Uneven Landscape - Pharmaceutical Executive

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Uneven Landscape
The Hay Group's 9th Annual Sales Force Survey points to sprouting opportunities amid the harsh soil of pharma's "rightsizing"


Pharmaceutical Executive


Positioning the Bar: Quality Over Quantity

One of the most interesting findings was that companies have lowered their daily call targets for all positions except primary care reps, who are expected to make an average of 8.4 calls a day. The most dramatic changes are for calls on corporate/national accounts and regional accounts, where the daily targets changed from 4.5 to 2.5 and from 4.1 to 1.3, respectively. These lowered call quotas reflect the time it takes to build strong and lasting relationships. The changes may also indicate that companies are moving away from counting sales calls, and focusing more on the quality of the call. It is no surprise companies are asking, "What is our ROI from these and other selling and administrative expenses?"

To set sales quotas, companies factor in territory results previously achieved (90 percent, up from 76 percent in 2007), territory potential (89 percent, up from 57 percent), overall company objectives (76 percent, up from 65 percent), and managed care impact (48 percent, up from 22 percent). Consistent with their increased role, firms plan to consider managed care impact in a territory more often in 2009, 63 percent of the time.

Design Basics

Pharma sales comp plans have never been—and never will be—simple. To be accurate and fair in determining rewards, employers have intentionally built checks and balances into incentive plans, often to the point of over-engineering them. Research has shown that plans that incorporate more than three variables lack the focus needed to inspire and direct employee behavior.

Traditionally, companies structure incentive plans around quantitative measures. For general physician reps, for example, the mix is 92 percent quantitative, eight percent qualitative, measures. Mostly, firms look at script volume, market share, and revenue (including Rx dollar value). The leading qualitative metrics for reps are selling skills (78 percent), call average (78 percent), product proficiency (67 percent), territory management (67 percent), and customer focus (56 percent). Qualitative measures are given the greatest weight in plans for regional account managers (RAMs). For national account managers (NAMs) and RAMs, achievement of special objectives figures highly into the plans, comprising one-third of the mix.

Most reps are eligible for a sales incentive plan after working for two months, suggesting companies are eager to usher sales people into productive roles quickly. (Five years ago, the average waiting period was three months.) Also, to the extent that companies hire seasoned reps from competitors, they can accelerate the training period. The average territory vacancy rate has decreased from 9 percent in 2007 to about 3 percent in 2008. Vacancy rates are higher in the small to mid-sized companies, which goes hand-in-hand with their expansion.

Long-term incentive plans reward longevity, and 64 percent use them. More reps are now eligible for equity plans. The most popular are non-qualified and incentive stock option plans, which grew in popularity from 40 to 75 percent.

Measuring Performance

Sales incentive programs depend largely on a company's ability to measure performance against goals. Companies do that at the individual level 72 percent of the time. Up to a quarter of managers get their comp based upon the performance of their district or region. Most often (67 percent of the time), plans pay incentives based on reps' achievement of a sales target or quota. About 18 percent of plans pay out primarily based on increased market share. However, market share has grown in popularity as a secondary mechanism, now used 35 percent of the time, compared to just 14 percent last year.

The most common source of qualitative data is management evaluation. For district and regional managers and sales reps, performance is also measured by selling skill/call quality and call average/frequency. This year, there is more emphasis on territory management (51 percent, up from 30 percent), formulary access (28 percent, up from 20 percent), and staff development (25 percent, up from 13 percent). Most firms (80 percent) require reps to meet a threshold to receive a payout. But across the board, firms have become more inclusive: Reps' and sales managers' thresholds are 80 percent of quota (down from 85 percent in 2007) and 83 percent for NAMs and RAMs (down from 85 percent and 90 percent, respectively).

On the other hand, companies have lowered the cap for payouts. Last year, the max payout was 200–225 percent of target; in 2008, it was 163–200 percent. The top 10–15 percent of performers typically achieve 110-120 percent of goal. Firms are also distributing incentives more promptly. Only 12 percent pay three times a year, while 68 percent award quarterly and 10 percent pay monthly (an increase from 4 percent).


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