Inside the Mind of an Incentive Plan Expert: Neal Songer

Introduction

In the changing incentive plan design and management, few voices are as experienced and insightful as Neal Songer, JD. With a career spanning over three decades in the pharmaceutical industry, Neal has witnessed dramatic changes in the landscape. Moreover, he has been at the forefront of designing and implementing effective incentive compensation (IC) strategies. 

Currently a senior IC consultant, his expertise is sought after by companies looking to optimize their sales force performance and overall business outcomes.

In this exclusive interview, Neal Songer shares his journey, key learnings, and candid thoughts on the successes and pitfalls of incentive plan design with our interviewer, Permendra Pandey. Let’s take a closer look at the discussion.

Question 1: Who do you follow to learn more about incentive plan design?

Neal Songer: From my earlier years in the IC industry, I was blessed to meet and work with John W. Keon, Ph.D., the CEO and Owner of The Marketing Advantage, Inc. John’s company was a third-party vendor who provided tremendous help while I worked at Solvay Pharmaceuticals, managing their IC department. He assisted us with some of our IC designs and facilitated the production of monthly report cards and quarterly IC pay grids. John is also the author of the book "Prescriptions for a Winning Sales Force Incentive Plan," which has been very insightful for me over the years.

Question 2: What’s an important question that IC automation vendors frequently overlook?

Neal Songer: There are actually several things. First, they should ask who the system's end-users are and what their level of IC and/or technical knowledge is. Second, they need to understand the end results expected from the IC automation. Lastly, they should check if the IC automation system will actually be user-friendly.

Question 3: What mistakes did you make early in your career when you started managing incentives?

Neal Songer: I made several mistakes in my earlier career as an IC manager. A few of them were:

1. Lack of communication with the end-users, such as field sales reps and management, on various aspects of the IC plans.
2. Taking for granted the usefulness of creating “Impact Analysis Reports” to show whether a proposed IC change would yield the expected results.
3. Assuming that various levels of management responsible for quality control of IC reports were giving their best efforts, which often wasn’t the case.

Question 4: How could we make incentive management worse?

Neal Songer: By NOT involving all key stakeholders throughout the various levels of the process. In other words, a lack of proper oversight where needed can severely hamper the effectiveness of incentive management.

Question 5: What’s a popular book (or trend) that you think is overrated?

Neal Songer: The trend of using goal attainments to measure performance has become overrated. In many cases, goals are not set fairly or equitably, which sets up sales reps for failure. The methodology for establishing goals is often too complex for sales reps to understand, leading to a lack of trust. Additionally, goals are usually based on forecasts, which are essentially educated guesses about the future. When goals are perceived as unrealistic, sales reps may become disengaged or even leave the company, which can be detrimental to the organization.

Question 6: What do you passionately disagree with in your industry?

Neal Songer: I disagree with the creation of IC plans that do not pay 100% for the expected performance levels. If an IC plan pays for poor performance just for the sake of paying out something, it fails to challenge sales reps to step up their participation levels, ultimately leading to a lack of productivity and synchronization between the company and its sales force.

Question 7: When did you realize your incentive processes were broken?

Neal Songer: I realized that the incentive processes were deeply flawed when I joined a new company where many of my old fellas were working. Seeing the same issues I thought we’d left behind was troublesome. The VP of the sales reps asked if I could replace their goal attainment IC plan with the PPM (Percentile Performance Metric) system I had implemented at our previous company. Based on a forced ranking tied to multiple metrics, this IC plan clearly showed that the goal attainment IC plan was not as effective as it was believed to be.

Question 8: What do most people get wrong about incentive process management, and why is that?

Neal Songer: Most people underestimate the time and effort needed to design an IC plan that delivers the expected results fully. They also often fail to invest enough time in the proper implementation of the plan to ensure its effectiveness. Designing and implementing a robust IC plan is a complex process that requires attention to detail and ongoing oversight.

Question 9: How do you handle manual effort and IC Bonus calculation errors?

Neal Songer: I found these methodologies to be a “Tried & True” solution to ensure that the IC Bonus Calculations are as reasonably accurate as possible:

1. Check Input Data: Make sure your data feeds are correctly set up. Use a Data Request Form (DRF) to specify the data and format required.
2. Review Eligibility Percentages: Verify sales reps’ eligibility percentages by considering factors like start date, hire date, deployment date, transfer date, termination date, and leave of absence dates.
3. Quality Check (QC) the Data: After setting up the IC Pay Grids, spend adequate time checking the data for any anomalies. For big teams with lots of data, decide on a statistical sample size that ensures accuracy. Have several people review the data to catch any mistakes. Each layer should have an official signoff for audit purposes.

Question 10: What are some effective methods to keep sales reps motivated?

Neal Songer: Some of the methods that I find effective to keep your teams engaged are:

1. Clear Bonus Plans: Design Incentive Compensation (IC) Bonus Plans that are easy to understand. The plan won't motivate sales reps effectively if they can’t easily grasp how to earn their bonuses.
2. Training: Provide thorough training on the IC Bonus Plan. Spend time helping sales reps understand how the plan works and how they can maximize their earnings.
3. Tiers for Growth: Design bonus plans with tiers that reward progression. For instance, there are levels like Associate Sales Rep (ASR), Professional Sales Rep (PSR), Senior Sales Rep (SSR), and Executive Sales Rep (ESR). Each tier should come with higher target bonuses.
4. IC Advisory Board: Form an IC Advisory Board with members from various levels (RBDs, DM, Sales Reps, etc.) to gather input on new or revised bonus plans. This involvement gives Sales Reps a sense of ownership and makes them more invested in the plan.
5. Contests and SPIFFs: Run occasional contests or Special Incentives (SPIFFs) to give Sales Reps a chance to earn extra money. These can add excitement and also benefit their overall bonus plan.

Conclusion

Neal Songer offers invaluable knowledge and real-world insights into the complexities of incentive plan design. In summary, the information provided above is just the tip of the IC iceberg, which has many facets. One of the most effective ways to think about improving upon any of the topics mentioned is to put oneself in the shoes of a sales rep and self-reflect on what would enhance productivity in daily tasks. Creativity and out-of-the-box thinking are essential. Above all, it's important to have fun and enjoy the work!