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Are incentive compensation schemes in the pharmaceutical industry becoming more “qualitative”?

Are incentive compensation schemes in the pharmaceutical industry becoming more “qualitative”?
March 23, 2021

Pharma industry

The introduction of so-called “qualitative” indicators in the incentive compensation schemes of promotion teams has been presented for some years now as a break with the practices of the pharmaceutical industry.

What are the challenges for the pharmaceutical industry in terms of “qualitative” incentives?

The desire to give evidence, in the eyes of supervisory authorities and public regulators, of a proactive approach to the proper use of pharmaceutical products has even led some industry players and commentators in the sector to present this development by pitting economic requirements against the need for quality.
There is no justification for this opposition:

  •  Economic results and quality indicators are not contradictory in any way
  • Many industries have long considered qualitative indicators to be predictive of economic performance

Since the function of incentive compensation is to encourage the beneficiaries of bonus schemes to gear their actions towards the company’s expected results, it is designed to encourage them to respect quality criteria in the same way as economic results, depending on the specific issues at stake for each company.


European Pharma Survey 2021  Receive the results of our 2020 study and participate in our next survey on  incentive compensation in the European pharmaceutical industry!  Register

What is the expected outcome regarding behavioural change?

The question, which is therefore posed to pharmaceutical companies for the variable share of the remuneration of these on-the-ground teams, is in fact to:

  • Define and complete the nature of the expected result, i.e. the company’s framework of requirements
  • Clarify what the performance of promotion teams should be
  • Create incentive compensation schemes capable of supporting management as it seeks to motivate teams

Defining a new performance requirement

The evolution of context, markets and regulatory frameworks helps broaden the definition of the requirement for business performance:

  • The achievement of economic results and the way they are achieved,
  • with performance defined as the ability to deliver an economic result in line with certain conditions
  • Performance success means delivering the company’s expected result(s): a bonus system must always encourage its beneficiary to achieve this result

However, recognition of the need to change the historical model should not dismiss the economic nature of a pharmaceutical company’s activity. Excessive zeal in this direction even undermines the credibility of the company’s demand for quality from its promotion teams.

The question therefore being asked, to varying degrees, by all pharmaceutical companies, in particular the major players who are greatly concerned about the image of their industry but also genuinely concerned about providing a quality service to their customers and patients, is:

->Should incentive compensation include a performance incentive for employees?

Quality: a requirement that needs to be defined

Three main areas are at the heart of the work carried out to supplement the economic requirement. They are currently being explored by the few companies that have sought to incorporate a qualitative dimension into their incentive compensation policy over the past decade:

The level of satisfaction of “customers” in the broadest sense (patients, health professionals and paying bodies etc.) with the benefit and service provided by the company’s offer

Compliance with the regulatory requirements specific to the pharmaceutical sector (the development of proper use and the application of the rules stipulated by all supervisory authorities etc.)

Changes in professional practices induced by changes in the environment and excellence in the implementation of key skills: knowledge, know-how and soft skills sometimes need to evolve rapidly in relation to current or past frames of reference.

Measuring performance: a need for data

Now that the framework of requirements has been redefined, even if partially, the question of measuring the results obtained, and therefore the nature of the data available, remains critical for healthcare companies used to a wealth of economic data:

  • Is the data external or internal?
  • What is the level of geographical clustering?
  • How often is the data measured?

In the areas of customer satisfaction or compliance, external data has gradually started to be offered to the industry. It has the following characteristics:

  • It is available in the short term and certainly in the long term at a broader level of clustering than economic data
  • It is inevitably measured less often quantitative data but consistent with the nature of the results being evaluated
  • To make it easier to use, it needs to be used to lead and manage the activity of promotion teams before even being incorporated into incentive compensation schemes.

However, the development of remote visits, linked to the COVID-19 crisis, is quickly accelerating the digitalisation of the sector. This will allow labs to measure a large number of indicators known to digital marketing services, including email opening rates, click-through rates, engagement and also customer satisfaction such as the Net Promoter Score (NPS). The best practices of sectors which are much more digitalised (such as Uber and Amazon) will allow the pharmaceutical industry to significantly review its practices in this area.

The fact that these kinds of indicators are becoming available will also encourage what organisations are calling for: collaboration between promotion teams, pharmaceutical teams and marketing teams. Indeed, what better goal to share between these teams than customer satisfaction?

In the area of business transformation and compliance, some companies have identified that they can and should produce their own data. They have acknowledged the need to:

  • Define a reference framework of the new professional practices expected in terms of knowledge, know-how, behaviours to be implemented and observance of good practices
  • Establish accurate indicators of achievement and implementation
  • Perform rigorous evaluation through management by means of a common methodology and practices.

Regardless of the direction taken by these companies to supplement their economic result requirements in terms of performance, the initial feedback has shown that these two requirements should be made inseparable from the beneficiaries:

  • Rapid change in this area, often sought by companies, requires that beneficiaries clearly identify that they do not have the opportunity to choose between economic results and performance, between the short term and the long term
  • The performance expected of a delegate or KAM is indeed the ability to deliver an economic result, relevant to their level, under conditions defined by the company. This dual and inseparable requirement allows companies to better protect themselves from a shift in the requirement for performance towards a mere obligation of means, which they have often had to face.

Current practices: an experimental approach based on new professions

In this general context, two main types of approach within the pharmaceutical industries can be observed:

  • A certain proportion – 50% according to our latest study (see infographics 2020) – of labs remain attached to incentive compensation schemes based exclusively on economic and/or competitive performance criteria.
    The companies that still use these schemes are distinguished less by their size or their growth context than by the nature of the markets they mainly target. They are less concerned with specialised or hospital markets and less involved in the development of new professions within the promotion sector, such as KAMs, institutional relations managers or regional doctors.
  • For around 25% of their premium scheme, a group of stakeholders have initiated approaches that are sometimes still experimental, driven by their own vision of the market and its environment but also with the desire to respond proactively to pressure from supervisory bodies, paying agencies and public opinion.

Moving towards a hybrid system?

In this second group of companies that have sought to complement their economic requirements with qualitative criteria, three main approaches can be distinguished:

  • The addition of a bonus based on management-by-objectives mechanisms, similar to those practised in sedentary functions, alongside quantitative schemes
  • Over the past few years, a larger number of companies have firstly sought to set up incentive schemes to manage the pre-launch or launch periods of their new specialist fields.
    Janssen (J&J), Ipsen, Sanofi, Celgene (BMS) and MSD, for example, have developed an excellence-based approach in the implementation of action plans for both traditional players such as pharmaceutical representatives and new roles, in particular KAMs. These approaches are essentially based on the construction of an internal framework of requirements and a rigorous methodology for evaluation by managers. External data is rarely used and continues to be discounted at national level when it is of benefit.
  • After a few years of experimenting with these launch scenarios, the stakeholders in the latter group are now trying to make widespread a quality-based component in the incentive compensation schemes of promotion teams.

The approach of the very few players which are beginning to take shape is based on the cross-referencing of external data on client satisfaction, disaggregated at least at regional level, with an internal evaluation framework that most often covers the fields of quality of implementation of the action plan in the areas of compliance, proper use and mastery of key skills etc.

The health crisis has fundamentally changed these practices, which were beginning to take shape:

  • For a number of labs, there is an urgent need return to economic requirements, as results were severely affected in 2020
  • The shift towards remote visits is becoming a survival mechanism, so needs to be supported
  • The digitalisation of the sector enables the monitoring of new indicators in the qualitative component of bonus schemes

Some conclusions from the various tests

In conclusion, it is worth highlighting a few methodological aspects that emerge from the experiences of companies that have worked on introducing a qualitative component into their incentive compensation schemes:

  • The performance period over which it is possible to robustly assess performance of a qualitative nature, however it is defined, is getting longer compared to the short performance cycles to which the pharmaceutical industry is used to
  • Giving top management greater responsibility in the assessment of the qualitative performance criteria selected is a key factor for success. This requires the implementation of a process and an internal operation to regulate this increased responsibility. As the learning and experience curve is unavoidable, it must be anticipated from the start of a project of this kind
  • Finally, the need for a thorough specification stage in terms of what the company really wants to achieve regarding quality is critical to the success and motivational effectiveness of these approaches.
    This final point is also the only way for a company to gain a competitive advantage by giving itself just the right means to align its incentive schemes with its own key challenges, while making sure it does not line up with its competitors’ practice without adding value.

European Pharma Survey 2021  Receive the results of our 2020 study and participate in our next survey on  incentive compensation in the European pharmaceutical industry!  Register


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Blog post author

Hervé de Riberolles

For more than ten years, I have been leading a number of projects for our customers to diagnose and re design the incentive compensation systems of their teams. The diversity of environments (sectors, countries, populations) that we face, my team and myself, requires a perpetual adaptation of our methods and our offer. The motivation of employees is, from my point of view, exciting, constantly evolving and at the crossroads of several areas of expertise. That's what makes it so interesting.

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