Sales and Marketing: New Balances

Since performance is measured against a target, the creation of that target is key to the integrity of the entire compensation system. Yet setting sales quotas is an inexact science at best—particularly in the primary care arena. Companies rise to this challenge typically by using a combination of factors, including actual territory results (89 percent), overall company goal/objective (86 percent), and territory potential (61 percent). The emphasis, however, is shifting away from territory potential, as it is down from 86 percent in 2005. Undoubtedly, this trend reflects the fact that companies are uncomfortable attempting to predict a territory's "true" potential, given the influence of external factors such as managed care. As a result, more transparent elements, such as actual sales targets, get more weight in the goal-setting process.

Other changes also are underway. For several years, the marketing function within pharma companies has been gaining in size, stature, and influence. This is noteworthy in an industry so traditionally focused on sales. While the scales have not tipped toward marketing—and aren't likely to any time soon—companies continue to recognize the value of marketing and reward their marketers richly. Product managers earned on average $129,300 in total compensation in 2006, while senior product managers raked in $157,800—both up seven percent or more from 2005. These increases stand in sharp contrast to the 0.5 percent increase granted to the industry's sales reps. Even senior specialty sales reps did not fare well in comparison, with only a 0.6-percent increase in total compensation.

One answer is to raise the percent of total comp represented by base pay for the PCP sales force, recognizing that these reps simply don't have a lot of direct impact on the actual sale. At the same time, companies can simplify the structure of their incentive plans, as many are starting to do. This would end some of the administrative misery—and free up companies to measure and reward positions, like specialty sales and corporate account roles, that have a more direct impact on sales volume. Time will tell, of course, if companies follow through with these changes, but the motivation is mounting—and the once-distant rumblings, as seen with Pfizer, are upon us.

Bob Davenport is vice president and managing director for Hay Group. He can be reached at bob_davenport@haygroup.com
. Carrie Fisher carrie_fisher@haygroup.com
and Erin Rosner erin_rosner@haygroup.com
are consultants for Hay Group Insight.