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Four Tips for Incentive Program Governance
Robert Kelly, Sr. Principal, Practice Leader, Sales Force Effectiveness, IQVIA
Amit Srivastava, Principal, Incentive Compensation, IQVIA
Mark Parisi, Sr. Principal, Incentive Compensation, IQVIA
Aug 21, 2023

Governance of your company’s incentive compensation (IC) program is important for ensuring compliant promotional activity, fairness when exceptions or special situations arise, and success with internal and external audits. Many life sciences companies found themselves pushing their IC governance policies and structures to the limit during the pandemic, and some early results from IQVIA’s 2023 IC Benchmarking Survey suggest that IC leaders continue to identify governance as one of their current operational challenges.

IQVIA experts offer four tips related to IC program governance to enable life sciences organizations to meet associated challenges head on.

  1. Establish a governance framework: Many companies establish an internal steering committee with overall decision-making responsibility for managing the incentive compensation program. This committee is typically comprised of many participants from a cross-section of functional areas, including but not limited to HR, Finance, Legal, Compliance, and an executive leadership sponsor. Duties of the committee typically include:

    • ensuring regulatory and financial compliance
    • review and approval of IC plan and contests designs
    • signing off on payments
    • preventing conflicts of interest
    • making precedent-setting decisions
    • approving exceptions
  2. Define an organizational philosophy surrounding incentive pay: Clearly outline the objectives and goals that your company’s IC program aims to achieve. For example, do you want to reward only individual performance, or is team-level achievement important also? Should the sales force be measured only on objective measures (e.g., sales, volume), or should subjective measures (e.g., MBOs, customer satisfaction) be considered?
  3. Document and enforce transparent and consistent policies: Create a terms and conditions document with your IC program's policies on subjects such as eligibility criteria, payout floors and caps, payout dates, the exception process, compliance requirements, etc. This document should be communicated to all plan participants to avoid any misunderstandings or misinterpretations. (Bonus tip: Have your participants sign off on the document upon hire, and at the start of every new pay period.)
  4. Monitor and audit your IC program: Establish processes to gauge the effectiveness and impact of the IC program. Identify and track key metrics, such as employee engagement, turnover rates, and payouts compared to individual and team performance. Perform regular audits (and cooperate fully with any independent internal or external auditors) to ensure compliance with established policies and to identify areas of improvement.

Every organization has unique requirements and considerations related to their incentive compensation program. These tips should be adapted to fit your specific needs. Could your organization benefit from an independent perspective on how your IC program is governed? Are you interested in learning more about how your company’s policies match up to those of your peers? Please connect with us to discuss how IQVIA could help your organization with IC program governance.

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