Roush Performance: How to Design a Sales Force Compensation Plan Custom Case Solution & Analysis

1. Evidence Brief

Financial Metrics

Revenue Composition: Roush Performance (RP) operates two primary segments: Performance Parts and Performance Vehicles. Performance Vehicles represent a significantly higher price point per unit compared to the 5,000+ individual SKUs in the parts catalog. (Exhibit 1)
Sales Growth: Management targets 20% year-over-year growth, primarily driven by the vehicle program. (Paragraph 4)
Dealer Network: Approximately 400 Ford dealers are active in the network, though only a fraction are considered high-volume vehicle partners. (Paragraph 8)
Commission Structure: Historically, sales reps received a base salary plus a commission percentage on total sales volume, with no distinction between parts and vehicles. (Exhibit 3)

Operational Facts

Sales Force: 15 regional sales managers responsible for geographic territories. (Paragraph 12)
Sales Process: Parts sales are transactional and often reactive. Vehicle sales require proactive dealer inventory management, floor-plan assistance, and retail marketing support. (Paragraph 14)
Inventory: Dealers must commit to stocking vehicles, which involves significant capital outlay. Parts require less floor space but higher SKU management. (Paragraph 15)
Geography: Sales territories are divided by US regions, with varying levels of Ford dealer density. (Exhibit 2)

Stakeholder Positions

Jack Roush (Founder): Focused on brand integrity and engineering excellence. Expects the sales force to reflect the technical superiority of the products. (Paragraph 2)
Tim Wheeler (VP Sales): Concerned that the current commission structure incentivizes reps to focus on easy parts orders rather than the difficult, time-consuming vehicle sales. (Paragraph 6)
Gary Jurick (President): Focused on bottom-line profitability and ensuring the compensation plan does not lead to excessive fixed costs. (Paragraph 9)
Regional Sales Managers: Expressed anxiety regarding any plan that reduces their base salary or makes their income too volatile based on vehicle inventory cycles. (Paragraph 18)

Information Gaps

Margin Parity: The case does not explicitly state the exact gross margin percentage for vehicles versus parts, only that vehicles have higher revenue per unit.
Historical Quota Attainment: Data on how many reps met or exceeded their goals under the old plan is missing.
Dealer Churn: The rate at which dealers enter or exit the Roush program annually is not quantified.

2. Strategic Analysis

Core Strategic Question

How can Roush Performance redesign its compensation structure to prioritize high-value vehicle sales without sacrificing the steady revenue stream of the parts business?
How to transition the sales force from transactional order-takers to strategic business consultants for Ford dealers?

Structural Analysis

Value Chain Analysis: The primary bottleneck in the RP value chain is dealer inventory commitment. Dealers are hesitant to floor-plan expensive modified vehicles. The sales force must provide more than product information; they must provide financial justification and marketing support. The current compensation plan fails to reward this consultative behavior.

Jobs-to-be-Done: Dealers do not just buy parts; they buy the ability to differentiate their showroom and attract high-margin customers. RP sales reps must be incentivized to help dealers achieve this differentiation through vehicle programs, which require a longer sales cycle than individual parts.

Strategic Options

Option 1: Weighted Commission Structure

Rationale: Assign higher commission percentages to vehicle sales (e.g., 5%) and lower percentages to parts (e.g., 1%).
Trade-offs: Risks neglecting the parts business, which provides consistent cash flow and brand visibility.
Resource Requirements: Updated accounting software to track split commissions.

Option 2: Base-plus-Quota with Vehicle Accelerators

Rationale: Maintain a stable base but implement a tiered bonus system triggered only after a specific number of vehicle units are moved.
Trade-offs: Increases complexity; may discourage reps in territories with lower demand for performance vehicles.
Resource Requirements: Territory-specific quota setting based on market potential data.

Option 3: Hybrid Regional/Individual Plan

Rationale: 50% of incentive based on individual territory vehicle sales, 50% based on regional parts volume to encourage teamwork and support.
Trade-offs: Potential for free-rider problems within regions.
Resource Requirements: Regional management oversight.

Preliminary Recommendation

Pursue Option 2. RP must move toward a quota-based system that treats vehicles as the primary growth engine. By setting territory-specific quotas, RP accounts for geographic variance while forcing reps to engage in the consultative selling required for vehicle programs. Accelerators ensure that top performers are rewarded for the high-effort task of expanding the vehicle dealer network.

3. Implementation Roadmap

Critical Path

Month 1: Data Modeling. Use last three years of sales data to model the impact of the new quota/accelerator plan on each of the 15 reps. Ensure the plan is cost-neutral at current volumes but rewards growth.
Month 2: Stakeholder Alignment. Present the model to Gary Jurick and Tim Wheeler. Finalize territory-specific quotas based on dealer density and historical performance.
Month 3: Pilot and Launch. Introduce the plan during a national sales meeting. Provide training on consultative selling techniques specifically for the vehicle program.

Key Constraints

Sales Force Turnover: Top reps may leave if they perceive the new plan as a de facto pay cut or if they lack the skills to sell vehicles.
Dealer Inventory Capacity: External economic factors (interest rates) affect dealer willingness to floor-plan vehicles, regardless of sales rep effort.

Risk-Adjusted Implementation Strategy

To mitigate turnover, implement a 6-month draw period where reps are guaranteed at least 90% of their previous year average earnings while they transition to the new vehicle-centric model. This provides a safety net during the longer sales cycle of the vehicle program. Additionally, RP must provide a centralized marketing toolkit for reps to give to dealers, reducing the friction of the vehicle sales process.

4. Executive Review and BLUF

BLUF

Roush Performance must shift from a volume-based commission to a quota-driven accelerator model focused on vehicle sales. The current plan incentivizes the path of least resistance: parts orders. To hit 20% growth, the sales force must become business consultants who help dealers manage the risk of high-ticket vehicle inventory. Transitioning the comp plan is the only way to force this behavioral change. The transition must include a temporary income floor to prevent the loss of experienced regional managers during the pivot.

Dangerous Assumption

The analysis assumes that the 15 current sales reps possess the financial literacy and consultative skills required to sell vehicle programs. Selling a $50,000 vehicle package to a dealer principal is fundamentally different from selling a $500 cold-air intake to a parts manager. If the talent gap is too wide, no compensation plan will fix the revenue plateau.

Unaddressed Risks

Dealer Floor-plan Sensitivity: If interest rates rise, the cost for dealers to hold Roush vehicles increases. This external factor could nullify sales rep efforts, leading to demotivation and plan failure. (Probability: High; Consequence: High)
Parts Revenue Erosion: If reps pivot too hard toward vehicles, the 5,000-SKU parts business may suffer from neglect, ceding market share to aftermarket competitors. (Probability: Medium; Consequence: Medium)

Unconsidered Alternative

RP should consider bifurcating the sales force. A small team of Vehicle Specialists could handle the complex, long-cycle dealer partnerships, while a larger team of Inside Sales Reps manages the transactional parts business. This would allow for specialized compensation plans tailored to the specific behaviors required for each product type, rather than forcing a hybrid role on all 15 managers.