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Sales reps see scaled-back incentive pay
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Listen to this quarter's earnings reports, and you'll see that cost-cutting played a big role in several companies' results. Merck, Pfizer, and others would have posted lesser numbers without the help of job cuts and other restructuring moves. So it's no surprise that in addition to sales-rep layoffs--which we've painfully observed in great numbers over the past couple of years--pharma is revamping rep compensation, too.
Almost 40 percent of companies have somehow altered their incentive pay in response to the economic downturn, according to a new compensation report from ZS Associates. Some 29 percent cut increases to base salaries and either cut back on or eliminated short-term incentive programs. Others are considering cuts to annual sales-incentive bonuses. And only 18 percent have lowered sales reps' quotas to account for the difficulties posed by the tough economy.
"Pharmaceutical and biotech companies today face the challenge of keeping costs down without sapping sales force motivation," said Chad Albrecht, lead author on the study. "That's exceedingly difficult at a time when company forecasts continue to be aggressive, payouts are uncertain and nearly every salesperson thinks their quotas are too high." Albrecht suggested shorter-term incentive programs to deal with the uncertainty, and to allow bosses to set quotas at shorter intervals. What do you think?
- read the ZS Associates release
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Shrinking sales forces face constraints
Comments
By Exec in Pharma | Posted 9:22am | November 2, 2009
Incentive plans for reps are incredibly hard to build. They are either too complicated to understand, or they are poorly designed. Territories are hard to compare, so force ranking and payouts based on performance is tough.
The industry should go back to mission specific goals that focus on long term performance and long term results. They should eliminate the pod concept and allow a rep to shine in their territory on their own efforts. They should increase the base salary, eliminate incentives and then promote based on ability to deliver against the long range mission. They should set a contract for each rep, saying they will must hit their goal 2 of 3 years to remain employed.
The executives in companies need to think creatively about how to build and retain the long term value of a rep who can stay in a territory and really develop relationships. Too many are focused on the short term, and that has proven ineffective. The turnover and movement is killing the soul of detailing. Trust never builds for the rep.
This business is not a race- it is a mission. Drug development takes years, and so does market development
By Exec in Pharma | Posted 9:22am | November 2, 2009
Incentive plans for reps are incredibly hard to build. They are either too complicated to understand, or they are poorly designed. Territories are hard to compare, so force ranking and payouts based on performance is tough.
The industry should go back to mission specific goals that focus on long term performance and long term results. They should eliminate the pod concept and allow a rep to shine in their territory on their own efforts. They should increase the base salary, eliminate incentives and then promote based on ability to deliver against the long range mission. They should set a contract for each rep, saying they will must hit their goal 2 of 3 years to remain employed.
The executives in companies need to think creatively about how to build and retain the long term value of a rep who can stay in a territory and really develop relationships. Too many are focused on the short term, and that has proven ineffective. The turnover and movement is killing the soul of detailing. Trust never builds for the rep.
This business is not a race- it is a mission. Drug development takes years, and so does market development
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