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Pharma's Incentive Compensation Plans Growing More Complex

June 5th, 2019

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As pharmaceutical companies shift their sales talent focus from recruitment to retention, they are adjusting their compensation programs to better align those goals with their most important business objectives.

An article on PharmExec.com discusses the tinkering companies have been doing with their variable pay to make it a larger percentage of compensation.

Partha S. Anbil , cognitive enterprise transformation leader, Healthcare & Life Sciences practice at IBM Global Business Services, outlines some of the features of incentive plans, noting the trend is to take into account multiple metrics -- not just sales or revenue.

"Incentive compensation plans tend to be varied, numerous, and extraordinarily complex, particularly with regards to the number of variables considered," he writes.

"In fact, current state suggests that in an attempt to incorporate as many performance metrics as possible, firms may compromise the extent to which sales representatives understand the criteria on which their incentive payouts are based."

Anbil lists the various metric categories and notes that plans are further tailored to the different segments of a sales force. There are other models, he explains, using a broad variety of metrics that, in addition to quantifiable measures, include "softer" ones such as "leadership skills" and "development of people."

The increasing complexity of incentive plans is prompting companies to reduce the payout frequency. Most still pay quarterly, but, Anbil says, the number making payments three times a year has double recently to 16%. Similarly, companies are tending to keep the basic structure of these newer plans intact longer.

"Most companies review their plans and make changes on an annual basis, representing a process of continual growth rather than periodic upheaval."

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