Last year's average turnover among general physician sales reps was 19 percent-up 2 percent from 2000-making retention the number one human resource issue for pharmaceutical companies today. Industry employers are discovering that despite all the resources-more than $8 billion a year-they devote to compensating their sales forces, money isn't buying them as much "love" or loyalty as they want. An examination of pharma companies' current compensation practices, as identified by the Hay Group's 2001 Compensation Report, reveals what money is-and isn't-buying the industry.
Taking a Breather In 2000, there were signs that the feverish sales-force expansion of the past few years was slowing down and that, consequently, companies were beginning to think of compensation as a tool for retaining talent as well as attracting it.
There's reason to believe that the expansion has peaked. First, fewer companies plan to launch a new product in 2002: 60 percent compared with 73 percent in 2001. Second, although three-quarters of the companies plan to add staff this year, the number that anticipate an increase of more than 5 percent dropped from 71 percent in 2000 to 61 percent in 2001. Third, fewer companies than last year expect to increase their use of contract sales reps. Only 12 percent of those who use contract sales organizations plan to increase their usage, compared with the 56 percent who planned to do so in 2000.That is not to say that hiring new reps has come to a halt. It is still going strong in some companies and market segments. In fact, the demand for sales and marketing talent is still great enough to make it an employee's market.
Reps Overboard Some of the demand, however, comes from the need to replace reps who have "jumped ship" rather than the need to keep up with expansion. Companies are challenged to find ways to keep sales people on board, and the issue is likely to keep some managers up at night. High attrition among sales people
is not unique to the pharmaceutical industry, and if anything, the situation is much better than in other industries. Sales people everywhere are notoriously hard to keep. In a recent Hay Group survey, a staggering 38 percent of sales people were eyeing the coastline for other opportunities and planned to leave their companies within two years.
Still, pharma may feel the pain more acutely than many other industries for several reasons. First, they try so hard through their compensation practices to avoid the problem altogether. Second, because of the technical nature of the job, pharmaceutical companies invest heavily in training sales people. It is a great loss when that investment flies out the window. And third, because the industry relies so much on personal selling, there's an unusually heavy price to pay for severing relationships with customers.
When researchers delved below the surface of those findings, they discovered that compensation is actually more of a "pull" than a "push" factor. In other words, it doesn't account for why people leave one position as much as it explains how they choose from among other options. Compensation weighs heavily in the decision because it can be evaluated from the outside; other factors that influence satisfaction-such as management style and advancement opportunities-are hard for candidates to assess until they are employed within a company. Also, it is important to remember how sales a rep's profiles contributes to the importance of pay. High performers are highly motivated to achieve. And they have a strong need to know-and to be recognized for-how much they are achieving. Money serves as an excellent tangible communicator of that measurement.
The survey data led Hay researchers to conclude that the tangible rewards of employment (pay and benefits) are simply the minimum returns that employees look for from their jobs-the threshold of acceptability. What truly differentiates employers in workers' minds is how the company behaves toward them and the degree to which it fulfills their psychological needs.