Tearing Up the Rule Book - Pharmaceutical Executive

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Tearing Up the Rule Book
Sales compensation practices are due for an overhaul in 2010


Pharmaceutical Executive


A Break from the Past

The overall trend is clear: Pharmaceutical companies are accelerating their move to new commercial models, and it now appears that many companies will be implementing them in 2010. This clearly has significant implications for sales administration and compensation functions. We recommend that:

Companies begin planning their new approach to performance management and compensation as soon as possible. After devising a strategy, companies should run pilots to test specific approaches prior to adopting them for the entire organization.

Leaders involve compensation specialists in the design of the systems that they will eventually be administering.

Consider outsourcing the maintenance of the legacy compensation system linked to the traditional reach-and-frequency sales model. This will free in-house sales administration and compensation specialists to concentrate on the challenges of executing and developing new performance measures and compensation plans.

Grow sales roles to engage physicians, institutions, and payers beyond sales through KOLs, research, etc. Map these roles, track impact, and build capabilities to measure performance.

Develop analytics that evidence a holistic view of performance—from job design to incentive rewards. Working with companies that only track and report data will not work, as their business model is based on the old approach. They are a good source of benchmarking and data, but these are backward-looking indicators. It is important to establish strategically oriented metrics.

Because few, if any, companies had fully implemented their new commercial models at the time of the 2009 survey, it reflected a business-as-usual approach to compensation and retention. By this time next year, new approaches to the market will be in place, and we can expect to see corresponding changes to compensation practices. 2010 and the next year beyond will be a period of experimentation, revision, and change in sales performance management as we have never seen before.

Carrie Fisher is Project Director, Hay Group Pharmaceutical Sales Force
Effectiveness Study. Marc Wallace is National Practice Leader, Sales Force
Effectiveness at Hay Group. Ian Wilcox is Vice President, Life Sciences Sector Leader at Hay Group. They can be reached at
.

About the Survey
The Hay Group Sales Force Effectiveness Study, now in its 19th year, is designed to characterize the culture, policies, and practices within pharmaceutical companies’ commercial organizations as well as to identify factors that impact sales performance. Thirty-two pharmaceutical and bio-technology companies participated in the survey, representing a broad cross section of the US pharmaceutical industry. In total, data were collected for 79 sales, marketing, and medical affairs positions, held by almost 70,000 incumbents.


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