagne, M., Dysvik, A. and Forest, J., 2016. Do you get what you pay
for? Sales incentives and implications for motivation and changes in turnover intention and
work effort. Motivation and Emotion, 40(5), pp.667-680.
Marks, R.B. and Badovick, G.J., 2015. The Relationship Between Adaptive Selling, Task-
Related Sales Behavior and Commitment to Performance-Some Promising Results.
In Proceedings of the 1997 Academy of Marketing Science (AMS) Annual Conference (pp.
178-184). Springer, Cham.
Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P.,
Johns, R., O'Leary, P., Robinson, J. and Plimmer, G., 2015. Managing employee
performance & reward: Concepts, practices, strategies. Cambridge University Press.

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