Slightly more than half of the reporting companies (53 percent) still use bonus-plan results in calculating a sales rep's
merit increase, compared with 64 percent last year. Using bonus-program results (which are primarily measures of sales) to
calculate merit increases is considered double dipping. While it may be easier and more convenient than having to evaluate
reps on other measures, using bonus-plan results places too much emphasis on one calculation that may be flawed in its own
Employment Options: Bending and Stretching
In an effort to accommodate different work-life balances, nearly half (44 percent) of the participating companies offer sales
reps the opportunity to share a job and/or to work part time. What is more, compared with last year, they are making these
options available to people sooner: 70 percent have no minimum tenure requirement for job sharing and 94 percent have none
for part-time work. So it is quite common to be able to step in off the street into a part-time or job-share sales position.
For traditional health and wellness benefits, companies are more likely to pay the full cost for part-time employees than
they are for job-share employees. The company pays the full cost of health insurance and life insurance in 67 percent and
50 percent of the cases for part-time sales reps, and 50 percent and 40 percent of the time for job-share reps, respectively.
Incentive Compensation Eligibility: Spreading the Wealth
The typical incentive-plan threshold, or lowest level of goal attainment at which a payout can be received, dropped from 80
to 90 percent in 2004 to 70 to 83 percent in 2005, so that more performers can receive payouts.
New hires are no longer afforded a leisurely orientation period before they are expected to begin contributing—and before
they can begin earning under the regular incentive plan. Over the past several years, the trend has been to put new hires
into the regular incentive plan sooner and sooner (after seven months in 1999 and just two months in 2004), a clear attempt
to ramp up productivity. The fact that many companies are hiring mid-career reps who are seasoned and do not need the same
degree of training before hitting the streets also contributes to this trend.
Three-quarters of the plans reported in the study do not have a cap, or maximum amount that can be paid out in incentive compensation.
Of those plans in 2005 that do have a cap, the maximum payout opportunity for outstanding performance is between 125 and 145
percent, which represents a shift downward from 2004 when the maximum was between 120 and 200 percent for "outstanding" performers.
Slightly more than half (55 percent) of the companies in the survey design separate incentive plans for the first months of
a product's launch to push early sales. The optimum period for a separate new-product compensation plan is six months.
Market Positioning: Hitting a Moving Target
The difficulty in setting a competitive incentive-compensation target is that the market median is obviously influenced by
what all companies do collectively and is, therefore, a moving target. Despite many companies' attempts to exceed the industry
median, which would raise it, the median has fallen slightly, with more companies intentionally targeting the market median
for sales reps, rather than shooting to exceed it. In 2005, nearly half of all companies in the survey (49 percent) targeted
the median, compared to 42 percent in 2004 and 39 percent in 2003. However, slightly over a third of participating companies
(36 percent) target the 75th to 90th percentile.
Performance Criteria: Throwing in the Kitchen Sink
The success of sales force incentive-compensation programs depends largely on an organization's ability to measure individual
performance against target goals. Given the very real differences that territories can have in potential (due to a variety
of demographic factors, such as managed care impact, physician prescribing trends, etc.), setting fair and equitable goals
is difficult. Frustrated by their inability to set territory-level standards, some companies simply set the same goal for
all reps. Goals can be either quantitative or qualitative, or some combination of both.