Pharmaceutical Executive Europe - April 2008 - (Page 31) Pharmaceutical Executive Europe April 2008 Sales: Incentive Compensation 31 does it lead to ‘good quality’ calls or to a plethora of short calls? Does it mean a particular brand is promoted by reps simply because it’s easier to sell than the brand that strategy otherwise dictates should be the prime focus? ● Rewarding high vs. low performers. We also believe that organisations tend to have the quality of workforce that their compensation plan produces. In other words, if an incentive compensation plan fails to reward high performers significantly above low or average performers then low/average performers are more likely to be attracted to that organisation. Risk-taking high achievers will be put off. ● Fairness. Is the plan ‘fair’? High sales force churn driven by perceived inequities in plan design or goal setting increases cost and leads to low morale. ● Efficient administration. Is too much effort/cost needed to create management reports? Inefficiencies mean too much overhead. ● Over and underpayments. Does the process result in errors leading to overpayments which add large financial risk to budgets? Are large numbers of reps and sales managers complaining about the scheme? Is this due to regular underpayments to them? At the start of the review it is rarely apparent where the real ‘pain’ or failure is. Our experience tells us that it is typically found in one or more of the areas listed above. Independent diagnostic review Although the diagnostic phase of the review could be handled inhouse by some organisations, there is a strong case for using an independent third party to evaluate its current state, particularly where the company employs local consultants familiar with localmarket conditions. And the good news is that such a review doesn’t have to cost a fortune and that the payback from the investment can be staggering (Figure 2). Feedback from reps, gathered in confidence by a third party paying due regard to the sensitivities usually at play in this area, is likely to produce a complete picture of the current situation and the state of sales force morale. Using an evidenced-based consultancy with a track record in this area also provides the opportunity to benchmark results against unpublished external data collected from similar organisations around the world. The independent, unbiased and complete nature of the data gathered and professionally analysed and presented to management can then become a powerful enabler of change within the client organisation. Through a planned and thorough 360-degree diagnostic review, such as the one indicated Figure 3, executives will achieve a good understanding of the current state of the incentive scheme and be able to respond with greater confidence to actionable recommendations on how to improve it. Figure 3: The four diagnostic steps. Gather and validate incentive compensation data Assess current plan Formulate findings Present findings Client input and feedback Figure 4: Sources of planning data. Client sales strategy Current data and compensation plan • Total payout – by territory – by product • Payout level • Performance metrics – by units – by currency – by scripts Business plan Qualitative feedback • Primary research to gather feedback from reps/field managers/sales exec/ sales ops/brand managers • Corporate business plan • Sales strategy • Eligibility rules • IC documentation • Product weights • Thresholds & accelerators • Absolute vs relative • Guarantee bonus • Time frame guarantee bonus
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