The Data You Need to Evaluate Your Lab Sales Compensation Plan. Sales Compensation in the Laboratory Industry: Incentives, Plans and Strategies

Transcription

1 The Data You Need to Evaluate Your Lab Sales Compensation Plan Sales Compensation in the Laboratory Industry: Incentives, Plans and Strategies

2 How does your compensation plan stack up? Find out with this new report Sales Compensation in the Laboratory Industry: Incentives, Plans and Strategies Accurate, publicly available data on sales compensation throughout the lab industry is hard to find. Sales Compensation in the Laboratory Industry: Incentives, Plans and Strategies can help. G2 Intelligence s in-depth examination of sales and field service representative salary levels, incentive compensation methods, and related benefits provides crucial facts and figures from both hospital lab outreach and independent anatomic and clinical pathology labs at every staff level from sales and account executives to director, VP and manager. The following summary provides some high-level findings. Detailed information can be found in the complete study. Laboratory sales compensation plans are often treated as legacies from better times and overlooked when administrators contemplate revenue improvement strategies. And while instituting a new or revised plan is not easy, laboratories must move beyond inertia and ensure that that their compensation plans are drivers that contribute to their success. Featuring data from two in-depth studies conducted by G2 Intelligence and Chi Solutions, the findings in Sales Compensation in the Laboratory Industry are invaluable for organizations refining or updating their compensation plans, and those who need to: Separate the selling of new accounts from servicing existing accounts Create sales specialists when the organization has previously operated with only generalist representatives Improve client retention and existing account sales growth Address sales personnel s lack of motivation for certain job elements Resolve high turnover of top performers and low turnover of poor performers Figure 1 Respondents by Revenue 34.7% 17.9% 12.6% 13.7% 11.6% 9.5% Under $5 $5 to $9 $10 to $49 $50 to $99 $100- $499 $500 or More Source: G2 Intelligence Survey Order your copy today! Visit or call xt. 2

3 Figure 2 Field Service Representative Revenue Sales Quota Worksheet Field Service Representative: John Doe (Small Territory) Month Billing Days Allocated Base Cash Receipts 1 (000) Upsell + New Sales 3 (000) Territory Cash = Receipts Quota (000) October 24.3 $56.8 $2.0 $58.8 November 20.7 $48.4 $4.0 $52.4 December $51.2 $6.0 $57.2 January 22.7 $53.0 $8.0 $61.0 February 21.3 $49.8 $10.0 $59.8 March 23.3 $54.4 $12.0 $66.4 April 23.3 $54.4 $14.0 $68.4 May 21.7 $50.7 $16.0 $66.7 June 23.3 $54.4 $18.0 $72.4 July $52.8 $20.0 $72.8 August $47.7 $22.0 $69.7 September $50.0 $24.0 $74.0 Total $623.6 $156.0 $ Previous three-month monthly average cash receipts are allocated by billing days with seasonal adjustment during December, July, August, and September, as an example. 2 These months are seasonally adjusted. 3 Based on $2,000 per month in cash receipts growth. Source: G2 Intelligence Key Market Trends Research shows that organizations are most likely to reassess compensation when sales growth falls below expectations. They may also decide to modify their strategies in response to increasing defection of their top salespeople to the competition, or sales personnel that appear to have grown comfortable with the income they currently earn. In addition, a manager may feel encouraged to reevaluate the laboratory s compensation plan when the incentive component is not sufficiently aligned with strategic initiatives, or when the plan ignores the profitability of new accounts sold. Sales Compensation in the Laboratory Industry: Incentives, Plans and Strategies details these and other influences driving the major initiatives and includes: Compensation Plan Design Decisions Incentive Caps and Goal Setting Characteristics of Salespeople Base salary levels, incentive types and benefits provided Comprehensive Chi Solutions and G2 Intelligence Survey Results Multi-User/Multi-Location Pricing? Contact Jonathan Wentworth-Ping at , or jping@g2intelligence.com

4 Sales Compensation in the Laboratory Industry: Incentives, Plans and Strategies is organized as follows: Introductory Overview Reassessing Your Compensation Plan featuring the reasons why laboratories reevaluate their compensation plans and strategies Compensation Plan Design Decisions with sections on Performance Measures and Performance-Payout Relationships Incentive Caps the use and rationale for incentive caps, with specific examples expressed in percentages of dollar amounts Goal Setting featuring methods, time tables, and a sample worksheet for proper quota/ goal setting Characteristics of Salespeople with an examination of salary- vs. incentive-driven personnel, and career changers entering the sales field from another part of the lab industry Chi Compensation Survey Results in-depth data on incentive types, salary levels, and benefits provided G2 Intelligence Survey Results respondent demographics, base salary by position, variable compensation by position, total compensation by position, performance against plan, and benefits provided Conclusions Order now to receive your copy for just $395 and your state s sales tax by visiting Or, to place your order by phone, please contact G2 Customer Service at ext. 2 or via customerservice@g2intelligence.com. If you wish to receive a pdf file of this report which can distributed to others within your organization or posted to an intranet for firm-wide use, pleasecontact our Licensing & Permissions director, Jonathan Wentworth-Ping at jping@g2intelligence.com or by phone at About G2 Intelligence Advancing the Business of Diagnostic Medicine G2 Intelligence provides timely, accurate and trusted analysis of industry and market trends, legal and regulatory developments, and technology and innovation that directly affect the operations, financial performance, and competitive position of diagnostic testing laboratories and related medical services providers. Formerly known as Washington G-2 Reports, the company has covered and reported on the diagnostic industry for over 30 years. G2 Intelligence delivers topical and analytical periodicals, proprietary research studies, and custom advisory services, and through live and virtual events, facilitates industry meetings and information exchanges. Our mission is to deliver relevant, meaningful and actionable findings on diagnostic industry markets, related regulatory change and lab operations. The organization strives to exceed client expectations and develop mutually beneficial relationships with industry leaders and influencers. G2 Intelligence is a division of Kennedy Information, LLC, a leading provider of professional market analysis. Information on other G2 Intelligence products and services can be found at About the Analyst James M. Root, MBA James M. Root, MBA Advisor and Senior Consultant for Chi Solutions, Inc., has extensive experience in general and marketing management for hospital and independent laboratories. Recently, as Senior Vice President for Park City Solutions responsible for its Laboratory Services Group, he served numerous hospital-based and independent laboratory clients. As co-founder of Chi Laboratory Systems, Inc., Mr. Root developed the organization into a staff of 50 focused on the needs of laboratories in all venues. Previously, he established and led Root Associates, Inc., growing this consulting and management services business on the principle that hospital and smaller independent laboratories can compete meaningfully in the marketplace. Before launching Root Associates, Mr. Root was Managing Director of MetPath (U.K.) Ltd., London, England, responsible for the startup of the firm. His earlier positions with MetPath included National Sales Manager and General Manager of the firm s eastern sales and service region, which comprised 210 employees at its largest.

5 Sales Compensation in the Laboratory Industry: Incentives, Plans and Strategies Table Of Contents CHAPTER 1: Introduction...7 CHAPTER 2: Reassessing Your Compensation Plan...9 CHAPTER 3: Compensation Plan Design Decisions...11 Performance Measures...11 Performance-Payout Relationships...11 CHAPTER 4: Incentive Caps...15 CHAPTER 5: Goal Setting...17 CHAPTER 6: Characteristics of Salespeople...19 CHAPTER 7: Chi Compensation Survey Results...21 Incentive Types...21 Sales Representatives...21 Sales Representative Salary Levels...32 Field Service Representatives...34 Field Service Representative Salary Levels...41 Benefits Provided CHAPTER 8: G2 Intelligence Survey Results...47 Respondent Demographics...47 Base Salary Level by Position...50 Variable Compensation by Position...52 Total Compensation by Position Performance Against Plan...55 Benefits Provided...55 CHAPTER 9: Conclusions...63 CHAPTER 10: About the Analyst...65 CHAPTER 11: About G2 Intelligence...67 Notice: No part of this publication may be reproduced, stored in a retrieval system or transmitted by any means, electronic or mechanical, without the prior written permission of Kennedy Information, LLC, a BNA business, Peterborough, NH, USA. iii

6 Sales Compensation in the Laboratory Industry: Incentives, Plans and Strategies Table of Figures Compensation Plan Design Decisions Performance-Payout Relationship Decisions Payout Curves for Two Different Sales Forces Payout Curve for Mixed Bonus and Commission Plan Maintenance Plus Growth Method of Quota Allocation Field Service Representative Revenue Sales Quota Worksheet Characteristics of Salespeople Salary vs. Incentives Percentage of Sales Representatives Identified as Customer-Focused or Sales-Centered.. 20 Incentive Type Caps on Incentive Income Amount for Incentive Income Cap Time Period for Payment of Bonus for Meeting Quota Extra Bonus Payment for Above Quota Performance Utilization of Special Contests Utilization of New Client Sales Quotas Monthly Net New Business Quota per Sales Representative Monthly New Account Business Achievement per Sales Representative Sales Plan A Sales Plan B Sales Plan C Sales Plan D Sales Plan E Sales Plan F Sales Representative Annual Salary Sales Representative Annual Salary and Salary Range Hospital Laboratory Outreach and Independent Full-Service Laboratories Sales Representative Annual Salary and Salary Range Anatomic Pathology and Esoteric Reference Laboratories Caps on Incentive Income Amount for Incentive Income Cap Time Period for Payment of Bonus for Meeting Quota Extra Bonus Payment for Achieving Above 100 Percent of Quota Utilization of Special Contest Utilization of Territory Revenue Quotas Service Plan A Service Plan B Service Plan C Field Service Representative Annual Salary Field Service Representative Annual Salary and Salary Range Hospital Laboratory Outreach and Independent Full-Service Laboratories Field Service Representative Annual Salary and Salary Range Anatomic Pathology and Esoteric Reference Laboratories Hospital Laboratory Outreach: Benefits Provided Independent AP/CP Laboratory: Benefits Provided Respondents by Revenue Respondents by Position Respondents by Age...48 iv Notice: No part of this publication may be reproduced, stored in a retrieval system or transmitted by any means, electronic or mechanical, without the prior written permission of Kennedy Information, LLC, a BNA business, Peterborough, NH, USA.

7 Sales Compensation in the Laboratory Industry: Incentives, Plans and Strategies What Type of Lab Do You Sell For?...49 Esoteric/Specialty Breakdown...49 Company s Expectations for Experienced Sales Representative, by Revenue Size...50 Base Compensation for 2010 and 2009 by Position...50 Base Compensation for 2010 and 2009 by Gender...51 Percentage of Gender in Each Position...51 Salary Comparison Both Studies...52 Are You on a Variable Compensation Plan? By Position...52 Variable Compensation...53 Estimated Total Median Compensation 2010, by Position...54 Estimated Total Average Compensation 2010, by Position Were You at Plan, Below Plan, or Above the Plan that Management Had Targeted for You? By Position...55 Do You Have a Company Car? By Position...55 Do You Have a Car Allowance? By Position...56 Do You Receive Any Other Transportation Benefits? By Position...56 Are You Provided with a Laptop or Computer? By Position...57 If Yes (to computer provided), Is Internet Service Included? By Position...57 Are You Provided With a Cell Phone? By Position...58 Is Your Cell Phone Service Paid for by the Company? By Position Does Your Company Offer a 401(k) Plan? By Position...59 Does the Company Participate in a Matching Plan for 401(k)? By Position...60 Do You Receive Stock Options? By Position...61 Other Benefits Provided...61 Notice: No part of this publication may be reproduced, stored in a retrieval system or transmitted by any means, electronic or mechanical, without the prior written permission of Kennedy Information, LLC, a BNA business, Peterborough, NH, USA. v