Driving intended positive behaviors
Every single IC Plan, no matter how well thought out or off-the-cuff, has one thing in common – in impacting pay, it also drives emotions and behaviors. However, the type of emotions and behaviors (which can be positive or negative) that are driven will vary for every plan. In order to develop a plan that will drive intended positive behaviors, it is critical to first identify the desired company and brand positive behaviors. For example, a desired compliance behavior may be to only promote a given product for patients over 18 years of age. Paying for all Rxs written by all physicians (including pediatricians) may motivate representatives to promote a product for use with under-aged
patients, potentially resulting in legal fines and penalties.
Other identifiable potential positive behaviors may include collaboration with team members and open sharing of best practices, avoidance of cannibalization of a secondary product in the portfolio, and a balanced portfolio effort. The plan needs to be motivational and also drive that motivation towards all desired outcomes and behaviors.
Strong links between individual payout and individual performance
Some IC plans may have a strong linkage between national payout and national performance, yet not differentiate well between individuals that are driving the brand and company objectives versus those who are not. When this is recognized, it can result in regrettable turnover and poor retention.
Example of Lack of Payout/Performance
Linkage at an Individual Territory Level:
Product A is a new launch product and the company chose to put a very high weight on national performance to encourage team collaboration. A small weight was placed on some MBO measurements. The national payout was very closely linked with national performance. However a downside consequence was significant turnover to a competitor
that was launching a new product with a commission plan among the individuals who brought in the highest volume with no turnover among those individuals bringing in the lowest volume in the country. Appropriate Range in Payout Spread Even when a plan differentiates well between individual performance with top performers earning the most and bottom performers earning the least, the amount of spread in the payouts is also important to motivate and drive performance. Spread can be either too narrow or too wide. Too narrow of a spread can result in high performers being demotivated to work hard as they feel that hard work does not pay much more than moderate work. Conversely, too large a spread can result in a high percentage of zero-to-low payouts and significant turnover
and training costs.
“Low risk” in plan-induced payout swings between periods
An example of a payout swing is where a sales rep gets a great payout (e.g. 200%) in one period, but a very poor payout (e.g. 50%) in the following period or vice versa, otherwise known as the “Hero to Zero” or “Zero to Hero” phenomena. In general, there are two main causes for payout swings. The first is induced by change in individual actual performance. This is what a good IC plan should drive, where compensation is based on a strong link between performance and payout and sales reps are highly motivated to achieve beyond prior periods.
The second cause for payout swings is plan-induced, where individual performance continues per the prior period, but payout changes vastly between periods purely due to the nuances in plan design itself. This is the type of undesired payout swing to be avoided. Plans that induce a payout swing penalize employees for prior growth over a longer period, resulting in poor morale, lackluster performance, and regrettable turnover.
Example of Plan-Induced Payout Swing:
Plan-induced payout swing is a fairly common issue for both Trending and Fair-Share Goal approaches. This Fair-Share approach requires every territory to grow at the same rate across the nation, say 10%, regardless of prior performance. As a result, a rep that had grown their business by 25% previously might very much struggle to continue this pattern to reach even the required 10% growth off that much higher base and therefore become a “Plan-Induced Hero to Zero” and miss a good payout. A rep that previously declined by 30% can easily earn a strong payout in the coming quarter by showing growth at 10% over the prior quarter’s significantly declined baseline figure. This practice actually penalizes for growth and can encourages reps to “play with the system” by holding off their best effort.