2020 has really shocked the medical products/devices industry due to the corona pandemic and several other natural disasters. In-person access had already been declining for the sales ecosystem and COVID-19 has just added gas to that fire. New modes of stakeholder engagement and behavioural changes are evolving and sales ops teams are constantly striving to keep up with this challenge. Additionally, the emergency nature of this year has teams scrambling to adjust IC plans and metrics to implement their short-term strategies and plan for the new normal in the long term.
Therefore, I invited Kenneth Pieh to share his perspective on trends and challenges related to sales compensation management in the medical devices industry and how the industry in general is dealing with this pandemic.
Ken has over 45 years of experience designing sales compensation plans, sales contests, and quota methodology specifically for medical devices companies. He has designed plans for start-ups, mature companies with billions in revenue, slow and fast-growing, capital/disposable models, mostly med-device type companies. Out of his impressive career of 45 years, he spent more than 30 at Medtronic at senior positions which included teaching and training about sales compensation principles in Asia and Europe. He was considered the worldwide expert for sales compensation, sales contests, equity, programs for the salesforce, quota related issues, acquisitions and startups. He also led a national seminar on sales compensation design. Among the participants were Coca Cola, Pfizer, Hoerscht, Abbot, 3M Medical products, Canadian and U.S. communication companies, DuPont, and many (30+) others.
Amit: The current pandemic situation aside, how has the IC landscape changed specifically for the medical devices industry in North America?
Ken: I do not think the IC landscape has changed much over the last few years. At times, some companies have tried “new” or “trendy” design ideas (like customer satisfaction) but my experience is that few companies stick with any new/unique approaches to sales compensation design. Most medical device companies use quota-based plans with varying payout ramp rates (flatter below quota and steeper above quota to make it more lucrative). A minority of medical device companies use actual volume. Most of these companies sell high asp implantable devices. In addition, there are a few large well-known companies that historically and currently pay on volume and for reps in these companies that do not perform, they are quickly terminated.
Amit: What are some new/unique future challenges med device companies will experience due to the pandemic as the result of social distancing negatively impacting in-person access?
Ken: Hospital access (for salespeople) has become much more difficult over time and will continue to become even more difficult. As we go forward, adding “technical”, “training” or “teaching” to titles may be used by some of the companies to help Sales Reps gain access. Many in-person meetings will continue to be virtual or at a minimum outside of hospital.
Amit: How are different organizations coping up with the pandemic and what are the measures taken by them on the sales compensation side to ensure that plans continue to be motivating, fair, and fiscally responsible?
Ken: My experience with many medical device companies during the pandemic was they were doing all they could to hold onto their sales employees – raising or implementing floors of commissions, adjusting quotas, anything and everything to keep their people. The income protection floors ranged from 70% of target pay to 100% with most companies in the 80-85% range.
Amit: How do you see sales compensation solutions evolve going ahead? How sales compensation needs of organizations will change in the future?
Ken: Assuming the medical device world continues to focus their sales efforts on the rapid ramp of recurring revenue, landing marque customers (Mayo, Cleveland clinic types) leading to an increase in profit and margin percentages, I think the key metrics today in sales compensation design will continue to be target comp, targets or quota performance goals, and higher rewards (more lucrative payout rates over quota). However, we will see a change in market pay and tweaks being made to metrics in the sales comp designs each year. The best designs will still be simple and have 1-3 elements at most.
Amit: What would be your recommendations to organizations using old-world legacy systems or are still working off Excel workbooks?
Ken: Excel can limp along for quota-based plans until an organization has 20-30 reps. Once they expand beyond that, it is far more beneficial for them to move to a sales compensation software solution. This empowers them to add more strategic value by enhancing sales compensation plan analysis and design through simulation and analytics. Excel can handle hundreds of reps where a company uses a straight commission design like “x% of revenue” but it becomes challenging when you move to any design beyond a flat payout rate. At the same time, sales compensation design software can help in decision making regardless of the plan types an organization uses.
Amit: Do you think the IC solution industry is well placed to explore the market potential or are there areas that they need to work upon? If Yes, what would those areas be?
Ken: Most IC solution companies do not have someone on staff with plan design experience. From my perspective, that aspect could be improved by software providers by offering or partnering with design experts as a part of their IC offering.
Amit: In conclusion, we can say that this unprecedented period has forced medical devices organizations to do some rethinking on their overall sales compensation philosophy, but their choices have been constrained due to limitations of their legacy systems. An amalgamation of the traditional approach with new thought processes along with new-age technology ecosystems may allow them to innovate and significantly improve the effectiveness of their sales compensation program management, operational efficiency and motivation of their salesforce.
Thank you, Ken, for taking time out and talking to us on such a strategic and complex subject. I am confident that your ideas will help readers deep dive into their sales compensation plans while also re-evaluating their sales compensation solution ecosystem to use that as a competitive advantage.
What is your experience with challenges related to Sales Compensation Management? How are you dealing with your IC plans during a pandemic? Feel free to reach out to us at firstname.lastname@example.org / email@example.com in case you have any questions or to talk about your current challenges and bounce off any ideas with no strings attached.