Sales Force Survey - Pharmaceutical Executive

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Sales Force Survey
Base pay is up and incentives are easier to earn as pharma tries to hang onto top performers and attract new talent.


Pharmaceutical Executive


As would be expected in a generally healthy employment climate, voluntary attrition among general practitioner and specialty reps remains high across all types of pharma companies. Companies predicted in the previous survey that it would reach 14 percent for GP reps and 15 percent for specialty reps in 2005. Interestingly, turnover is higher in specialty companies than in Big Pharma—that's a first. Double-digit voluntary attrition puts an extra burden, and cost, on the staffing departments of companies attempting to expand their overall sales forces. Conversely, attrition rates may be a blessing for companies with plans to scale back.

Although two out of three surveyed companies have plans to introduce new products, none of the participants anticipate that they will be using Contract Sales Organizations (CSO) any more than in the past, even though rep turnover is high. (Big Pharma companies are the heaviest users.) In fact, 44 percent of companies surveyed said they intend to use CSOs less often. It appears that Big Pharma's hiring slowdown is not translating into a growing demand for temporary sales people.

For the past few years, the industry's sales battle cry has been, "Improve sales-force productivity." So it is somewhat surprising that, in 2005, companies reported that they expect nearly every type of salesperson to make fewer calls. On average, GP reps are now expected to make eight calls a day, down from nine in 2004. This change could simply mean that companies are being more realistic in their expectations, considering the difficulty reps have in gaining access to physicians. Or they may be emphasizing the need for quality interaction with physicians, as opposed to calls made simply for the sake of recording an office visit.

Marketing: Gaining Ground

The pharmaceutical industry has traditionally been a sales-dominated business (in contrast, for example, to the consumer packaged goods industry, which is dominated by the marketing function). Over the past few years, however, the balance of power is shifting toward marketing. Although there was no spike in compensation for marketing positions over the past year (as was observed in other recent years), anecdotal evidence shows that companies are giving thought to how marketing positions are leveled, what competencies are required in different marketing positions, how performance expectations are set, and how people advance through the marketing ranks. For example, they're evaluating the value of a background in pharmaceutical sales for the career ladder they offer a marketer.

Base Salary: Losing its Edge?

Four of five pharmaceutical companies have formal salary structures in place for their sales organizations, and an equal number periodically alter them based on market data to respond to a competitive employment market.

The mix of base salary and incentive pay is shaped by an organization's competitive objectives. In general in 2005, companies aimed to make base salary about 75 percent of total compensation; the rest is incentive compensation. This year's study suggests a continued trend toward targeting cash rewards at or above the industry median, a strategy intended to help attract and retain sales talent. Companies, however, reported a greater tendency to target the median, rather than above it, for base salary. Just over three quarters of the respondents reported that they targeted the median for their sales reps' base salary.

Respondents reported that their median salary increase between 2005 and 2006 was 4.0 percent, just half a percentage point higher than in other industries. (Just five years ago, pharma's median salary increase was 2.6 percentage points higher than other industries.) However, the median base salary for all levels of sales reps combined rose almost six percent (from $62,400 to $66,300) last year, most likely because of competitive pressures.

The starting salary for an entry-level sales rep in the pharmaceutical industry is just 10 percent higher than for a beginning salesperson in other industries. However, once incentive compensation is factored in, the average entry-level pharmaceutical rep earns 32 percent more than his or her counterpart in other industries.

While the average merit-increase percentage won't change between 2005 and 2006, the factors determining an individual salesperson's merit increase will. The number of companies relying on compa-ratios (an employee's base salary divided by the salary midpoint for his or her particular job and level) is growing (from 34 percent in 2004 to 43 percent in 2005). Meanwhile, the number of companies taking note of team skills has doubled (from 6.4 percent in 2004 to 13 percent in 2005), although it remains small.


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Source: Pharmaceutical Executive,
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