Vaughn Manufacturing is a London-based automobile parts manufacturer. Specifically, it manufactures crankshafts, a key component of the engine, and sells directly to automobile manufacturers (also known as original equipment manufacturers, or OEMs) like General Motors, as opposed to selling to engine manufacturers. While selling directly to OEMs grants Vaughn a higher “Tier 1” status in the automobile business and direct access to the biggest players, it also means Vaughn has very little leverage in negotiating with the much larger OEMs.

England is by far the largest and most important sales territory for Vaughn, and its district sales manager is Keith Horton, a 26-year company veteran. Horton personally recruited several members of his team, who he calls “young guns,” and takes great pride that the team’s sales volume is consistently the highest in the company. Horton’s managerial style can best be described as aggressive, and he often insults or pressures his salespeople in order to increase their performance. In his words, “auto-manufacturing is a cut-throat business, and I want my salespeople to be tough. I want to be the toughest thing that my salespeople ever face, so that customers will seem like pussycats by comparison.”Although he closely watches the performance of the salespeople, the company provides little training or specific sales guidance. He feels that salespeople learn toughness by figuring things out for themselves.

The newest salesperson on the team is Raul Sajak, a 23-year-old recent college graduate. Raul is highly intelligent, graduating at the top of his class, sensitive, and extraordinarily good with relating to people. Although he could have worked in nearly any business, he wanted to join Vaughn, in part because he was a successful retail automobile salesperson throughout college and loved doing it. He is married and is preparing for the arrival of a new baby.

Although Raul started strong in his first year at Vaughn, he has struggled recently, being well below quota in nearly every sales category for the last quarter of the fiscal year. As the automobile market becomes more competitive, customers have been more difficult, making sales negotiations more complex, and creating further challenges for Raul. Vaughn’s attorneys require that Raul and the other salespeople negotiate specific contract terms with respect to legal liability, but OEMs now require that suppliers sign their standard purchase agreement without negotiation if the supplier wants to sell at a given price. Furthermore, OEMs have very specific product specification requirements that Vaughn engineers tell Raul they will have trouble meeting. Raul often feels caught in the middle between the various interests inside the company. Compounding the problem is the feeling that he cannot go to Horton for guidance.

In addition, Raul is uncomfortable with the intimidation tactics of Horton and the OEMs. Horton has encouraged his sales team to bluff when asked about the wholesale cost of the crankshafts in order to make a sale and threaten to walk out of the sales negotiation with a “take it or leave it” approach. Raul is concerned that he cannot use the friendly, open, and intelligent sales approach to which he is accustomed.

Horton does not understand Raul’s falling performance: “I don’t get it. Raul is compensated on a 100 percent commission basis, so he has the incentive to sell more and make a great deal of money. I even offer free tickets to local professional sporting events like soccer games and cricket matches when my salespeople meet or exceed sales goals. If he works as long as I have, he can be promoted to sales manager too.”

Questions

1. Based on the model for salesperson performance, what are the possible causes for the diminished performance of Raul?

2. What can Horton do to improve the sales performance of Raul?