Good incentive plan design is based on agreed upon core business principles and objectives across different stakeholders such as Sales, HR, Finance, & Operations. Varied elements can be incorporated as part of detailed plan design to address different business situations / strategies. There is always a trade-off between the number of elements to be included vs. plan simplicity to ease understanding and communication. At times, the various options available at hand is overwhelming and it may be challenging to identify which specific options should be used for different business scenarios.
At the heart of the pharmaceutical incentive plan design, there are specific foundational elements that needs to be determined after reviewing the plan participant responsibilities, sales cycle structure and the lifecycle stage of each portfolio product:
- Performance Measure / Determiners – volume or dollar sales, share and share change etc. As a secondary process these performance indicators can be measured against a goal or ranked for relative performance.
- Plan Type – lookup curve, commission, matrix, etc.
- Qualifiers / Constraints – performance of primary product, activity adherence etc.
- Modifiers / Multipliers – behavioral MBO, nation performance etc.
- Plan Calculation Parameters – plan measurement period, interim payout caps, payout frequency.
- A combination of these foundational elements in plan design determines sales rep engagement and promotes desired behavior from the salesforce.
In this blogpost, we will focus on qualifiers and modifiers and how they can be used effectively.
Qualifiers are generally constraints / conditions in the plan design which determines the IC eligibility of the plan participant for a payout on any particular plan component. The idea is to add the set of threshold conditions to the plan design which enables the designer to zero out the incentive payment for that component irrespective of the performance of the participant on the plan measure. Qualifiers can be defined to meet specific business needs and can fall into various categories –
- Behavioral – Qualifiers to enforce certain core sales rep behaviors like completion of product training, administration process adherence, threshold on customer satisfaction survey score, number of coaching sessions / conferences etc.
- Activity Adherence – Qualifiers to encourage adherence to their call plan. Measures like percentage attainment to defined prescriber call plan, percentage call attainment to high value target prescribers
- Product/Portfolio Focus – Qualifiers to reinforce the primacy of the lead product in the portfolio. No other plan component will pay out unless a threshold has been attained on the lead product. Some examples threshold performance on primary product, threshold performance on product portfolio for a more balanced performance.
- HR Based – Qualifiers to enforce HR rules. For example the employee may be on a performance improvement plan or a rule may be that he/she be employed on the last day of plan period or a rule for zero unpaid vacation etc.
- Data Based – Qualifiers to check gaming of sales numbers. For example the difference in reported data from primary and secondary data sources (mostly applicable in countries that lack structured pharmaceutical data).
- Company/Team Performance – Qualifiers to encourage teamwork. For example a threshold on national performance or a threshold on team’s performance will encourage the team to help each other out.
Modifiers are usually known as multipliers in the pharmaceutical industry. This is a design feature that allows the plan designer to accelerate or decelerate a plan participant’s incentive based on one or more performance measures. These can again be categorized as –
- Behavioral – Modifiers on behavioral metrics like say the Physician Satisfaction Survey Score or the Pharmacy engagement score
- Company / Regional Performance< – Modifiers on company or regional performance. If the company beats quota everyone’s payouts are accelerated. If it does not everyone’s payouts are decelerated. These also help in budget management.
- Portfolio Performance – Modifiers for balanced performance on product portfolio. An additional kicker based on product portfolio performance is a good example.
- HR Based – Modifiers for HR exceptions like new hire, military leave of absence, written warning etc.
- Data Quality Measures – Modifiers to improve data quality like a modifier on the difference between gross and net dollars
Qualifiers and modifiers are a very useful plan design component to configure the plan to meet any specific strategic need. The same performance measure can be used for different purposes depending on the business situation.
When designing a new incentive plan, the first step is to identify the guiding principles and then determine the behaviors and outcomes you wish to promote. Once these have been identified, discuss and select the combination of design elements that support these desired outcomes. Always keep qualifiers and modifiers in your plan design back pocket to tweak the plan to meet your exact needs.