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Preparing for the Future. Susan M. Snyder, Hay Group Marc Wallace, Hay Group. November 15, 2011. Agenda. 1. About Hay Group Increasing R&D effectiveness Sales force compensation. 2. 3. About Hay Group. 01. Our areas of expertise. We help organizations work.

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preparing for the future

Preparing for the Future

  • Susan M. Snyder, Hay Group
  • Marc Wallace, Hay Group

November 15, 2011



About Hay Group

Increasing R&D effectiveness

Sales force compensation



our areas of expertise
Our areas of expertise
  • We help organizations work.
our global presence and capability
Our global presence and capability



Offices in 47 countries

International clients


$450 million

Employees worldwide


powerful hr tools to help your people flourish
Powerful HR tools to help your people flourish
  • Putting 60 years of Hay Group expertise at your fingertips
  • Powerful and intuitive tools available online
  • or electronically
  • Competitively
  • priced
  • Created specifically
  • for HR professionals
  • and line managers
  • Support
  • recurringprocesses across the
  • employee lifecycle
an invitation for you http www haygroup com surveys best companies 2011
An invitation for you...
game changing times
Game-changing times

Reduced tolerance for risk

Cost to value


Greater regulation

Cost pressure


Longer lead time for product development

Patent expiration

Decline in R&D productivity


The market share of biotech drugs is continuously increasing



The share of biotech drug sales is expected to reach almost a quarter of total drug consumption by 2014, compared to less than one-tenth in 2000

global biotech sector is getting to stabilize
Global biotech sector is getting to stabilize
  • The industry appears to have turned the corner, though it has not returned to pre-crisis levels of normalcy
  • Across the established biotech centers, revenues grew by 8% — identical to growth in 2009 after adjusting for the Genentech acquisition, but well below the 12% seen in 2008 or the high double-digit growth rates the industry was able to deliver in many prior years

Global Biotechnology Revenues (USD bn)

8% growth

Global Biotechnology Employees

Note: Figures pertain to 622 public companies

Source: Ernst & Young Report 2011

biotech is moving towards profitable business model
Biotech is moving towards profitable business model

Global Biotechnology Net Income (USD bn)

Global Biotechnology R&D Exp. (USD bn)

30% growth

2% growth

  • Large numbers of firms undertook drastic cost-cutting measures to survive. These efforts resulted in a much stronger bottom line, propelling a sector that has bled red ink for most of its history to unprecedented levels of aggregate profitability
  • But while the focus on operating efficiency has its benefits, it has come at a high cost. In an industry where R&D is by far the biggest expenditure, it was inevitable that deep spending cuts would lead companies to slash R&D expenditures
    • R&D expenses, which had plummeted by 21% in 2009, grew by a modest 2% in 2010 — a positive development, but far below the investments that biotech companies have historically made in innovation. In 2009, 64% of US companies and 55% of European companies decreased their R&D spend; in 2010, those numbers fell to 49% and 45%, respectively

Note: Figures pertain to 622 public companies

Source: Ernst & Young Report 2011

r d productivity is down
R&D productivity is down…

New drug approvals of major players

Total R&D spend (USDbn) of major players

R&D productivity ratio =

our diagnosis
Our diagnosis

Organizations aren’t leveraging the human talent that they have

Scientists are motivated in unique ways, and must be led accordingly

Most R&D leaders do not create engaging climates that energize their teams

While R&D leaders must demonstrate technical expertise, many have not expanded their leadership portfolio to include providing alignment, feedback, and collaboration

Many R&D professionals do not believe that performance is linked to recognition; instead, they think that mediocrity is tolerated

Instead of enabling innovation, organizations are inadvertently putting hurdles in place by allowing slow decision-making, risk-aversion, and lack of collaboration

leading scientists isn t easy
Leading scientists isn’t easy

Scientists enjoy solving problems, need recognition, and tend to be loners

Avoid anything that puts barriers between scientists, regardless of their title or level of expertise

Facilitate free flow of information and iterative feedback loops among scientists

Create opportunities for collaboration, both formally and informally

Provide rewards in the form of recognition, reputation and respect (including from top management, peers inside and outside the company, and patients)

Allow the opportunity to present at conferences and to customers to build their own and the company’s reputation

Clarify and celebrate the link between their work and its practical impact on the business and patients

measuring engagement climate
Measuring engagement: climate

Climate indicates how energizing the work environment is for employees

It accounts for up to 30 percent of the variance in key performance measures

Up to 70 percent of the variance in climate is driven by how leaders behave

Fully engaged employees are 2.5 times more likelyto exceed performance expectations than their ‘disengaged’ colleagues

Leadership styles

Organizational climate

Aligned and motivated employees


50-70% of variance in organizational climate can be explained by differences in leadership style

Up to 30% of variance in results can be explained by differences in organizational climate

the climate gap in r d
The climate gap in R&D

How does it feel to be in R&D in large life science organizations?

67% report that their current environment is tolerable (15%) or de-motivating (52%)

These results are worse than those reported by other LS functions except Manufacturing

Research is worse off than Development, and when compared to other industries, ranks at the bottom of the list

digging deeper organizational climate
Digging deeper: organizational climate
  • Organizational climate drives performance
    • Good working environments – or climates – energize and focus people to do their best. Mediocre climates dampen motivation and diminish performance
    • Research shows that these aspects of climate have the biggest impact on performance:

… and of all the things that influence climate, leaders have the biggest influence

digging deeper climate
Digging deeper: climate

16% are in Energizing situations, but they are lacking the Clarity that drives business results

Only 17% are in High Performance climates and firing on all cylinders

15% are getting by in Tolerable climates, but Flexibility (innovation) drops along with Clarity and Team Commitment (collaboration)

52% of the sample are disengaged, struggling across all dimensions, and De-Motivated

comparing two organizations climate
Comparing two organizations: climate

Company 2

Company 1

Products approved, 2007 – July 2011: 4

Products approved, 2007 – July 2011: 9

More leaders creating positive climate correlates with R&D productivity

leadership styles drive much of climate
Leadership styles drive much of climate

Leadership strength is defined by flexibility

Leaders who can tailor their behavior, or leadership styles, to a situation create positive climates

Those who do not create negative climates

Our research database, containing assessments on over 550,000 individuals from over 4,900 organizations, shows that the following styles have the biggest impact on climate







  • Achieving immediate compliance
  • Providing long term direction and vision
  • Creating harmony and avoiding conflict
  • Building commitment and encouraging new ideas
  • Accomplishing tasks to high standards
  • Supporting long term development

leadership drives engagement
Leadership drives engagement

Leadership differences in R&D

  • Outstanding R&D leaders maintain their technical credibility and go beyond it
    • Provide direction and feedback
    • Engage their teams in problem-solving and collaboration

Leadership Styles in De-Motivating Climates (feedback from 453 direct reports on 77 leaders)

Leadership Styles in High Performance Climates (feedback from 124 direct reports on 26 leaders)

comparing two organizations style
Comparing two organizations: style

Company 2

Company 1

Products approved, 2007 – July 2011: 4

Products approved, 2007 – July 2011: 9

Leaders who use a broad range of styles create more positive climate…. which correlates with R&D productivity

engagement alone is insufficient
Engagement alone is insufficient

Work environments have to turn motivation into productivity


Employee effectiveness

Strategic intent

Business results


the business case for engaging and enabling employees
The business case for engaging and enabling employees

Employee performance

Employee retention

Customer satisfaction

Financial success

Increase in employees above performance expectations

Reduction in turnover rates

Customer satisfaction rates

Revenue growth

High engagement only





High engagement +

high enablement





Based on linkage case studies using Hay Group’s global normative database

issue 1
Issue #1

Life Science Norm

R&D Norm

Lack of feedback and development

I have a good idea of the possible

career paths available to me

Rate your opportunities for learning

and development

Rate your immediate supervisor on providing you with clear and regular feedback

Rate your immediate supervisor on

coaching you in your development

Training is available on an ongoing

basis so that I can continue my

learning and development

Rate your company on providing

training so that you can do your

present job well

% Favorable

issue 2
Issue #2

Life Science Norm

R&D Norm

Lack of focus on – and recognition for – outstanding performance

The better my performance, the

better my opportunity for career


The better my performance, the

better my pay will be

Poor performance is usually not

tolerated at the company

% Favorable

issue 3
Issue #3

Life Science Norm

R&D Norm

Obstacles to innovation and collaboration

Employees are encouraged to take

reasonable risks (e.g., try new ideas or new

ways of doing things) in an attempt to

increase the effectiveness of the organization

Decisions are made without undue delay

Rate cooperation among employees where

you work or within your location

This company encourages cooperation and

sharing of ideas and resources across the


My work group receives high quality support

from other units on which we depend

% Favorable

things you can do to improve r d
Things you can do to improve R&D

Our prescription

Clarify the definition of outstanding performance – for individuals and for the function

Determine the critical few metrics that align to that definition of excellence

Align recognition and reward to those metrics, and give clear feedback about them on an ongoing basis

Build leadership capability to broaden beyond technical excellence, with special focus on developing the ability to provide feedback and to coach

Differentiate technical leadership from project / program leadership, and establish / communicate a project leadership career track

Develop matrix leadership skills in program management

Enable innovation

Push decision-making to the lowest capable level

Remove obstacles to collaboration, especially across boundaries

perceived strengths
Perceived strengths

Hay Group Managed Markets SFE research / Pharma Executive article

false confidence
False confidence
  • Hay Group Managed Markets SFE research / Pharma Executive article
limited coverage across the healthcare ecosystem
Limited coverage across thehealthcare ecosystem
  • Hay Group Managed Markets SFE research / Pharma Executive article
needed investments
Needed investments
  • Hay Group Managed Markets SFE research / Pharma Executive article

Critical for B2B partnerships and value creation !!

application a payer s value selling process
Application: a payer’s value-selling process

Integrated Indications & Offers

Cost and Quality Guarantees


Call centersupport

Analytic and presentation tools

Pricing guardrails and oversight


Collaborative Research

Identify opportunities


Tailor value proposition

Negotiateand close



Identify client support team

Track ‘promised value’ measures

Conduct account reviews

Contractrenewal tickler


Roles for sales and customer service

Measures, reminders and cross sells

Integratewith CRM

Treatment Compliance

Sustain & Grow Mutual Market Share


mutual economic impact of your investments
Mutual economic impact of your investments


High Impact




(from competitors)



Credible Partner


Door Openers


Deal Killers


Importance(to Customers)




five actions for creating value
Five actions for creating value
  • Think difference, importance and economic impact
  • Surprise your customers with openness
  • Measure your partnership strength
  • Invest in leadership, teams and processes
  • Cover the healthcare ecosystem
top challenges
Top challenges
  • In 2011, Hay Group observed that clients focused on:
    • Reflecting roles
    • Reflecting strategy
    • Linking pay to organizational performance
    • Streamlining plans for simplicity
  • We did NOT see:
    • Routine updates of the plan
    • Redesigning to better reflect incumbent impact

This is reflected in the 2011 results as well.

expectations for 2012
Expectations for 2012
  • Based on the 2012 results, we expect that:
    • Sales compensation cost will be under increasing scrutiny
    • Trends in solution selling will temper leverage
    • Reviewing strategy and defining the implications for the sales plan will be emphasized
    • Traditional challenges will be addressed with broader redesign:
      • Goal setting
      • Long sales cycles
      • Team sales

2012 will focus on the link between growth and incentives

rule 1 if you haven t defined your sales roles you can t design sales incentives
Rule #1: If you haven’t defined your sales roles, you can’t design sales incentives






Field Rep



incentive plans and metrics
Incentive plans and metrics
  • Most organizations use 1-3 metrics.
  • The number of metrics remained consistent from last year 70% to this year 73%
  • Most organizations have between 1-4 sales incentive plans which are often differentiated by role

Number of different sales

incentive plans



eligibility and plan type
Eligibility and plan type
  • Eligibility for plans remain high.
  • Chemicals and Insurance/ Financial Services have the highest predominance of Base Salary with incentives than other sectors.
  • Plans for Account Managers and Sales Reps were similar in components.
  • Annual eligibility
  • Plan type
plan components
Plan components
  • We saw a slight dip in Individual prevalence from 82% to 75% though most organizations still make that a majority of their plan.
  • Other remains low in prevalence but has a high value in the plan assigned to it.
  • The splits between the organization level have more to do with the specific industry.
ttc philosophy and recent payouts
TTC philosophy and recent payouts
  • Most organizations target above market performance for sales reps.
  • The distribution of incentives paid was fairly normal for this past year.
common goal setting challenges
Common Goal-Setting Challenges
  • Common goal-setting challenges:
    • High demand volatility
    • Long selling cycles
    • Cycling
    • Variance across channels (heavy lifting)
high demand volatility
High demand volatility
  • Many organizations – and industries – struggle with exceedingly high volatility of demand. This can frequently make it a challenge to set quality goals.
long selling cycles
Long selling cycles
  • If the time from initiation to close is longer than the performance period of the incentive plan, it is challenging to define a goal.
  • It is important to consider:
  • The frequency of opportunities
  • Where the incumbent has the most impact on the sales
  • Cycling occurs when a good performance sets up bad performance and vice-versa.
variance across channels
Variance across channels
  • Channels are so different that some reps have a windfall, others have an unachievable target.
contact information
Contact information
  • Susan M. Snyder, Hay Group
    • Senior Principal and US Director, Leadership & Talent in Life Sciences
      • Phone: (914) 659 - 7781
  • Marc Wallace, Hay Group
    • Vice President and US Director, Sales Force Compensation
      • Phone: (312) 228 - 1816

Thank you!Susan M. Snyder, Hay GroupSenior Principal & US Director, Life Sciences Leadership & Talent Phone: (914) 659 - 7781 Marc Wallace, Hay GroupVice President & US Director, Sales Force CompensationPhone: (312) 228 -