Pharmaceutical Hiring Slow to Respond to Market Changes

Feb 29, 2012
This article is part of a series called News & Trends.

Even after cutting their way through 2011, pharmaceutical companies expect to make more cuts this year to their salesforces as they struggle to adapt to the changing marketplace for their products.

A survey by consultants Hay Group found that half of Big Pharma, as the major drug companies are collectively called, believe themselves overstaffed, with many planning to eliminate from 6 to 15 percent of their sales staffs. The consulting group’s 2011 Annual Study of Sales Force Effectiveness says only 5 percent of the the other companies in the life sciences industry plan cuts.

“While smaller, more specialized companies appear to be aggressively hiring, Big Pharma is still fixated on continual cuts and retrenchment, as these organizations seek to find their way in an uncertain world,” says an article by Hay Group practice leaders and survey authors.

The article in Pharm Exec, which distills the findings in the proprietary report, says a  “dramatic structural change” is underway in the pharmaceutical marketplace, but bemoans the industry’s response. “While change is championed publicly,” the authors write, “recruiting still focuses almost exclusively on those with industry experience.”

Among the changes to the historical sales scenario identified in the article are the decrease in direct physician contact, the widening role of generics, and the diminishing number of new blockbuster drugs coming to market. Though there is no universal agreement on how to change, there is an emerging sense that product differentiation and focusing on new customer groups may be the way to go. The Hay Group study found more companies last year intent on adopting a customer-centric sales approach.

Yet, in comparing what the Big Pharma companies were doing with regard to recruiting, training, and incentivizing their sales staffs, the study found a disconnect. “Integral organizational elements (for example, training and performance management programs or hiring priorities) may be lagging and possibly not providing appropriate support to these strategies,” the authors of the Pharm Exec article wrote.

“By far,” they note,”Companies prefer to hire from their competitors’ field salesforces, only infrequently tapping other departments within the company, or sales professionals outside the industry…  The finding that the dominant criteria used in hiring sales reps remains ‘years of pharma industry sales experience’ reinforces the concern that the commercial organization may not really be ready or willing to move in a new direction.”

Matt Gurin, Hay Group’s U.S. reward practice leader for life sciences and one of the article authors, said, “When it comes to staffing and go-to-market models, the gap between big pharma and other players in the life sciences arena is considerable, and it continues to grow.”

Training for sales reps, the Hay study found, is still mostly focused on product knowledge, selling skills, and the like, with only 40 percent of the respondents to the survey reporting any effort at teamwork development. In-person, and coaching/mentoring are the preferred training methods, though a shift toward the use of more e-learning and technology-driven techniques is discernible. It’s a trend the authors suggest may not be entirely positive.

However, in the area of compensation, they bemoan the slow adoption of qualitative components in determining merit pay. Comp plans, they report, were primarily based on prescription volume (a primary factor according to 55 percent of the respondents), revenue (21 percent) and market share (21 percent).

Base salaries in 2011 averaged $84,700 for sales reps. With their 2010 bonuses included, the total payout averaged $114,300. District managers total payouts averaged between $185,800 and $188,900 for those considered “senior” or “advanced.”

Qalitative elements such as teamwork, territory development, and especially customer satisfaction accounted for less than 10 percent of the overall performance measures. “Alarmingly, among the 13 qualitative measure options listed in the study, “customer focus/satisfaction” landed in 11th place,” the authors note. (For some types of jobs in the overall life sciences it did rate much higher; in first place for hospital regional  managers.)

“Certainly the commercial function lives and dies on its sales figures — and quantitative measures are expected to dominate,” agree the authors adding, “But it may be wise for companies to invest more on the qualitative side, both in the incentive portion allotted to these measures and their choice of what to emphasize there.”

While the study, which benchmarks the industry annually, found companies are making changes, the article warns: “the pace of change is leisurely enough to suggest that companies opting for a truly radical shift in practice will end up changing the competitive game — in their favor.”

This article is part of a series called News & Trends.