How Sales Incentive Compensation Plans Are Being Revised by MedTech Leaders

The cost of sales incentives for medical device companies can be substantial. To create the best medtech operation plan, companies often use a combination of data analysis and subjective factors to determine territories, set quotas, and weigh various factors. These tasks can be challenging even in stable conditions, but the COVID-19 pandemic has made them even more complex.

The net result for many companies has been a drop in sales due to postponed surgeries and medical procedures leading to decreased orders. Conversely, companies producing essential products like ventilators, PPE, and COVID-19 tests have seen a sudden surge in orders. Regardless, the typical medical technology company's plans for steady growth have been drastically altered, either by a substantial increase or decrease in sales.

There were virtual discussions on the impact of COVID-19 on sales force incentives and how the industry can respond. Over 30 participants, mainly commercial medtech operations and technology leaders responsible for setting and managing their company's incentive plans, shared their knowledge and expertise in this important area.

We hope that by sharing a synthesis of the conversations, you’ll be inspired to apply some of the thought leaders’ concepts when appropriate. Here’s how the industry executives and medtech consulting firms are managing through the pandemic and planning for the potential impact down the line:

• Countering Early Forecast Disruptions: The majority of organisations experienced minimal effects during Q1. However, the major disruptions took place in the latter half of the first quarter, by which time most companies had already determined their results. Companies that experienced drastic changes in demand during March are mitigating the impact by either eliminating March data or including it only for those who would benefit. The "better of two or three months" approach protects salespeople from unexpected swings they have no control over. This "better of" policy was a common theme in the discussions, with a focus on the idea that salespeople are still dedicated to delivering results.

For the lucky companies that saw significant gains in Q1, they are implementing a "Force majeure" clause, granting management discretion in the amount of sales force payouts. One participant shared their approach, "We aim to reward creative problem solving and exclude windfall orders not reflective of sales performance." Both these companies and those with decreased sales aim to share the impact (positive or negative) with the sales force, but not provide excessive windfall payments. This also sets a more appropriate baseline for 2021 quotas

• Anticipating Greater Disruptions: The participants of the discussion concurred that there will be a bigger impact on forecasts in the second quarter, hence policy changes will be more extensive. To limit the negative impact on the sales force, most companies have put in place payout floors. The specifics of the guarantees vary, with some aiming for total compensation to be between 70-90% of the target. Some companies have already announced that there will be no incentive payouts for Q2, while others are offering additional "hazard pay" for workers in hospitals. To adapt to the rapidly changing forecasts, leaders are moving to shorter measurement periods and focusing on performance by geography. They aim to estimate business potential, performance metrics, and payouts on a case-by-case basis while following the "better of" principle.

• Handling The Ever-Evolving Needs: The medtech analytics keep indicating the ever evolving market needs. To cater for these needs, leaders are actively keeping their field teams engaged. They’re using modern medtech marketing methods to facilitate the team and using the online sales. Along with that, they’re coming up with an innovative sales incentive plan and enhancing product training as well. Organizations are also reaching out to customers in order to find ways to provide value, even if that means just offering phone support. In the best-case scenario, customer relationships will become stronger during these challenging times.

Leaders are adapting their management strategies to accommodate the changing needs of their sales teams. So far, they have found that their teams have been willing to carry out their duties without the need for formal management objectives. However, as the future remains uncertain, some leaders are contemplating the use of management by objectives (MBOs) to better outline their expectations. One participant shared that they may limit the use of MBOs, but still expect their sales team to be ready for the reopening of business in the second half of the year.

The discussions had a positive vibe and leaders showed unity in their mission of delivering effective treatments to patients and promoting better overall health. The participants expressed their desire to stay connected and exchange ideas and experiences concerning IC and other related subjects