Sales Performance Management

The Future of Pharmaceutical Compensation Update

2010-10-05T22:21:00.000-07:00

I saw this article today, CIAs pressure pharma to rethink sales rep compensation and thought it was interesting enough to share. A few weeks back we discussed in detail the future of Pharmaceutical Sales Compensation and neglected to take into consideration Government oversight, which appears to be a major driving force in Pharma comp. For those not familiar a CIA is a "Corporate Integrity Agreement" between the Department of Justice and a Corporation, it generally comes with a substantial fine.

In this case Novartis is going to have to cough up $422M dollars. It appears that Novartis was compensating their reps to push sales of products that are reimbursed under government programs. The compensation related language in the CIA includes, "ensure that financial incentives do not inappropriately motivate [sales reps] to engage in the improper promotion, sales, and marketing of products reimbursed by government healthcare plans."

Is Novartis the first company to come under scrutiny from the DOJ for their compensation practices? No, the article also talks about GlaxoSmithKline who signed a five-year CIA in 2003 (and paid $88 million) Over the summer, the company announced that it would end bonus structures for sales reps based on sales targets, and instead focus on qualitative measures, like customer evaluations. We discussed GSK's new compensation policies specifically in an earlier blog post the future of pharmaceutical sales compensation

In September it was Forrest Pharmaceuticals - $313M fine, CIA language includes, "Policies must be designed to ensure that financial incentives do not inappropriately motivate such individuals to engage in improper promotion, sales, and marketing of Forest’s products.

Also this year; Allergan - $600M fine, CIA language includes compensation (including through salaries, bonuses, and contests) for Relevant Covered Persons who are sales representatives. These Policies and Procedures shall: 1) be designed to ensure that financial incentives do not inappropriately motivate such individuals to engage in improper promotion, sales, and marketing of Allergan’s Government Reimbursed Products; and 2) include mechanisms, where appropriate, to exclude from incentive compensation sales that may indicate the off-label promotion of Allergan Government Reimbursed Products;

Government regulations impact the way a number of industries have to think about, design, pay, and track sales compensation. The Future of Pharmaceutical compensation will certainly be one of those industries The next wave of this that will be taking place is in the health insurance industry as the impact of health care reform will start to ripple through starting Jan 1, 2011. I hope to discuss this in more detail in a future post.

Thanks for reading. Comments and questions are always appreciated.

SPM News Weekly Wrap Up

2010-09-18T22:32:00.000-07:00

The lunch and learn in Dallas at the Capital Grille yesterday went well, some good conversation, good food, and very interesting themes and questions from the attendees. Hope to see you at the next one.

Next week I’m really looking forward to speaking at the World at Work Spotlight on Sale Compensation conference. I’ll be co-presenting with Jennifer Kerr from Ecolab a very talented manager with a world of experience in how to leverage technology and reporting to drive sales performance. Our presentation is titled ‘Sales Performance Management: Market Review and Vendor Selection’ and will be on Wednesday the 22^nd from 8:45 – 10:00. More information on the workshop can be found here. For anyone attending the conference, I guarantee it will be worth your time to stop and listen. For those of you not attending the conference, I’m not going to share the whole presentation here, but there a few exciting highlights that I will be posting the weeks to come.

Does Technology matter when it comes to Sales Performance Management? You better believe it! I finally had the chance to sit down and read the excellent research titled ‘Sales Performance management: Getting Everyone on the Same Page’ from Peter Ostrow, Research Director, Sales Effectiveness at Aberdeen Group. Performance Dashboards, Automated Solutions to forecast rep performance against goals / expected compensation, and CRM or SFA that includes a compensation module are all things that best in class organizations share more so than companies defined as average or laggards. The full research report can be found here.

Well that’s it for this week’s wrap up - For the most current up to date Sales Performance Management news please follow me at https://twitter.com/SPMconsulting

SPM News Weekly Wrap Up Sept 11th

2010-09-11T11:48:00.000-07:00

If you are in Dallas next Friday and would like to hear more about Sales Performance Management I will be speaking at a free luncheon and would love to see you there. The main topic will be how SPM can help strategically align your compensation plans, drive the right behaviors, and increase selling time. More details and RSVP information can be found here: SPM - Lunch. Network. Learn

This week I got down and dirty with 5 of the leading applications in the space. It had been a while since I had actually touched the products, so I went and logged into to a number of different environments and built some rules, built some hierarchies, created a workflow, made some manual adjustments and modeled some scenarios of potential new plan changes. There is something to be said for doing vs. seeing and the end results was pages and pages of notes and some new insights into the latest product functionality and ease of use. Good stuff.

I saw a quote this week from Donal Daly the CEO of The TAS group and founder of the Sales 2.0 Network, "The impact on a customer of a bad buying decision is always greater than the impact on a sales person of a lost deal." I agree 100% with Donal and I find that I really enjoy the role of customer advocate when helping with a vendor selection process. The corporate and personal risk to my clients of potentially purchasing the wrong technology solution to meet their problems is something that I take very seriously. As I see more and more companies and individuals market their Vendor Selection services in the Sales Performance Management space I hope that they share the same viewpoint and don't just view it as another project. Thinking about this here are three attributes to look for in a company that I would trust to help you match the right solution with your business needs and aspirations.

1. Experience - The consulting firm should have experience in running Vendor Selection projects, both from a time perspective and from a quantity perspective. If the consulting firm hasn't led 10-15 of these projects I would take that as a huge red flag. It takes time to develop the skill sets, knowledge and tools necessary to lead these projects. Something else to look for business and technical background. The consulting firm should have the institutional knowledge to address both IT and the businesses concerns when looking at new technology.

2. Methodology - At every step in the process the consulting firm should be able to bring to the table it's own methodology, best practices, templates and worksheets.

3. Knowledge - What pool of resources will the consulting firm pull their knowledge of the different technologies from? Hopefully it includes a majority of the following - relationships with the vendors, implementation expertise on the products, recent deep dive demonstrations of the potential technology, research analysts, and production customers.

That's it for this week, I hope everyone has a great weekend.

For the most current up to date Sales Performance Management news please follow me at https://twitter.com/SPMconsulting

SPM News Weekly Wrap Up

2010-09-03T14:38:00.000-07:00

In the absence of a lot of industry news, this week has flown by for me personally. The first part of the week was spent finishing up and submitting my presentation for the upcoming WorldatWork Spotlight on Sales Compensation event. I’ll be speaking on the Sales Performance Management Market and on Vendor selection. With such a dynamic and rapidly evolving space I wanted to present a different way of thinking about the technology solutions available and I think I succeeded. For those of you attending the conference I hope you can find the time to stop by and participate in the discussion. For those of you that aren’t able to attend I’ll share the most well received ideas shortly afterwards.

The rest of the week was spent speaking with clients (and perspective clients). This week a common theme I heard was cost - How to drive cost out of the administration of compensation? To me the answer is not to cut costs per se but to relentlessly drive economic value to the organization by better utilization of human capital, technology, and the optimization and where applicable the automation of processes. Today I want to quickly touch on the human capital side of the equation.

To achieve cost-cutting measures it rarely makes sense to arbitrarily cut heads in the sales compensation administration department. The focus should be on changing the department from a cost-center to a center of excellence that adds value back to the organization. Which leads to the question – Can compensation administration organizations be differentiated? Is there a vast difference between the average and market leading organizations? Our experience says yes - It is just not enough to produce accurate compensation payments in a timely manner and provide some reporting to the field. This level of performance is not even average and unfortunately I still see organizations that cannot execute on these table stake activities (note – even the poorest performers shouldn’t lose hope!).

Now envision a market-leading organization where the self sufficient compensation team delivers excellence in the above activities and proactively evaluates effectiveness of the compensation program and delivers improvements. An organization where a whole host of reports, dashboards, and analytics are made available for all compensation stakeholders – Finance, Field Sales, Sales Management, and Executives. An organization where when sales would like to make a change to the compensation program or introduce a short-term incentive the questions are not, how long will it take to code and how much will it cost to do so?, the questions are more along the lines of, “How would you like to measure the effectiveness of the change?” How about a compensation administration team that can support the quota setting and territory planning activities as well as administer disputes but more importantly systematically drive errors out of the process to prevent disputes from happening in the first place? These are just a few example of what high-functioning teams are out there doing today.

To move from the organization of ineffectiveness and inefficiency where the question is how many heads to cut to an organization of the future that adds value takes significant vision, leadership, and persistency. To achieve this transformation take heart in knowing that the roadmap to success already exists and the payoff in terms ROI is there for the taking.

For those in the states, hope you have a happy and safe labor day weekend.

For the most current up to date Sales Performance Management news please follow me at https://twitter.com/SPMconsulting

SPM news weekly wrap up

2010-08-27T11:20:00.000-07:00

Two stories of note this week -

First –

Xactly www.xactlycorp.com announced that their flagship product Incent, a SaaS Sales Performance Management solution, achieved Oracle validated integration With Oracle CRM On-Demand. (Read more here) This is the 2^nd year in a row that Xactly has recognized this achievement. Xactly also is very tightly integrated with SalesForce.com.

Data integration on SPM projects are almost always a potential flash point and rarely go without a hitch. Drawing a line in the sand between IT and Implementation Vendor responsibility is something that should be addressed very early in the Sales Proposal cycle, not after the project has been kicked off.

Different vendors have went done various paths to provide integration flexibility, functionality and risk mitigation. Some of the solutions have fixed schemas to map to while others allow “on the fly” configuration of target tables within the system. Some vendors have partnered up with best-in-class ETL (extract, transform, and load) solutions and others have built the tools into their core systems.

When companies like Xactly go the extra mile to pre-build the connections to source systems it helps lower the costs, lowers the time to deploy, and lowers the risk associated with integration.

Second –

Callidus Software Inc. www.callidussoftware.com announced Lenovo, one of the world's leading personal computer manufacturers, has successfully implemented Callidus Software's Quota Management solution to help manage sales goals and coverage for 1,900 members of its sales force world-wide. (Read more here) Quota Management software to me is a somewhat underutilized enabling technology that I think many companies can take advantage of.

In my experience leading Sales Organizations successfully approach the quota setting process by –

· Having a clearly articulated process

· Model Quotas using historical data, market input, field sales inputs and take in consideration the competition

· Setting Attainable Quotas

· Effectively communicating Quotas in a timely manner

What does the recent research show? In 2009, on average, sales representatives achieved only 52% of quota, sales departments achieved only 79% of plan and sadly most companies do not plan to invest in more sales training or technology in 2010. When will companies realize that hope is not a strategy! In addition most companies plan to raise sales quotas in 2010 by 10% or higher. (Source: CSO Insight’s 16^th annual, Sales Effectiveness Research Project, 3,000 participants.)

For the most current up to date Sales Performance Management news please follow me at https://twitter.com/SPMconsulting

SPM news weekly wrap up

2010-08-20T16:52:00.000-07:00

This week from a news perspective was very positive for Callidus Software. They had two press releases, both in the financial services industry, regarding wins for their Monaco On-Demand platform. Why is this important? Over the past few years Callidus Software has dramatically shifted their corporate strategy from a traditional software model of deriving revenue from selling on premise software licenses, the associated annual maintenance, and implementation services to today's reoccurring revenue model built around the On-Demand platform and on going services. These two deals are continued affirmation of the commitment to and success of the new strategy. I think it's also an important indicator of the continued growth and acceptance of SaaS / Cloud applications in the SPM space.

For the most current up to date Sales Performance Management news please follow me at https://twitter.com/SPMconsulting

SPM Application Scalability

2010-08-19T17:02:00.000-07:00

A very common line of questioning that I hear from clients is around scalability and their concerns with the different applications being able to handle a particular size of sales force or the volume of business events that they would like to pay on.

Brief Aside – A business event can be Billing, Shipping, Invoicing, Cash, Booking, Clearing Credit or anything else that you would like to trigger a compensation event.

The quick answer on SPM scalability is if you have less than 10 Sales Representatives or more than 100,000 or would like to pay on a handful of business events or tens of millions of business events per pay period there is one or more third party applications that can handle this. Sounds great in principle but unfortunately stopping here would be doing a great disservice to clients as the short answer never tells the whole story.

To really answer these Scalability questions we need to do some further investigation into the client's needs, performance expectations and vision of the enabling technology. The first thing I like to find out is the performance expectations. What is an acceptable length of time to process commissions from data load to report generation? This provides a good baseline for the rest of the scalability answer, as needing things to run in 15 minutes is a lot different than being happy with an overnight process.

The next piece of the conversation is a multi-dimensional view of system usage that I call Intensity. The factors of intensity are the potential limiters or bottlenecks that will cause the various systems performance to degrade processing to an unacceptable cycle time or cause SLA's to not be met. A good analogy for Intensity is MPG for your car. The sticker may say 25 MPG for your new car but your actual experience turns out to be something much less. What causes the difference? Well the sticker MPG is based on something unrealistic like a strong tailwind, going downhill, smooth acceleration and with just the driver in the car. You want to drive in varying wind conditions, sometimes going uphill, with the A/C on high, half of the soccer team in back and rapidly accelerating into traffic to merge only to find yourself playing stop and go on the freeway - This is Intensity.

Some example factors of SPM application Intensity to consider include:

Number of Payees
Number of Compensable business events to be processed
The Ratio of single business events to number of people who get paid (think Direct Sales Rep, Manager, Director, VP, Sales Engineer, Channel Sales Manager, etc.)
Complexity of Configuration
Number of Reports
Number of Concurrent Users
Number of Cycles per pay period

The applications in the Sales Performance Management space have different ways of scaling to handle load such as flexible application grid servers that grow by adding CPU's and the associated memory, pushing the work back to the database server, or leveraging a distributed workload in the Cloud but in general the top plays in the space are all scalable within reason but with associated cost. At this point in time we can diverge into a Cost/ Benefit or ROI discussion, take a rough estimate at costs based on the expectation and vision or perhaps the client has a budget number in mind to spend on environments or hosting and we can use that rough number as a baseline to continue.

At this point we are ready to match up the client requirements around scalability to the different applications in the space and give an objective answer to the question of what systems can meet or exceed these requirements.

Before wrapping up I wanted to quickly mention Performance Tuning as this is an issue I see frequently with customers that have already deployed an application and are now wondering how to make it faster. For implementations that we weren't originally involved with, we rarely see an aligned administration organization, proper training, optimized processes or expertly tuned configuration. I'll save that for another post but the short story (see above) is generally there are ways to improve system performance.

Let me know if you have any questions about matching up your organizations scalability requirements with the different vendors in the space.

The Future of Pharmaceutical Incentive Compensation?

2010-08-11T11:05:00.000-07:00

In the Article titled, “GlaxoSmithKline to drop sales targets as basis for incentive pay” it states that “GlaxoSmithKline P.L.C. just announced that it will no longer base bonuses of many of its 5,500-member sales staff on their individual sales targets. So how will the drug company, which employs thousands in the region, evaluate the performance of its sales reps?” The company is planning on basing sales representative pay on, “customer feedback, in part, will determine bonuses as well as a sales rep’s “adherence to company values of transparency, integrity, respect and patient-focus.”

While I was reading the article my first thought was that it seems like a pretty big shift in sales compensation strategy and by the end I had a few questions that the article didn’t address that I wanted answered – Is this a prevailing trend, could the idea of softer measures be applied to other industries and is it even feasible as a way to motivate and change behavior?

To get some answers to my questions I turned to my colleague Scott Barton. Scott is a managing principal of NewSigma, a professional services firm dedicated to helping companies align their sales compensation plans with transformative sales strategies.

Justin Lane (JL): Is the change referenced cyclical or part of an overall transformation?

Scott Barton (SB): “Large pharmaceutical companies like GSK are transforming their sales organizations in response to a number of market trends, including consolidation of drug companies and buying groups, increased regulation and a significant increase in marketing spend to stimulate more pull-through, initiated by the patient or physician, in the sales channel.”

JL: Is this transformation unique? Has it played out in other industries?

SB: “Certainly. We’ve seen this transformation in a lot of technology sectors, where an emphasis on marketing, product development and alternative sales channels decreased the prominence of the direct sales representative.”

JL: So the article points out this shift will have implications for how the company pays its salespeople. Do you agree with its premise?

SB: “I would expect management to put less emphasis on variable pay and recognition programs, more on relationship sales skills and base salary, which compensates for skill.”

“However, the company is short sided to initiate this shift through a significant change to its sales compensation program. While the plan should make a statement about what behaviors management expects from its salespeople, compensation is not a surrogate for sales strategy and a performance management system.”

“To suggest the company will offer less variable pay for high performers while it tries to figure out how to measure performance is certain to alienate the people who can help deliver on the company’s new strategy.”

JL: Maybe the company needs a different type of salesperson?

SB: “Could be. In some cases, salespeople who help fledgling startups become multi-billion dollar behemoths are not well suited for a relatively mature, multi-channel sales strategy. These people ride waves of product innovation and high growth. Once that wave crests, they’re paddling out for the next one.”

Note these wave-riding sharks are the exception, not the norm. Most sales professionals adapt to maturing markets and more-complex sales models.

You mean they willingly forgo lucrative upside pay opportunity?

SB: “Not without some resistance. I didn’t willingly give up my sports car to make room for a minivan. The minivan was part of an overall transformation in my personal life. And the sports car presented a level of risk I didn’t think was appropriate for this new role in my life. It’s all about tradeoffs.”

JL: Trading off a set of wheels is different from a reduction in pay, isn’t it?

SB: “My point is salespeople must understand the big picture and the playbook to determine if the change is right for them. This includes how management measures success and defines successful outcomes. Salespeople, unlike many other functional roles, have a strong financial orientation and need a strong line of sight between their contributions and their business unit’s financial goals.”

Can a measure like customer satisfaction adequately substitute a salesperson’s financial goal?

SB: “Physician satisfaction with a sales rep, referenced in the article as potential measure of sales success, does not necessarily secure buyer loyalty, market share and profitable growth for the drug company. The problem with these types of qualitative measures is they tend to produce sales rep pay amounts that aren’t aligned with the company’s financial performance.”

JL: So how can a company like GSK help ensure a successful transformation?

SB: “Management has to engage its salespeople in the strategy and motivate them to help drive that strategy forward. Starting the discussion with compensation seems intuitive but is too emotional a topic to motivate a thoughtful response.”

“Success outcomes I’ve observed follow a basic storyline: what’s changing; why is it good for the sales rep; what does success look like and what does each rep need to do to be successful? If the story’s first chapter is about the company’s intent to reduce compensation, management should not expect to engage the sales force. The result is distracted salespeople, loss of sales talent and reduced productivity.”

Thanks Scott! As usual great insights from Mr. Barton! If you would like to read more of his musings and expert knowledge about sales compensation please visit the very articulate blog www.salescompinsights.com His contact information and some information about his company are below:

Scott Barton

sbarton@newsigma.com

www.newsigma.com

NewSigma, LLC specializes in sales compensation planning and operations. NewSigma consultants work with companies to design and implement solutions to increase sales productivity and reduce operational expense.

Who Should Lead SPM Projects?

2010-08-10T13:00:00.000-07:00

Today there is an article on the CIO website titled, Who Should Lead BPM Projects? and it discusses if these types of project should be led from Finance or IT. Great question and very applicable to Sales Performance Management projects as well.

SPM implementations are very complex projects that involve stakeholders from multiple areas typically IT, Sales, Finance, and HR. Early in the project these stakeholders need to sit down and come to a common vision of how the technology will be used to support the compensation management program along will help define how the leadership of the project changes over time. Other key considerations in determining leadership include - Does the organization have a dedicated PMO, testing, or training team? Will the technology be deployed on-premise or at a vendor site (SaaS, Cloud, Hosted, On-Demand).

A common example we see following a traditional waterfall methodology will have IT leading the project for the Requirements, Design and Build Phase and part of the way through Testing. Once system testing is over, the business should generally assume leadership of the project to run User Acceptance Testing and deployment to the administration team and the field. For Agile methodologies we see the leadership shift more strongly to IT throughout the course of the project.

From a pure Project Management perspective IT generally has the experience in running projects and usually IT will have to tackle the most technically difficult part of the project - the upstream data. If the project is going to be deployed on-premise then many IT project tasks will be on the critical path - Hardware, software installation, logical and physical DB, security, etc. If the project is being deployed in a SaaS environment then IT still has to be responsible as the Data Provider but it's very feasible for this type of project to be led from the business side.

In summary, for Sales Performance Management projects, I don't believe this to be a simple "A or B" answer but leadership for a SPM project should be defined by each organization to match their strategic goals with resources (both internal and external) and capabilities.

What types of leadership structures have others seen be successful for a SPM project?

CRM Magazine Announces Winners of 2010 CRM Market Awards

2010-08-09T13:49:00.000-07:00

CRM Magazine Announces Winners of 2010 CRM Market Awards
Incentive Management — Winner: Xactly
Leaders: Callidus Software, Merced Systems, Synygy, Varicent Software
One to Watch: Softscape

Congratulations go out to Chris Cabrera and his team at Xactly Software on winning their second consecutive CRM Market Award for Incentive Management. The runner-ups in this category (with a few notable exceptions) are who I call, "the usual suspects". These are the some of the technology providers that we see quite often in competitive deals in the Sales Performance Management (SPM) space. The wildcard or the one that is most out of place is Softscape. Now I have to admit that I hadn't previously heard of Softscape, but after visiting their website to learn more about what they do I understand why. Softscape isn't a pure play SPM solution but a People Management solution. Specific SPM solutions that they do offer are -

Incentive compensation administration
Long term incentives
Salary planning
Goals management capability

If you are looking for a People Management platform or these SPM capabilities match up well with your prioritized business requirements around potential new technology Softscape is probably worth a look. One additional note - Softscape's public (contact information required) white paper library on People Management is very extensive and contain a wealth of knowledge.

Links to companies listed above:

Xactly
Callidus Software
Merced Systems
Synygy
Varicent
Softscape

Varicent is the Fasting Growing Company in Canada

2010-08-04T20:26:00.000-07:00

Varicent, a Sales Performance Management company, is the fastest growing company in Canada in Profit magazines Top 100 list. Varicent's SPM offering is a very flexible and complete Sales Performance Management solution that includes Incentive Compensation Management, Territory Management, Quota Planning and Roster Management. Ease of use, flexibility and rapid ability for users to become proficient in using the technology are some of the reasons they continue to win their fair share of competitive deals. For more details around their solution visit the Varicent website

My Opinion - From the Vendor Selection projects that I have been involved in the last few years the Varicent SPM offering is first tier and should be included on your short list of vendors to consider for a Sales Performance Management solution.

Bullish about the Sales Performance Management Space

2010-08-04T15:11:00.000-07:00

Two items so far this week are of significant interest and indicators of positive momentum in the SPM space -

1. Xactly receiving $12M in funding This is a fairly significant funding number in the software space. In the last month only a handful of deals were larger that this. The statement, " In the first half of 2010, Xactly increased worldwide recognized revenues by more than 50 percent over the first half of 2009. In 2009, Xactly also increased worldwide recognized revenues by more than 50 percent over 2008 and nearly tripled its number of customers and subscribers." indicates strong growth so far in 2010 and I see no signs of this abating.

2. Callidus 52 Week Stock High They released mixed earnings results last week with strong indications of quality (perhaps profitable) Q3 & Q4 ahead. The shift from traditional software licenses and on-premise implementations to leased software and On-Demand delivery and maintenance by the vendor has allowed Callidus to smooth out a once lumpy revenue stream and have more predictable numbers for the street. Continued focus on building the reoccurring revenue base (new customers and retaining current) and continuing to reign in expenses could prove to be a winning strategy. Time will tell. Callidus also announced a win for an unnamed client for their Monaco product.

So far in 2010 the SPM market space for both technology and services has been very strong.

Aspirations - 2 years down the road

2010-08-04T07:17:00.000-07:00

V.2 Launch. Still looking to write some original content but in the short term looking to add some color commentary to news in the space that I am tracking on the twitter account SPMconsulting - http://twitter.com/SPMconsulting

Blogging Aspirations

2008-03-14T21:22:00.001-07:00

Though I read a few blogs on a daily / weekly basis this is my first attempt at blogging and I hope anyone who happens to read it will bear with me as I learn the tricks of the trade. If anyone would like to be a contributor to the blog, please let me know. Some of the topics I would like to cover in the weeks to come are

· Consolidation in the SPM industry
· Vendor Selection Projects
· Top reasons for success and failure in SPM implementation Projects
· The importance of Business Process Re-Engineering
· The Sales Compensation Management Lifecycle
· How SAAS is changing the marketplace
· SPM hierarchy of needs
· Other Items that seem relevant