The future of incentive compensation

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We recently published a white paper that describes how emerging pharmaceutical companies can develop motivating and sustainable incentive compensation plans amid the many uncertainties that accompany a product launch. As we wrote that paper, it prompted some discussion about how incentive compensation may change in the years ahead.

Of course, emerging pharma companies must work first and foremost to fine-tune their incentive compensation plans today. But they also must keep a close eye on how changing industry dynamics will impact sales rep motivation and force changes in plan makeup in the coming years. With the increased availability of patient-level data, companies will have the opportunity to incorporate new metrics (e.g., the length of therapy adherence) into incentive compensation plans. Additionally, as key account manager roles grow, companies will need to structure plans for these individuals, whose activities, incentives and goals often differ from traditional reps. And companies will need to continue to find ways to motivate reps as physicians further restrict access. Overall, the evolving health care system will add complexity to incentive compensation plans. It will be up to emerging pharma commercial leaders to ensure plans account for new metrics as well as the evolving roles within the sales force to maintain motivation and results.

Another key consideration is the generational mix of the sales force. Millennials are poised to comprise 75 percent of the global workforce by 2025, according to Deloitte, and pharmaceutical companies should respond accordingly, even if many of today’s high-performing reps remain baby boomers.

Though every person is unique, it is possible to generalize to some degree about different generations’ motivational preferences. Some of these differences are based on life stage more than generation. For example, a sales rep nearing retirement will naturally be more risk-averse than a rep in her 20s. However, generally speaking, individuals from each of the five generations in the workforce do tend to respond differently to incentives. Companies should account for this reality as they design incentive compensation plans.

Whereas baby boomers may seek more financial rewards, younger, millennial members of the sales force may seek more visible forms of recognition. As a result, companies should get creative when they reward these younger reps. Instead of simply dusting off traditional recognition tools like President’s Club, think about creating a “shareable” version of a reward trip. Consider announcing sales award winners on social media and encourage reps to share pictures from their award vacations with a custom hashtag. Evolving sales rewards to meet the needs of younger generations will put a pharma company in a position to engage and retain reps as the generational mix of the sales force continues to change. At the same time, companies should retain traditional motivational techniques and plan types to ensure they continue to accommodate the motivational needs of the older generations in the sales force.

Commercial leaders at emerging pharmaceutical companies often feel like they’re drinking from a firehose. So, it can be difficult to think about future incentive compensation trends. But it’s important for these leaders to do their best to keep an eye on what’s next to ensure they effectively motivate a changing workforce in a shifting health care industry.


Melissa McDevitt

Melissa McDevitt is an associate partner at Beghou Consulting. She leads the firm’s Durham office.