One third of the participating organizations maintain funds to be allocated at the district manager's discretion as pay "kickers."
These funds are outside of the regular incentive-compensation plan and can be used to recognize a rep's contribution that
is not measured in the regular plan or to compensate for the influence of managed care in a rep's territory. The existence
and use of these funds underscores the fact that even with the sophisticated reward systems in place, managers often feel
the need to intervene in order to compensate fairly. They are a way for managers to say, "I know that the plan calculation
didn't really reflect what you did."
Companies use a variety of additional cash and non-cash rewards in an effort to recognize extraordinary sales efforts. These,
in fact, often have greater impact than the formal incentive-compensation plan in directing behavior. Participants report
that between one percent and 20 percent of their annual sales incentive budget is spent on awards and recognition programs,
with the average being 6.8 percent.
Continuing a trend observed last year, companies appear to be increasingly linking perquisites, such as upgrades in car options
and single rooms at sales meetings, to performance. Reps who want to "smell the leather" have to earn it.
Many companies also include sales staff in their long-term incentive compensation plans to reward them for performance achieved
over a period of years. The plans can be based on incentive stock options, non-qualified stock options, performance units,
restricted stock, or stock appreciation rights. The percentage of companies that award non-qualified stock options as part
of their long-term incentive-compensation plan has continued to decline, from 72 percent in 2003 to 51 percent in 2004 to
37 percent in 2005. However, eligibility for other types of long-term incentive programs has been increasing, perhaps in an
effort to reduce turnover.
The pharmaceutical market is vast, complex, and dynamic. When all is said and done, there is still no way to measure and reward
the performance of the industry's sales people that is absolutely accurate, completely fair, and easy to understand and administer.
Fortunately, pharmaceutical employers never stop trying to come as close to that elusive ideal as possible. Like the crew
of the Golden Gate Bridge, they are motivated each year to review the situation and to make improvements.
Bob Davenport (bob_davenport@haygroup.com
) is vice president and managing director for Hay Group. Carrie Fisher (carrie_fisher@haygroup.com
) is a consultant for Hay Insight.
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