The Worst and Most Common Incentive Compensation Plan Designs - #2
#2 - The Intertwined Kickers
Throughout The Marketing Advantage’s (TMA) 35 years of developing, evaluating, and innovating sales incentive compensation plans for pharmaceutical, biotech, and medical device companies, TMA has encountered many poorly designed compensation plans. Here we will discuss one of four plan designs that fail to motivate the sales force and ultimately lead to declined sales—The Intertwined Kickers.
Intertwined Kickers
Intertwined Kickers are sales compensation plans with multiple components and complex conditions. For example, one might stipulate that if the attainment for Product A exceeds 100% and there are at least 35 New to Brands, the payout for Product A is multiplied by 1.05. Additionally, if the combined sales of Product A and Product B exceed 3,000 TRx, an extra $300 is earned—unless more than 60% of the total prescriptions (TRx) are for Product B.
These intertwined conditions can create a web of confusion, making it difficult for sales teams to understand what exactly needs to be achieved to earn incentives. The complexity not only adds administrative burden but often leads to frustration and disengagement among sales reps, undermining the plan’s effectiveness to drive sales.
A client of ours initially had three products in their sales compensation plan with nine intertwined components. Needless to say, the sales reps had no idea how an additional 10% of Product A’s sales would impact their overall compensation. When a rep cannot answer this simple question, it indicates that the plan is too complex to effectively motivate them, leaving reps disengaged rather than driving performance. TMA’s changes to the plan ultimately resulted in increased sales.
Conclusion
The complexity of Intertwined Kickers often leads to confusion and disengagement among sales reps, defeating the purpose of a motivational compensation plan. Simplifying these plans is crucial to ensure clarity and drive performance effectively.
