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Andy Kach
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Brian Chapman
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Spurring Growth Through Incentives

Posted by Tobi Laczkowski on August 27, 2015



Key_finding_Infographic_newHistorically, the medtech world has been dominated by those who advance the science and technology embedded in the therapies. But there is another important differentiator: the strength of the sales force. Successful companies have discovered that the sales force can be as much or more of a factor in the success of a product than the product itself. Furthermore, the structure of the incentives provided to the sales force can be an important component of attracting, motivating and retaining the right talent.

The 2015 Incentive Practices Research study for the medical products and services industry, conducted recently by ZS, revealed that many medtech companies have figured this out, and are turning up the heat on their incentive schemes. The study revealed that a significant number of companies are increasing incentive budgets, more generously rewarding top performers and setting more aggressive quotas to stimulate performance.

Why Now?

What’s driving this shift, and do salespeople merit a rethinking of incentives? First of all, business is good. Surveyed companies reported significant growth in 2014, with a median revenue increase of around 7.5% from the previous year. As the conservatism and caution of previous years recede, companies are using incentive plans to ride and even accelerate this growth trend.

The survey highlights their logic. Its results indicate that, in order to retain excellent performers and maintain their commitment, companies plan to pay the top 10% an average multiple of 2.3 times the target incentive this year, an increase from 1.9 times in the previous year. A quarter of companies now pay as much as three times the target incentive to these top performers.

But just as companies need to think beyond great technology, they also need to focus some effort beyond the top performers. Companies are increasingly rewarding managers for the performance of direct reports, insisting that less stellar but nevertheless invaluable sales team members must be well looked after as well. How else can today’s average performer be nurtured into tomorrow’s star?

Time to Take the Upper Hand

What’s the takeaway? Be bold. Combining strong technology and strong incentives, forward-thinking companies can now grab competitive advantage.

As companies enter a more favorable business environment, setting more aggressive quotas and eliminating caps can introduce the necessary stimulus to boost performance, and reduce the risk of valued salespeople defecting to competitors.

Our study also indicates that companies are increasingly using metrics of potential to increase the precision of the quotas themselves. This, in turn, leads to higher confidence levels and higher leverage in the incentive compensation plans. Quota refinement, based on local field knowledge, is a technique employed to provide even further reassurance.

Companies slow to follow suit are at serious risk of falling behind the competition. The more naive a company’s incentive scheme, the more at risk it is of losing key people, with remaining employees left to wonder why they’re not being offered the same incentives as peers in rival companies.

See the executive summary and a related infographic for more detail.

Topics: incentives, sales compensation, Incentive compensation, compensation, medical products and services, medtech, Tobi Laczkowski, incentive practices research, IPR

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AUTHORS
Brian_Chapman_thumbnail
Brian Chapman
Principal,
ZS Associates
Tobi_Laczkowski_thumbnail
Tobi Laczkowski
Principal,
ZS Associates
Will_Randall_thumbnail
Will Randall
Manager,
ZS Associates
Matt-Scheitlin-London_thumbnail
Matt Scheitlin
Associate Principal,
ZS Associates
Andy-kach_thumbnail
Andy Kach
Associate Principal,
ZS Associates
Bhargav_Mantha_thumbnail
Bhargav Mantha
Associate Principal,
ZS Associates
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