Assignment

HRS 6400:
Sales Force Management
TITLE: Roush Performance

PGDM - HRM
Term – 5
T A Pai Management Institute

Submitted to:
Prof. Jeevan J Arkal
Submitted By:
Isha Dewal - 20H117
Lavanya Verma – 20H121
Rajarshi Chattopadhyay – 20H127
Samiksha Gill – 20H131
Sardoddi Abhinav – 20H132

Submitted on:
17th October 2021
 1. What are the pros and cons of the current and proposed compensation plans developed
for the company?
Compensation Pros
plan
Current -  Simple to operate and easy to
100% understand as a no sales no pay
Variable pay approach is used.
with fixed  Acceptance by Senior RSMs as they
commission made a decent income and enjoyed
rate on freedom of doing what they wanted to
vehicles and do and when they wanted to do.
parts.  The plan has been in action for the
past 25 years and hence is well
embedded within the culture of the
sales force.
 Because there were no difficulties in
the calculation of compensation, this
type of pay was considerably easier
for the corporation to implement.
 Provided salespeople with a clear
vision of how to make money and
ensured that their only focus was on
growing sales volume.
Base salary ● Serves dual purpose as salespeople
plus would be paid a base income that
compensation would cover their living needs, while
commission compensation would
Cons
 Provides limited incentives for a lot of
duties(acquiring new accounts, selling high
margin products, developing and maintaining
relationships with dealers, explore new markets)
 Distress among Junior RSMs as they found it
difficult to establish new territories. They were
also uncertain about the pay they would receive
during initial days as they didn’t have contacts
and this also led to worry about their personal
livelihoods.
 RSMs were not motivated to maintain good
relationships with dealers and hence the attrition
rate of dealers was continuously increasing.
 Many RSMs decided that increasing throughput
at existing dealers was more productive,
therefore they didn't open any new accounts.
The company's growth was hampered by this
mindset.
 RSMs had little incentive to build relationships
with their dealers, devise underperforming
dealer strategies, or seek out new markets to
expand the company's sales.
● Simulation results showed that there will be
decrease in pay of some people
● A lower variable component would lower the
motivation of high-performing star RSMs, who
 constantly drive them to work harder
to grow sales
● Fixed salary will increase morale and
motivate salespeople to engage in
long-term relationship-building
activities with dealers.
● Inherent income stability for
salespeople
believed they had earned the right to the high
pay they were already receiving.
● Fixed salaries would be based solely on tenure
and would consequently ignore territory
characteristics.
● A greater fixed wage would just encourage
salespeople to become even more complacent
and neglect their responsibilities.

Base Salary ● Salespeople will have a clear and set ● Unintended consequences resulting in decreased
plus Quota- target to aim for overall performance.
Bonus Plan ● Quotas will provide salespeople with ● Salespeople might manipulate timing of sales in
more ambitious goals. order to achieve quota
● Large enough bonuses will motivate ● Monitoring of each transaction will be required
salespeople to put in some extra effort which will be an extra burden and hence will
that they would have not exerted in reduce time available for spending on other
absence of quota. management activities, such as resource
planning, new market development and field
coaching.
● Larger quotas (in comparison to lesser market
quotas) may be perceived as unfair by
salespeople in major markets.

Base Salary Best of both the schemes can be achieved ● Overly complicated and costly to administer
plus ● Does not take into consideration the actual
Commission challenges and problems faced by salespeople
and Quota- on field.
Bonus Plan ● Salespeople will have difficulty in
understanding how they earn and hence will
shift their focus
2. What are the key changes you would make to the compensation plan, explain the
rationale for the same?
 The following key changes should be implemented to the compensation plan for Roush.
1. Introducing a Fixed Pay component: The current pay plan of 100 variable pay signals
to the sales force that only short term gains are important. This creates an overall myopic
approach towards meeting the targets for the current period.
2. Introducing an area-based component: To fairly compensate RSMs with large territory
for the extra effort needed to service the territory, a component based on territory size
should be introduced.
3. Introducing a dealer retention bonus: Dealers play an important role within Roush.
According to the case, dealers have a very high attrition rate. To encourage dealers
sticking with the company, a retention bonus needs to be implemented.
4. Changes to the Quota bonus plan: Salesforce should have a minimum sales goal to
reach before the bonus payout. This is currently missing in the pay plan.
5. Moving compensation from result oriented to activity oriented: To ensure a sustained
push towards achieving sales across all customer categories, a component of the targets
should be moved to activity based. This will balance the effort by sales force overall
customer categories rather than focusing on one category which may be easier for the
salesperson to sell to.

3. Compare and contrast the sales compensation plans discussed in the case.

Parameters 100% Variable Base Salary + Base Salary + Quota Base Salary +
Pay Commission Bonus Commission + Quota
Bonus

Firm’s objectives: Not appropriate for This strategy This pay plan is The best strategy for
The compensation the present firm's considers the firm's appropriate for the achieving a company's
plan must consider goals of expanding goal of bolstering company's goals, such overall objectives since
the firm's overall operations and its sales staff as increasing revenue it is flexible enough to
objectives capitalizing on new and market share adjust as the company's
market trends needs change.

Market condition: Changes in market Since the pay is The quota bonus may According to market
Because of the conditions have a split into two fluctuate depending on conditions, the company
changing market moderate to high halves under this market circumstances can simply adjust the
conditions, a influence on the plan (Fixed and and previous sales. commissions and
compensation plan 100 percent Variable). Variable Does consider present bonuses. This strategy
must be developed variable pay remuneration might efforts to achieve aims to precisely
that considers the incentive plan, be altered in corporate objectives quantify the RSMs' net
genuine efforts and since RSMs will response to market and mitigates contribution to the
net contribution to priorities high- conditions and the problems such as company's goals.
the company's goals. priced items even if company's current hard work in
demand for lower- offerings. exchange for a higher
priced products is future quota
growing.

Motivation of sales This compensation The salesperson's RSMs' efforts would The desire to earn
force: Motivation is scheme is living expenses be boosted if they commission and
a result of the motivating for would be covered were motivated to bonuses by meeting
salesperson's genuine existing RMSs due by the base wage, meet allocated targets objectives will be
efforts being to the nature of the and proper in order to earn bigger strong, but the system's
rewarded. product and case commission would incentives. In complexity will tend to
circumstances; create motivation to comparison to past reduce the amount of
however new make more sales. pay programmes, work needed of RSMs.
RMSs are having It's still tough to higher motivation is
difficulty strike a balance envisaged.
establishing new between drive and
accounts. Another complacency,
issue is established because a larger
RMSs' fixed pay may lead
complacency in to complacency.
terms of acquiring Lower variable
new compensation
accounts/dealers, would have a
and non-sales negative impact on
 related activities star performers'
are not taken into motivation.
consideration.

Administrative This compensation Moderate In such a In such a compensation

efforts: The job of plan is quite administrative compensation arrangement, high
determining straightforward, effort is required to arrangement, administrative efforts
remuneration based and it takes very keep track of moderate are required.
on performance must little administrative individual sales. administrative efforts
not be arduous. effort. are envisaged.

Complexity: The Calculating the Procedure is a little The compensation Such a compensation
compensation rewards is not more complicated scheme is rather plan has a high level of
strategy must be difficult and does than a 100 percent complicated to complexity, which
simple to understand. not need variable pay comprehend. This may necessitates extra effort
It should not divert a sophisticated compensation draw the salesperson's to work out the
salesperson's focus. mathematics that scheme. notice, and the danger calculations and
are beyond the of excessive pressure comprehend the
comprehension of should not be compensation system.
the average person. overlooked.

Loyalty of Because the RMSs In a commission- The issue here is There are several
salesperson: The may work based pay model, manipulating sales potential to uncover
salesperson's loyalty according to their it's difficult to timings or reaching weaknesses in the
must be rewarded conditions to some create loyalty. quotas artificially. In system that might
through the extent, loyalty is such a pay structure, it unduly divert RSMs'
compensation plan. quite strong in such is rather difficult to attention, making it
a pay arrangement. create loyalty. harder to sustain
loyalty.