Planning a Successful Sales Compensation Program

Medical device manufacturers depend on high-functioning sales and revenue departments. The sellers at the heart of the sales team must understand the company’s objectives and expectations. Forming a strong sales compensation plan for each seller role unites medical device sellers and company leadership. Companies must craft detailed sales compensation plans and review the outcomes those plans produce.

Core Aspects of a Sales Compensation Plan

A sales compensation plan is a comprehensive description of a role’s payment structure. The description includes the seller’s base salary, commissions and bonuses they may earn as well as sales incentives the organization offers.

However, a sales compensation plan’s scope extends beyond basic payment information to encompass the following.

Role Expectations 

Sales compensation plans describe expectations and procedures related to the seller’s compensation. Some core elements of a sales compensation plan include the seller’s duties and responsibilities, the processes they will execute, key performance indicators (KPIs) that define success and sales metrics the organization expects the seller to meet.

Seller Qualifications 

Sales compensation plans also include information that helps fill seller roles with the best talent. Businesses fill sales compensation plans with information that defines the qualities and qualifications that a competitive candidate for the role would possess. The human resource department (HR) can reference the compensation plan during candidate recruitment and evaluation.

Role-Specific Plans

A sales compensation plan is part of a larger sales compensation program. The program encompasses the plans for each specific role. It also defines standards and practices for sales compensation plan management, governance and administration.

A compensation program should include specialized plans for each position. Sales organizations curate plans for each role and will adjust them according to seller attributes such as experience level, sales cycle length and the sales channels the seller will utilize.

Molding the Sales Compensation Plan to MedTech Roles

Sales compensation plans for medical device sales roles must balance the core elements of typical sales compensation plans with the unique factors that apply to the industry. The plan will accommodate the expectations that the seller and company hold for each other.

A MedTech sales compensation plan must feature a specialized approach to elements such as:

• Salary, commission and benefits
• Gross margin, sales volumes and quotas
• Sales incentives and incentive distribution policies

The patients’ needs also factor into sales compensation planning for medical device sales. Beyond sales quotas and revenue, a person in need of medical care lies at the heart of the sales compensation plan. A sufficient balance of business and seller considerations streamlines the delivery of lifesaving medical equipment. Meeting the sales quota ensures an ample supply of valuable equipment to the customers treating their patients. Clarifying compensation and expectations drives seller motivation and performance.

MedTech Sales Compensation Plan Reviews

Retaining top sales personnel is an ongoing process. Regular sales compensation reviews are critical to a MedTech company’s sales productivity and continuity.

A sales compensation plan may fall behind when market dynamics shift and business or sales strategies change. Regular reviews help sales organizations adapt to common scenarios.

MedTech sales organizations should assess their sales compensation plans to answer common questions:

• Is your current sales compensation plan working?
• How are you measuring its success?

When to Audit a Sales Compensation Plan

MedTech sellers should mobilize sales compensation plan audits in response to changes that impact sales processes or budgets.

For instance, launching a new imaging device would change the organization’s revenue potential and sales processes. Updating the sales compensation plan would ensure sellers comprehend their quotas, performance metrics and incentives.

Sellers may also adjust sales compensation plans as buyer expectations evolve. A buyer could increase their demand for a specific type of medical device from one year to the next. The sales compensation plan would adapt to ensure sellers accommodate the rise in demand.

A proactive approach to sales compensation plan evaluations allows companies to adjust smoothly. Most companies analyze their sales compensation plans every year to stay ahead of the market. Medical device companies should schedule sales compensation plan audits in the fall to prepare for the new fiscal year.

Outside of annual reviews, companies may notice several common signs indicating the need to assess the current plan:

• Seller performance wanes
• Sellers express performance indicator uncertainty
• Open sales roles remain vacant
• Top sellers leave the organization
• Sales income falls out of alignment with the cost of goods sold (COGS)

How to Review a Sales Compensation Plan in the MedTech Industry

Medical device companies should conduct a comprehensive review of their sales compensation programs every year using this checklist:

1. Establish a sales compensation review team. Assemble a team of personnel representing sales management, regional sales management, finance, product division and human resources (HR) to review existing plans.
2. Assess current practices. Gather external survey data, senior management expectations, participant perspectives and pay/performance analyses to conduct qualitative and quantitative assessments.
3. Confirm next year’s sales goals. Reference qualitative and quantitative data to produce and fully document the sales goals for the next fiscal year.
4. Reconstruct incentive plans by job. Using a design worksheet, outline the organization’s preferred incentive plans, note the gap between current and ideal plans, and then implement adjustments that are feasible for the next fiscal year.
5. Cost model new plans. Analyze the cost of any new pay programs by modeling the sales compensation program down to the individual level.
6. Confirm administration. Ensure the company’s IT solutions update to automate incentive pay calculations with the adjusted figures.
7. Hone the communication process. Develop a full communication program to announce alterations to new and existing sales compensation plans. The communication policy should encompass manager training, participant presentations and coaching tools for supervisors.

Alexander Group’s Capabilities for Informing MedTech Sales Compensation

Alexander Group conducts research and analysis that establishes a solid base for medical device sales compensation plans. Our capabilities will advance your business’s mission of driving revenue and delivering essential medical equipment to healthcare providers. We strengthen sales departments by developing new sales compensation plans, auditing individual plans and honing the greater sales compensation program. With our research and guidance, your sales compensation plans will align with the market and your revenue objectives.

Sales Compensation Planning Resources for Medical Device Sales

To learn more about sales compensation and implementation checklists, read Compensating the Sales Force: A Practical Guide to Designing Winning Sales Reward Programs by David Cichelli.

Visit the Alexander Group’s Medical Device practice page to learn more about best practices in the industry. If you have questions, please contact one of our practice leaders.