Sales reps see scaled-back incentive pay

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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