Roush Performance: How to Design a Sales Force Compensation Plan

Roush Performance manufactured and marketed factory-modified performance vehicles and high-end aftermarket automotive performance parts. Since its inception, Roush Performance had focused on building its engineering technology competency and diversifying its product portfolio to grow sales. Many of its engineers were proud to be on the forefront of technological innovations with the company. In contrast, Roush’s marketing and sales divisions had a somewhat passive role. The sales culture was stagnant, and sales compensation, a key factor in motivating salespeople, had remained unchanged for 25 years. Sales compensation is one of the key elements in an organization’s sales management strategy. It is used as a primary mechanism to motivate salespeople and represents the lion’s share of a firm’s expenditures. Sales organizations have to constantly update their compensation practices to continually motivate their salespeople as the firm’s sales strategy changes to adapt to evolving market conditions. In 2018, Roush’s growth was down, and its salespeople had become shortsighted and complacent. A new sales compensation plan seemed necessary to better align salespeople with Roush’s goals. The case outlines the challenges of designing a new sales compensation structure that can better motivate salespeople. The case focuses on salespeople but can relate to other employees and, thus, applicable to general HR management. The main teaching themes of the case are as follows: • How to design an effective compensation plan that is consistent with the organization’s objectives • Understand the role of various compensation components, including salary, commission, quota, bonus, and overachievement rewards • How to effectively set and update quotas • How to align other sales management instruments with compensation