Qualitative Metrics Are Emerging New qualitative approaches are being developed to measure the performance of sales representa- tives. Some leading-edge companies are also measuring customer satisfaction and the ability to build relationships, and they are using these data to reward their representatives. Other mea- sures that help determine the success of a sales- person include appropriate product promotion, business acumen, customer focus, the ability to train others, and achievement in leadership roles. Anonymized patient-level data can measure the number of genuine new patient prescription starts (new prescription is only a measure of new pieces of paper), as well as dosage titration and compli- ance and persistence. Our experts discuss the vari- ous metrics being considered that will reshape the yardstick of sales success. COLAPIETRO. HIGHPOINT SOLUTIONS. One of the most likely drivers moving companies away from a script-centric incentive compensation model, in the near term, are privacy laws, such as New Hampshire’s Prescription Confidentiali- ty Act, which bans the sale of prescriber-identi- fiable drug data for marketing purposes. As the industry continues to evolve from a personal sell- ing model to a more holistic, relationship-based selling model that emphasizes services and edu- cation, we believe the incentive compensation metrics will follow. In the near future, metrics, including peer-to-peer interaction facilitations and customer loyalty continuum progressions, will become part of incentive plans. JENNINGS. INVENTIV SELLING SOLUTIONS. Met- rics will begin to focus on the value that rep- resentatives deliver to healthcare providers and, ultimately, to patients. Healthcare providers will be asked to complete customer satisfaction surveys rating the level of service that they receive from individual representa- tives as well as pharmaceutical companies as a whole. Sales teams will be measured on their ability to be seen as a resource as well as to exe- cute marketing initiatives, such as patient edu- cation, that don’t necessarily have sales goals attached to them. The insights gained through these satisfaction surveys will make it increas- ingly evident which sales teams are succeeding in their efforts to be customer focused. KEEFER. PUBLICIS STRATEGIC SOLUTIONS GROUP . A number of additional metrics will likely be included in the incentive compensation mix, Sales models are evolving to meet the new challenges of today’s market, and incentive compensation and measurement plans are changing as a result. As the new environment of pharma sales shifts to more specialized and consumer-centric approaches, the industry will need to respond to adequately compensate and incentivize its sales teams. Our experts say prescription numbers will remain the predominant measurement for sales rep performance in the near term, but eventually, the industry will have to create IC plans that include alternative methods of measurement. Our experts report that the change has begun, albeit very slowly. New measures will be added to the compensation mix to more broadly capture the performance of sales representatives and while script metrics won’t disappear, they will definitely have a smaller impact on sales representatives’ overall pay. INCENTIVE COMPENSATION: A new model — more qualitative metrics Many companies are evolving their salesforces and their approaches to customer centricity; however, the evolution is still in its infancy. CHRIS COLAPIETRO HighPoint Solutions “ 12 January 2010 PharmaVOICE PDF created for: Marah Walsh ([email protected]) 1/4/2010
Transcript
QualitativeMetrics Are Emerging
New qualitative approaches are being developedto measure the performance of sales representa-tives. Some leading-edge companies are alsomeasuring customer satisfaction and the abilityto build relationships, and they are using thesedata to reward their representatives. Other mea-sures that help determine the success of a sales-person include appropriate product promotion,business acumen, customer focus, the ability totrain others, and achievement in leadership roles.Anonymized patient-level data can measure thenumberofgenuinenewpatientprescriptionstarts(new prescription is only ameasure of new piecesof paper), as well as dosage titration and compli-anceandpersistence.Our experts discuss the vari-ousmetricsbeingconsidered thatwill reshape theyardstick of sales success.
COLAPIETRO.HIGHPOINT SOLUTIONS.One of the
most likely drivers moving companies awayfrom a script-centric incentive compensationmodel, in the near term, are privacy laws, suchasNewHampshire’s Prescription Confidentiali-ty Act, which bans the sale of prescriber-identi-fiable drug data for marketing purposes. As theindustry continues to evolve fromapersonal sell-ing model to a more holistic, relationship-basedselling model that emphasizes services and edu-cation, we believe the incentive compensationmetrics will follow. In the near future, metrics,including peer-to-peer interaction facilitationsand customer loyalty continuum progressions,will become part of incentive plans.
JENNINGS. INVENTIV SELLING SOLUTIONS. Met-rics will begin to focus on the value that rep-resentatives deliver to healthcare providersand, ultimately, to patients. Healthcareproviders will be asked to complete customersatisfaction surveys rating the level of service
that they receive from individual representa-tives as well as pharmaceutical companies as awhole. Sales teams will be measured on theirability to be seen as a resource as well as to exe-cutemarketing initiatives, such as patient edu-cation, that don’t necessarily have sales goalsattached to them. The insights gained throughthese satisfaction surveys will make it increas-ingly evident which sales teams are succeedingin their efforts to be customer focused.
KEEFER. PUBLICIS STRATEGIC SOLUTIONS GROUP.Anumber of additional metrics will likely beincluded in the incentive compensation mix,
Salesmodels are evolving tomeet the new challenges oftoday’smarket,and incentive compensation andmeasurement plans are changing as a result.
As the new environment of pharma sales shifts tomore specialized and
consumer-centric approaches, the industry will need to respond to
adequately compensate and incentivize its sales teams.Our experts say
prescription numbers will remain the predominantmeasurement for
sales rep performance in the near term,but eventually, the industry will
have to create IC plans that include alternativemethods of
measurement.Our experts report that the change has begun,albeit
very slowly.Newmeasures will be added to the compensationmix to
more broadly capture the performance of sales representatives and
while scriptmetrics won’t disappear, they will definitely have a smaller
Many companies are evolving theirsalesforces and their approaches tocustomer centricity;however, theevolution is still in its infancy.
CHRIS COLAPIETROHighPoint Solutions
“
12 J a n u a r y 2 0 1 0 PharmaVOICEPDF created for: Marah Walsh ([email protected]) 1/4/2010
focusing on factors that relate more directly tohowwell each sales representative is fulfilling thevalue proposition for physician offices. Satisfac-tion surveys measure some of the more qualita-tive issues, such as howwell the representative isproviding physicians with information that addsvalue to their practice and if the representative isoffering services, such as patient educationmate-rials and samples, that help provide betterpatient care. Activitymetrics can bemore quan-titative when tablet PCs are being used and caninclude information relating to whether the rep-resentative is calling on the right physicians atthe appropriate frequency and if samples arebeing allocated appropriately.
MEROLD. SYMPHONY METREO. There definitelywill be newmetrics, some driven by the chang-ing influence of managed care and othersbecause companies have to work smarter nowthat they have had to downsize. For example,we are building metrics that determine therep’s ability to influence new patient starts orunderstandwhat activities really drive new pre-scription share growth for specific local mar-kets. Bringing in longitudinal data sets willadd value; profitability will be another emerg-
Incentive COMPENSATION
ingmetric, as well as such qualitative factors ashow well sales reps build a professional rela-tionship with their physician community.
MOSBY. WILSON LEARNING WORLDWIDE. Thecomplexity of today’s environment requires ashift in go-to-market strategies, with sales rep-resentatives serving as leaders of well-integratedservice teams who work together to address theneeds of healthcare providers. Specifically addi-tional stakeholders in sales management, oper-ations, marketing, medical, and managed care,can create an innovative environment internallywhile building strong credibility for the com-pany in the eyes of customers. While quantita-tive measurements such as market share, rev-enue, and territory growth will continue to bekey factors, due to the new service model, therewill be a need to set and integrate additionalbaseline qualitative measurement perimeters.Examples of these qualitative metrics mightinclude measuring the sales team’s ability toextend the length of sales calls, create perceivedvalue to the customer during the sales call, andthe use of resources and value-added tools andservices. Other metrics include factors thatincrease customer satisfaction, effectively
Newdata sourceswill allow newbrand prescription-basedmeasuresandmetrics to supplement existingsimplistic total prescription andsales volume approaches.
13PharmaVOICE J a n u a r y 2 0 1 0PDF created for: Marah Walsh ([email protected]) 1/4/2010
launching new products, creating more effec-tive clinical-based discussions, improving thecustomer’s ability to impact patient outcomes,and increasing the quality of support during thetotal office call. The impact of each of these andother activities can be effectively evaluated.Because this is a paradigm shift in how thepharmaceutical industry has measured perfor-mance, it will be important to define and com-municate new standards separating adequatefrom exceptional performance.
REDDEN. ZS ASSOCIATES.There are several newqualitativemetrics in the pharmaceutical indus-try that supplement results-based metrics.These includemeasures of customer satisfaction,appropriate promotion, and successful comple-tion of training curricula, among others. Twometrics that are being discussed more frequent-ly are anonymous patient-level data to rewardappropriate use of products and detailing quali-ty metrics to reward the quality of physicianinteractions, not just the number of calls per day.In some cases, these qualitative measures areincluded explicitly in sales compensation plans,as qualifiers with their own target amounts, orfor performance management, but not explicit-ly in the sales compensation plan.
NELSON.THE LANTERNGROUP.We have observedanumber of newmetrics—bothqualitative andquantitative — emerge over the past few years.Thesemetrics tend to have two focal points: cus-tomer focus and business drivers. Some of thecustomer-focusmetrics include theuse of outsidedata gathering services that provide customersatisfaction measures for doctors, customer trustand value scores, customer-centric behaviors, andnumber of new prescribers, as well as internalmeasures of customer engagement or focus.Business driver metrics tend to focus on territo-ry-specific measures that are determined by thesales rep and his or her district manager. Thesemeasures are typically more of a management-through-business-objectives style and reflect theuniquedynamics of theparticular territory.Busi-ness drivers tend to revolve around specificman-aged care plan growth, gaining access to specificphysicians, specific messaging effectiveness, sub-jective performance measures, and key businessbehavior measures.
SALES. KANTAR HEALTH.With the introduction
of varying versions of a new commercial modelthat is less focused on coverage and frequencyand more on a key account selling model, newmetrics become important, such as relationshipbuilding, business planning, and those skillsmore associated with marketers. Also, a valuemust be put on the actual interaction betweenthe rep and the customer; we need a measure ofhow this interaction affects the business, andunfortunately the script is no longer a validmeasurement for many interactions.
SZCZEPANSKI.PDI.The industry buzzword cen-ters on profitability measurement today ratherthan the historic metrics of reach and frequency.The blanket approach of multiple reps callingon physicians assumed that profitability waspresent in most or all territories. Now that weare moving away from that sales model, we arealso looking for ways to identify call quality; inother words, we need metrics to measurewhether promotional efforts have been effectivein producing physician recall that can lead toincreased script volume. Such an approach canbe very complex to execute at the territory level,although many in the industry are currentlyfindingways to do this on a national and region-al level.
WOJCIK.TGASADVISORS.A January 2009 bench-mark showed that three-quarters of the compa-nies surveyed already include some non-quanti-tative measures in their incentive compensationprograms, primarily management throughbusiness objectives. A few companies are tryingto augment prescription credit with other typesof measures at the district or regional level, suchas data on customer satisfaction with a salesteam. The cost tomove to the territory level hasbeen prohibitive, but once technology makesthis information available, companies are likelyto use it to determine if it drives sales.
Challenges of QualitativeMetrics
Ourexperts tell us thatmuchof the industry is inter-ested in the concept of qualitative metrics, butnobody is doing it very well right now, mostlybecause there is no successful model to embrace.Eventually,however,datawill be used to determinewhatisdrivingresultsandhowmuchisaresultofanindividual rep’s actions andhowmuch is causedbyuncontrollable factors, such as managed care orlack of physician access.There also has been a shifttodeterminewhat ishelpingorhurtingprofitability.Companiesare trying towork smarterbydetermin-ing if samples are boosting or depressing sales, forexample, or what may be affecting the physician’sbehaviorwithin theoffice.Our experts discussotherchallengesofworkingwithaqualitativemodel.
COLAPIETRO.HIGHPOINT SOLUTIONS.The main
Incentive COMPENSATION
Qualitative data will create a way to predictfuture sustained performance,although it is alittlemore difficult to realize immediate value.
CELESTEMOSBYWilson LearningWorldwide
“There are somanyinfluence pointstoday that it’s moredifficult to evaluate asales representative’seffectiveness solelyby prescription data.
RICK KEEFERPublicis SellingSolutions
“
“As organizationstransition to newcommercial models,qualitativemeasurements willbecomemorepredominant in2010 incentivecompensation plans.
SANDY JENNINGSinVentiv SellingSolutions
14 J a n u a r y 2 0 1 0 PharmaVOICEPDF created for: Marah Walsh ([email protected]) 1/4/2010
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agedmarkets as the most important focus for indus-
try in 2009, according to the TGaS Advisors Annual
State of Commercial Operations benchmark.This has
deep implications for newsalesmodels and incentive
compensation. Although the changing commercial
model necessarily includes managed markets, com-
panies have not, for the most part, integrated their
sales and managed markets operations effectively.
Another benchmark, “Future of Managed Markets
2009:AligningResources toCustomers,”revealed that
pull-through ranked as one of the top three concerns
for leaders in this area. Current changes in business
structure, however, may help resolve this ongoing
dilemma. Five of the top 10 pharmaceutical compa-
nies are moving to regional business unit structures
to be“closer to the customer.”Regional profitability, a
key measure that can be included in the metrics and
incentive compensation programs, has the potential
todrawsales andmanagedmarkets together tomax-
IntegratingManagedMarkets into Incentive Plans
imize pull-through. For this to be effective, however,
profitability measures need to be reconfigured to
include rebates.
Ifmanagedmarkets rebates and incentives are cal-
culated in regional profitability and incentive com-
pensation, the salesforce will:
� Pay more attention to managed markets pull-
through issues to maximize the contracts they
have.
� Be motivated to give input into the types of con-
tracts, mix of customers contracted, and rebate
levels.
� Develop better planning, collaboration, and
strategies to address local market needs, such as
more selective local market contracting.
� Increase communications with field sales leader-
ship.
Source: Brian Bamberger, Managed Markets Practice Leader, VP,TGaS Advisors; Mr. Bamberger may be e-mailed [email protected].
Prescription activity will continue tobe amethod usedwithin theindustry formeasuring salesperformance as it has been in placefor decades andwill be difficult toreplace in the short term.
JENNIFER SZCZEPANSKIPDI
“
16 J a n u a r y 2 0 1 0 PharmaVOICE
challenge will be verifying the results. As theterm qualitative metrics implies, the metricsthemselves cannot be quantified. In the shortterm, we believe the most realistic way com-panies will seek to verify qualitative results isby incorporating them into their marketresearch studies.
FOX. IMS HEALTH. There are two major chal-lenges. First is getting buy-in and then accep-tance from the salesforce. Since this approach isnew, it will take time for sales teams to under-stand and accept these newmetrics. The secondchallenge ismoremathematical—making surethe metrics used are sound and that differencesin calculated performance are statistically signif-icant based on data volumes. What works forone product might not work for another.
JENNINGS. INVENTIV SELLING SOLUTIONS.Becauseof the lack of hard data and measurable assess-ments of patient outcomes, subjectivity and biasin measuring performance will be major chal-lenges. In addition, asmanaged care and region-alization trends continue to evolve, sales organi-zations will need to look at metrics on alocalized level, and not rely on the convenienceof a one-size-fits-all metric plan. Other factors— such as geography, local or regional; man-aged care challenges; and Medicaid populations—need to be consideredwhen setting goals andmeasuring the effectiveness of sales reps. Thisrequires that goals are set in conjunction withfeedback from the front-line managers. In addi-tion, it will be necessary to develop and executetraining programs to prepare field managers fortheir participation in this process.
MEROLD. SYMPHONY METREO. The industry’sbiggest strategic issues are how to work smarterwith fewer resources and managing the largeamount of data needed to operate an informa-tion technology infrastructure that can’t keepupwith the current pace of change. If IT depart-ments are going to take a traditional approach,these units will wait a year or more before thenew solutions can be implemented, and this issimply unacceptable. New solutions are desper-ately needed to focus the activities of the small-er sales rep forces; they need analytic support tomore appropriately weigh what the rep caninfluence and separate out some of the factorsthat have nothing to do with the reps them-selves, such as managed care, lack of physicianaccess, use of Internet, or the impact of otherphysician programs.
MOSBY.WILSON LEARNING WORLDWIDE. Simple,concrete measures, such as market share growthand an increase in script numbers, are clearly eas-ier to define and quantify with direct, easilyaccessible data. As qualitative metrics are added
to the assessment ofsales success, onechallenge will be toaddress the fact that
measures of this sort are often subject to theobservations and judgments of different deci-sion-makers, such as sales executives, immediatedistrict managers, and even the customer. Forexample, determining how much value wasbrought to a sales call will most likely requiremeasurable feedback from a physician. Becausethis type of assessment is a little more complex,it will be a challenge to come up with one set ofmetrics that fully describes and aligns the salesteam’s and the organization’s performance. Oncenew standards have been determined, anothercritical challenge will be to prepare sales execu-tives to communicate these standards to theteam and to coach for and assess behavior changeon the part of teammembers, especially the salesrepresentatives. Figuring this out will be a wel-come paradigm shift, because using quantitativedata alone has only revealed what has happenedin the past. Qualitative data will create a way to
also predict future sustained performance,although it is a little more difficult to realizeimmediate value. Every organization hopesfuture projections will become real, but becauseof the many business factors that could impactqualitative outcomes—market dynamics, newregulations, organizational changes, tenure ofthe salesforce, time to proficiency for new salesprofessionals, newproduct launches, for example— belief in the value of measuring qualitativeoutcomes will take patience.
NELSON. THE LANTERN GROUP, The difficultywith the new measures is the ability to accu-rately measure these metrics at a territory level.Many of the newmetrics work well at a region-al level but they become more suspect the clos-er they get to a territory level. This is going tocreate significant trust issues with the field. Ifthe data cannot be effectively measured at a ter-ritory level it will not provide the type of per-formance measure required to engage sales rep-resentatives. Many of the new measures are alsosubjective. This provides a number of chal-lenges, ranging from issues of fairness to peoplegaming the system. While we see a greaterfocus on providing clear accountability andtransparency in these subjective measures, thesalesforce may still perceive them as unfair.Another difficultywith the newmeasures focus-es on sales representatives’ buy-in to the mea-sures.We have noticed that sales representativeswho have been in the industry for a while tendto have an aversion to changing the main ele-
Incentive COMPENSATION
The“more is better”methodology of selling
is dead. The Wall Street Journal now predicts
that the number of pharmaceutical sales repre-
sentatives in the United States will drop to
70,000 by the year 2015. This is a tremendous
change from the boom of the 1990s and the
early 2000s, when the total number of reps
exceeded 100,000.
While some companies saw the writing on
the wall and began adapting a few years ago,
other companies now find themselves well
behind. For those companies stuck in the past,
reducing salesforce mirroring, creating more
personal relationships with targets, and uncov-
ering new ways to reach physicians are the
orders of the day.
The companies that will excel will be those
that innovate now and find new avenues for
connecting with targets and that develop rela-
tionshipswhere doctors actually call on reps for
information.
Cutting Edge Information’s report Reinvent-
ing Pharmaceutical Sales Forces analyzes the
state of thepharma sales arena and reveals how
Calculating FairMarketValue
“More companies arelooking at alternativemeasures,bothqualitative andquantitative,to helpdiscern theperformance andpay-out for sales people.
KURTNELSONThe LanternGroup
“Newqualitativemetricsthat supplementresults-basedmetricsincludemeasures ofcustomer satisfaction,appropriate promotion,and successfulcompletion of trainingcurricula,among others.
STEPHENREDDENZSAssociates
Three-quarters of companiessurveyed already include somenon-quantitativemeasures in theirIC programs.
JEFFWOJCIKTGaSAdvisors
“
innovative leaders are winning in a time when
most companies find themselves in trouble.
Whether a salesforce is growing or shrink-
ing, compensation claims the majority of its
resources. Primary care groups spend an aver-
age of 62% of their allocations on compensa-
tion for reps and managers, and this expense
carves out 60% of budgets for specialty and
hospital teams.Travel, training, and technology
are also significant expenditures.
Top reps claim average total annual com-
pensation of well more than $100,000. High-
level district mangers take home between
$150,000 and $200,000 mark. Average and
starting compensation packages are naturally
lower, but the main concerns for sales man-
agers are hiring, training, and fielding talented
personnel.
Source:Cutting Edge examines the investment levels ofsurveyed companies as well as resource allocations andthe compensation levels of reps,district managers, andregional managers across the performance spectrum.Todownload the full report,go tohttp://www.cuttingedgeinfo.com/reinventing-sales-forces/?download.
18 J a n u a r y 2 0 1 0 PharmaVOICEPDF created for: Marah Walsh ([email protected]) 1/4/2010
ments of their incentive plans. Where we’veseen these new measures introduced, we’ve alsoencountered individuals respondingwith “I’m asales person— pay me to sell.” Companies thatimplement these new measures need to putextra focus on the communication and trainingaround these plans not only to address any buy-in issues, but also to educate individual salesrepresentatives on what they need to do tomax-imize their payout with the new plan.
SZCZEPANSKI.PDI.Measuring profitability on aterritory level is difficult as so many differentfactors impact the rep’s ability to sell. Physicianaccess is one issue, but the patient mix, formu-lary position, and the role of consumer advertis-ing all impact how a brand is prescribed withina territory. Essentially we want to know if themessage is getting through; does the qualityand quantity of calls produce the resultsrequired as well as material return on invest-ment. Currently reps are not typically incen-tivized to drive use of non-personal channelssuch as Webinars, e-detailing, etc. But as theindustry continues to move from the tradition-al brick-and-mortar sales approach to a combi-nation of personal and nonpersonal activities, alltactics will need to be factored into the rep’smeasurement of success.
REDDEN. ZS ASSOCIATES.Today, many compa-nies struggle to achieve meaningful pay dif-ferentiation with qualitative metrics —manyview these compensation elements as gimmes.Having quantifiable, activity-based salesachievements tied to results can help ensurethat top performers significantly out-earnlesser-performing colleagues. Another chal-lenge is continued data restrictions andchanges in data quality. Many companies aretaking a pragmatic approach, either removingunreliable data sources or making approxi-mate payout adjustments rather than getting
bogged down with accounting for everynuance. In addition, some of the emergingmetrics may not be granular enough to beapplied at the territory level and are onlyapplicable at district or regional levels.
WOJCIK. TGAS. There are multiple factors thatimpact effectiveness of sales. Managed care is themost obvious and most widely discussed. Anumber of companies nowconsidermanagedcare access as part of their goal-settingprocessand adjust sales territory level goals based onthe formulary status of the product. Anotherfactor of growing importance is access. Anumber of physicians and physician groupsnow restrict their availability, and somegroups require sales reps to be certified beforethey are given access to a facility. Theserestrictions make it increasingly difficult to
measure the true effectiveness of a sales rep. ATGaS Advisors benchmark study found that,given restricted access, most companies wouldmove to a ZIP-code level for performance mea-sures.We no longer have onemeasure but sever-al different combinations for each customer type.The real challenge is to build the infrastructureand flexible systems that can manage these newcombinations of data input and measures.
MOSBY.WILSON LEARNINGWORLDWIDE. Incorpo-rating a qualitative approach to measurementwill have to be implemented initially withinindividual pharmaceutical companies, as everyorganization sets its own priorities, has its ownproduct and service mix, and its own sales cul-ture. In time, there will be a baseline of expertiseon what works and what doesn’t. As best prac-tices are established, finding the similarities inqualitative information that are consideredimportant and have some commonality acrossvarious pharmaceutical organizations will be animportant next step in standardizing this type ofmeasurement. This will be the relatively easypart, as the industry begins the complex task ofstandardizing qualitative measurements of suc-cess linked to outcomes, as it has already beendone for quantitative metrics. This will takesome serious discussion by experts in measure-ment and evaluation. To measure the impact ofsales activities, for example, it will be importantto define the most common outcomes salesteams should work to achieve, describe morebroadly what success looks like, and strive tomeasure ROE, return on expectations, whichanswers the question: what is the expected valueof achieving certain qualitative goals?�
BOB MEROLD. SYMPHONY METREO. Senior-levelmanagers need to paymore attention to the cre-ation and deployment of analytics across theirorganizations, with special emphasis on theneed for an IT infrastructure that can morequickly meet growing analytic needs. In mostcompanies today, implementing a new analytictakes at least 12 to 18months; such a large timelag is a huge problem. Companies that are ableto move faster will gain a competitive advan-tage. This requires direct involvement fromsenior-level management because the problemspans across multiple departments and todaythese units are both understaffed and not well-coordinated. Senior managers need to realizethat to evolve the business, the company needsto make changes much faster today. Otherindustries are doing it. For example, when a coladelivery truck driver pulls into a grocery storeparking lot, he already has yesterday’s sales fig-ures, along with a formula that tells him whatto stock that day, and he can make adjustmentsto react to immediate market conditions. Inthese companies, the ability to deploy informa-tion and make better real-time decisions is ahuge strategic value and can translate to a cou-ple of extra margin points on the bottom line.Pharma needs to embrace that same type ofthinking andmore aggressively deploy analyticsthat drive real-time commercial decisions. Onlysenior leadership can create a cohesive plan andassume the business risk such an initiativeentails. What management will discover is thehidden benefit of such an effort: a greatlyimproved internal organization that works farmore effectively across functions when everyoneoperates off objective analytics.
CELESTEMOSBY.WILSONLEARNINGWORLDWIDE.There will now need to be a new connectionbetween compensationmodels and the new cus-tomer-centric sales and measurement approach.The critical first step is to strongly link com-pensation plans to a process for identifying new
measurement opportunities and then createmethods to measure performance based on thenewmetrics. Some qualitativemetrics are basedon individual feedback and judgment calls. So,compensation plansmust establish amodel thatintegrates currently used quantitative measuresof success with the new evaluation metrics foractivities that impact healthcare provider deci-sions, patient/consumer behaviors, and stimula-tion in market demand. Explanations of howdifferent metrics are linked to business perfor-mancewill be the key. Thiswill help alignmet-rics associated with the new sales model andwith the quantitative data already used. Forexample, brand metrics are considered to beeffective tools for measuring the qualitativeparameters of brand performance in a givenmarket, and the organization takes time tomeasure the effectiveness of brand growth andsustainability activities. This same type ofthought process can be applied to measuringindividual performance. To support this, allexecutives from sales, marketing, and trainingmust be on the same page andwork together todecide how using all of thesemeasurement datapoints can have practical implications to estab-lished and future compensation models for theintegrated service team.
KURT NELSON. THE LANTERN GROUP.Compen-sation plans need to be able to account for thechanging dynamics of the industry. Compa-nies need to be able to define what the keybusiness drivers are that need to be addressedby sales representatives and then develop com-pensation models that can impact thosedrivers. This will require a shift in thinkingfor many companies. Not only will this newmodel require companies to look at othermea-sures, it might require them to rethink theirentire pay model. Creating more individual-ized plans, where representatives design theirown plan — within specific parameters — assome managed market teams have done is a
trend that we believe will expand in the future.This involves companies letting go of some ofthe control that they have typically had incompensation and pushing this down theorganization. Some organizations might lookat reducing the amount of pay at risk andincreasing base salaries if they are focused ondriving more customer-centric behaviors.Other companies might need to shift more payto at-risk drugs or increase the use of short-term incentives to drive the performance ofspecific drugs that are in tight competitivemarkets. The one-size-fits-all model of com-pensation plans needs to be thrown out.
JENNIFER SZCZEPANSKI.PDI. It is in the com-pany’s best interest to excite, motivate, andretain its top performers. This means develop-ing a long-term incentive plan to encourageretention. A fully loaded primary care rep nowcosts his or her employer about $250,000annually to cover salary, benefits, car, cellphone, laptop, plus any bonuses. We are nowseeing companies move away from the tradi-tional compensation model of quarterly fixedincentive pools to a less traditional mixbetween variable and fixed compensation.While the use of compensation trips and thosetypes of rewards are being analyzed after thesevere criticism of AIG executives taking anincentive trip after the government bailout,the truth is that these types of perks are veryimportant to the top performers. It is a highlymotivating technique for engaging top per-formers, and one that provides return oninvestment over a longer horizon of time.Points programs for non-cash prizes andrewards are another compensation methodbeing explored. We like to say, “Cash is kinguntil you win a prize.” Because non-cashincentives are lasting, physical reminders ofthe achievement or performance, they are goodmotivators. While cash is a quality reward, itis spent and easily forgotten. Typical incentiveprograms are quarterly and when they are over,they’re over. Longer-term incentives such asnon-cash contests, points programs, and evenstock options tend to single out the high per-formers and provide them with motivation toremain engaged and driven to succeed over amuch longer period of time.�
BY ROBIN ROBINSONAligning Compensation PlansWith NEWER SALESMODELS ANDMETRICSThe industry not only needs to change its metrics, it alsomust focus on how those
metricsmay impact the incentive compensation plans.Leadership buy-in,a shift to a
more team-based approach,and retaining high performers are all new challenges
presented by the changing sales environment.Our experts give their advice on how to
better align the incentive packages tomotivate today’s sales reps.
ompensation plans have always hadto evolve to meet the needs of themarket, and today is no different. Buttoday the target is moving faster.
New plans now must align with organization-al goals that are in constant flux and requiremore flexibility in creating structures for indi-vidual sales representatives, with the addition-al focus on new methods of measuring perfor-mance. The changes in compensation planshave traditionally been driven by several fac-tors, including the evolution of closed loopmarketing, healthcare reform, and the decreasein prescription data availability. Many of theconcerns in the future are the same ones oftoday: how do companies discern sales thatwere driven by sales representative actions ver-sus e-detailing methods; how do companiesaccount for performance driven by managedcare wins or losses versus representative effort;and how do companies reward maintenanceversus growth?“Organizations must continually look to
see what new data sources are out there andhow can those data sources effectively helpthem measure representative performance,”says Kurt Nelson, president of The LanternGroup. “The compensation plans of tomorrowwill be different, but they will also containmuch of what we already have today.”The key, he says, is that companies have to
ensure that the new plans are understood andbought into by the field. Participants are notonly looking for the “what” of the plan, butalso the “why” behind the plan. It is vital thatorganizations communicate and train theirreps to effectively create engagement and driveperformance.Certainly what happens with healthcare
reform under the Obama Administration willhave an impact on the way pharma companiescreate compensation plans in the future.“The impact on managed care, formularies,
and how difficult it will be to pull throughbrand products will have a significant impacton compensation models,” says Jennifer
Szczepanski, director of incentive compensa-tion at PDI. “Compensation models may needto be regionally based to reflect selling condi-tions within that locality as the formulariesestablished by the regional payers dictatereimbursement terms for the brand being pro-moted.”Formulary position can significantly
impact access and utilization and make theselling proposition that much moreformidable if the brand is not included.Nonetheless, she says, reps need to be well-versed on themanaged care environment with-in their territories and compensation plansneed to continue or begin to take these region-al differences into consideration.The profile of the traditional rep is also
changing, Ms. Szczepanski says.“There is a continual shift away from the
traditional rep profile toward a variable salesrep profile that is dependent upon where theproduct is in its lifecycle and the demands ofthat therapeutic category or overall productcomplexity,” she says. “Although these repscommand a good compensation package, theyare more motivated by accomplishment andrecognition than just achieving a specific com-pensation level.”With the increasing shift in influence to
managed care, government, organizations, andcare givers, a new set of measures must be putin place to gauge performance by the newteam-based selling that’s coordinated byKAMs(key account managers) and IAMs (integratedaccount managers), according to Stephen Fox,global practice leader, sales performance centerof excellence, IMS Consulting.“As more products lose patent protection,
incentive plans can now be put in place tomeasure prescribing dynamics at a very finelevel of detail,” he says. “For example, it is pos-sible to measure what percentage of business islost by switches to a generic compared withlosses to another branded competitor. There-fore, reps can be incentivized to protect againstgeneric erosion.”
“We anticipate that continued compliancerequirements will influence incentive plandesigns, ensuring in particular that sales cred-iting practices discourage off-label promo-tion,” says Stephen Redden, principal andleader of the incentive compensation practiceat ZS Associates. “Data restrictions and otherdata-related challenges will also factor intocompensation plans; to the extent that salesdata become untrustworthy, the emphasis onthese data in the sales compensation plans willdecline. We also anticipate that increasedtransparency in drug pricing will strengthenmanaged care programs’ influence at the locallevel and sales compensation plans will need torecognize the resulting local variations ingrowth potential.”As longitudinal patient data become more
robust, these new measures may be anotherway to calculate the impact of a sales rep, saysJeff Wojcik, principal at TGaS Advisors.“While we have started to report a number
of companies beginning to provide this infor-mation to the field as part of their performancereporting and targeting, only 25% of the com-panies in the benchmark currently do so on aroutine basis,” Mr. Wojcik says. “We have notyet run across any salesforce compensationplans being run with these measures.”�
C Organizationsmust continuallylook to see what new data sourcesare out there and how can thosedata sources effectively help themmeasure representativeperformance.
