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Quota-Based Compensation Plans Outpace Ranking Plans
Date:9/30/2008

ZS Associates study shows quota-based plans most popular among makers of

pharmaceuticals/biotech, medical device and technology products

EVANSTON, Ill., Sept. 30 /PRNewswire/ -- The third annual Incentive Practices Research (IPR) study, conducted by global sales and marketing consulting firm ZS Associates (http://www.zsassociates.com), finds that an increasing number of companies - in pharmaceutical/biotech, medical products and high technology industries - are favoring quota-based compensation plans over ranking plans.

Ranking plans pay sales representatives and managers based on how they performed compared to their peers. These plans thrived during the late 1990s, especially in the pharmaceutical industry, as a way of managing compensation costs, but have steadily declined in popularity. ZS Associates' research has found that(1):

-- 73 percent of pharmaceutical/biotech companies surveyed use quota-based plans, while 20 percent use ranking plans

-- 85 percent of medical device companies surveyed use quota-based plans, while 21 percent use ranking plans

-- 89 percent of high tech companies surveyed use quota-based plans, while 26 percent use ranking plans

Stephen Redden, principal and leader of the Incentive Compensation Practice at ZS Associates, advises executives to deploy ranking plans cautiously, as they can promote unproductive competition between salespeople. "Knowing your sales compensation cost with certainty is an important objective, but using ranking plans to achieve this objective is not recommended," says Redden. "There are ways to structure quota-based plans - and model the costs - that can provide accurate compensation cost estimates without increasing the internal competition in the field."

Quota Fairness a Top Concern

The survey also indicates that quota-setting fairness is one of the most pressing concerns and cuts across al
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SOURCE ZS Associates
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