Incentive compensation management is vital in motivating and rewarding sales teams within the pharmaceutical industry. However, managing the incentive compensation process is generally not as straightforward as expected and requires several steps for the desired success. 

In this blog post, we will explore key best practices to ensure process excellence in sales operations, enhancing performance and increasing employee satisfaction.

1. Clear and Transparent Sales Compensation Plans:

The foundation of a successful incentive compensation plan lies in its alignment with the organization’s strategic goals. Sales Ops must work closely with the leadership team to understand the key performance indicators (KPIs) critical to business success.

Create clear, aligned sales compensation plans that reflect the strategic business objectives for the life sciences organization (pharma, biotech, medical devices). Sales Ops should clearly communicate the plan structure, eligibility criteria, payout calculations, and any applicable thresholds or accelerators. This clarity helps prevent misunderstandings and ensures that salespeople are aware of what they need to do to earn their incentives.

According to CSO Insights, specific to the pharmaceutical industry, organizations with transparent sales compensation plans experience 33% higher sales goal attainment.


2. Automated Sales Compensation Calculation and Administration:

Manual calculation and administration of incentive compensation can be error-prone, time-consuming, and resource-intensive. Embracing pharma-specific technology solutions automates the sales compensation calculation and management process for accuracy, efficiency, and scalability.


Companies within the pharmaceutical industry that utilize automated systems witness a 45% decrease in incentive overpayments, as reported by the Aberdeen Group.

Tailored automated systems for pharma can handle complex incentive calculations, track sales data, and minimize administrative burdens. This allows Sales Ops professionals to focus on strategic tasks that are aligned with industry needs.

3. Robust Data Management Systems:

Robust, tailored data management systems and data lakes are vital for accurate and reliable incentive compensation management in the pharmaceutical industry. Establishing a centralized database that integrates data from various sources using masters, such as sales performance, quotas, territories, and prescriptions/transactions, is of utmost importance. 

Regularly validate and cleanse the data specific to the sales incentives calculations to eliminate duplicates and inconsistencies. A reliable data management system enhances decision-making and forecasting capabilities, providing a single source of truth.

In a survey of pharmaceutical companies, 92% of respondents reported that having a robust data management system improved the accuracy and efficiency of their incentive compensation management processes.

4. Realistic and Attainable Targets:

Set realistic and attainable targets to maintain motivation and engagement. In-depth market analysis ensures targets align with industry-specific challenges and opportunities, preventing demotivation and dissatisfaction.

A study published by Harvard Business Review found that employees who perceive their targets as achievable are 3.5 times more likely to be engaged in their work.

Collaborating with sales managers and reps to set challenging, data-driven targets is crucial in pharma. Regularly reviewing and adjusting targets ensures fairness and adaptability to changing industry conditions.

5. Timely and Accurate Reporting:

Sales Ops professionals need comprehensive reports for performance insights, payout calculations, and pharma-specific trends. Regular communication of tailored compensation information fosters transparency and industry alignment. Moreover, progress updates and personalized insights help them track their incentive payout and reduce related disputes.

According to a study by the Aberdeen Group, pharmaceutical companies with timely reporting experience a 32% higher sales team attainment of quotas.

Empowering sales reps with what-if calculators allows them to simulate different scenarios based on their performance. This capability helps them align their actions with the incentive plan and increases motivation as they can visualize the impact of their efforts on potential earnings.

6.  Collaboration between the Sales and Finance Departments:

Collaboration between sales and finance is crucial in pharma’s incentive compensation management. Establishing effective communication channels and workflows ensures seamless coordination.

According to WorldatWork, 83% of organizations reported that collaboration between their sales and finance departments was essential for successful incentive compensation management.

Close collaboration between Sales Ops professionals and finance teams in pharma validates commission calculations, ensures compliance, and streamlines incentives. This fosters accountability and aligns with the industry’s unique context.

7. Continuous Evaluation and Improvement:

Ongoing process excellence in pharma’s incentive compensation management requires continuous evaluation and improvement. To ensure their effectiveness, Sales Ops must conduct regular performance data reviews using statistical parameters and industry benchmarks, analyze results, and collect feedback from sales teams and other stakeholders.

Gathering feedback from sales teams through focus groups identifies any perception issues and other pain points to refine the process further. Also, embracing technology and industry insights gives a competitive edge in managing incentive compensation effectively.

A survey conducted by WorldatWork found that 88% of pharmaceutical companies continuously review and refine their incentive programs to align with changing business needs.

8. Training & Development:

Incentive compensation management involves not just software and processes but also people. To ensure seamless business continuity, multiple stakeholders, including Sales Ops teams and administrators from different functions, should thoroughly understand the business needs and systems.

Regular training and development support can empower them to navigate the process efficiently and align with organizational goals. Well-trained stakeholders in incentive management make informed decisions, resolve issues, and ensure process accuracy and fairness effectively.

The Sales Management Association found that companies that invest in regular training and development for their incentive compensation management experience 23% improvement in process accuracy and a 19% reduction in dispute resolution time.



    • Implementing these industry-specific best practices in incentive compensation management can significantly impact sales team motivation, accuracy, and overall performance.  
    • The above practices are key to achieving process excellence in sales operations within the pharmaceutical industry.  
    • By adopting them, companies can drive success and gain a competitive edge in today’s dynamic business landscape within the pharmaceutical sector.

    When you look at sales incentive compensation from a macro perspective, it means encouraging sales representatives to perform specific activities in exchange for rewards and benefits to accomplish desired performance outcomes.

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    However, it doesn’t seem as straightforward as you may expect when you start taking a closer look at the process.

    Because your sales team isn’t a coin-operated vending machine, yielding the desired growth and revenue isn’t as easy as dropping in a couple of quarters in the coin slot.

    For any incentive compensation management program to succeed, it needs the right combination of variables, such as base salary, incentives, and commission, to inspire and motivate sales representatives to drive performance and net sales outcomes with each passing quarter.

    It’s the job of sales leadership to carefully choose the right incentive plan for the organization and its sales staff. Before they can proceed with it, several key questions need to be addressed. Let’s take a look at them –

    • What would adequate compensation for top sales performers would ideally look like?
    • What could be the disadvantages of underpaying or overpaying?
    • How can you identify when and if you are paying too less or too much?

    Fortunately, sales operations teams can consider a data-driven planning approach, follow the best practices of incentive compensation management, and conduct regular analysis to find answers to these critical questions and prevent common incentive management mistakes that most organizations tend to make.

    What are the Best Practices of Sales Incentive Compensation Management?

    When you set sales quotas that are not fair then it causes distrust in the system and doesn’t provide enough incentive for sales representatives to go above and beyond, you cannot expect them to put effort into enhancing their performance further. In such instances, your organization will witness a drop in performance, resulting in a loss of revenue and potential deals.

    If you’re keen to avoid taking such a plunge, here are five best practices you must implement to ensure that your sales incentive compensation management is effective. 

    • Setting the Right Bar for Sales Quotas 

    Precise and accurate sales quota planning is paramount to the success of your sales force. Just like setting the bar too low would result in windfall gains for the salespeople, unrealistically high quotas can make them feel discouraged and burnt out. The best way to set quotas would be to rely on historical data along with territory potential markers. 

    • Making Incentives Worth Your Sales Representatives’ Time and Effort 

    For sales incentives to be effective, they must genuinely motivate your sales representatives. If they don’t appear enticing enough, your sales force won’t work hard enough to achieve or exceed those goals. While weighing cost (effort) against the prescribed benefit (incentive), your sales staff’s earnings need to be structured so that the benefits stand out as a clear winner.

    In order to achieve this, sales operations teams would require accurate sales forecasting to enhance seller performance, improve pipeline visibility, and gain insight into commission earnings. When done right, organizations will be able to avoid scenarios where they end up paying higher incentives even when performances have been low. 

    • Tailoring Incentives According to Job Roles 

    Because each job role comes with unique responsibilities, you need to ensure that your compensation plans are customized based on specific roles. For example, you cannot expect the same compensation model for both a reporting representative and a manager.

    Ideally, incentives should drive bottom- and middle-performers to improve their performance and reward individuals who have been overperforming consistently. Such incentives will encourage the right behaviors, helping organizations to achieve their desired sales and revenue goals. 

    • Avoiding Capping the Sales Compensation Plan

    The role of incentive compensation plans is to drive behaviors that you seek from your sales staff. If you reduce the incentives when your representatives are able to meet 120% of their set quotas, it sends out a clear message that you want them to stop putting in effort when they reach that level. By doing so, you’ll end up missing out on opportunities that could translate into a higher ROI – all because your salesforce will hit their given numbers and stop working. 

    • Aiming for the Bell Curve 

    You must give your sales incentive compensation plan adequate time to align with your company’s goals. When it happens, your job will be to revisit data and assess whether engagement within your salesforce has improved. If the data shows that they are barely exceeding or meeting the prescribed quotas, you must take a closer look at your sales incentive plan along with the actions it has been driving.

    If you notice that your sales team has been barely hitting the quotas and reducing their efforts afterwards, it is usually because they are just meeting your set expectations. In that case, raising the bar can be useful. If they perceive rewards as worthwhile, your sales forcewill most likely rise to the occasion, ultimately driving the performance rates upwards. 

    • Leveraging a Sales Incentive Compensation Software 

    There is no denying that the excellence of sales incentive management depends on managing complex data efficiently. Sales employees expect accuracy in their incentive payout rollouts, and it can be time-consuming to manage them on excel sheets. Because of this reason, successful organizations rely on the best sales compensation software applications to manage quotas and incentives.

    With Auroch’s comprehensive compensation management solution, you can take care of all challenges you might face with your incentive management, from commission plan to employee performance track to bonus management.

    Inspire with a Better Sales Incentive Plan Today! 

    When you have the right incentive compensation plan, you can shape your sales team in a way that drives your organization forward. In turn, it will also enhance your company culture, creating an atmosphere of education, learning, healthy competition, and mentoring.

    When you follow the best practices, you create room to make regular improvements to the system, enabling transparency and predictability in salary structures.

    If you think your current compensation plan could benefit from a couple of tweaks, don’t shy away from the challenge. Instead, you must welcome it because it will pave your company’s path towards a brighter future.

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