Client story: High performers always matter! - 02/24

Last year, we recommended that our client switch from a commission-based incentive compensation (IC) plan to a goal-based IC plan. In the commission plan, a fixed commission rate is paid per unit of drug sold. While this plan is good for launching a drug, it makes sense to move to a goal-based plan when there is 6-8 quarters of historical data. In the goal plan, every territory gets a different goal based on its historical performance.

However, the major issue with migrating to a goal plan is that high-performing territories will get the highest goal and a lesser payout than the commission plan. The client was not comfortable with this point.

We suggested an accelerated payout curve above 100% goal attainment, but it still had some issues since low-volume territories were getting more benefit than high-volume territories. For example, a territory with 100 goals and attaining 110 sales will have 110% attainment while a territory with 50 goals with 60 sales will have 120% attainment and more payout.

Suddenly on the call, we suggested a Goal + Commission payout. Above 100% goal attainment, commission payout was applicable. The benefit of commission payout was that both territories would get the same payout now. The client was happy with this suggestion since it encouraged high-performing territories to cross the goal and get higher payouts. From a comparison standpoint, high-volume territories won’t feel unfair in the case of the above example.

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