Designing a bonus program for a health care business is no simple task. Once you’ve created a model that makes both you (and your sales team!) comfortable, moving to the implementation phase of a new “Commission Plan” for your organization can present a separate set of challenges.
Below is our advice on both isolating and becoming successful at both designing and implementing change in your business…
1. Design a mutually beneficial model.
Sharing a percentage of what your sales person generates with them is the most efficient way to pay your sales people, period.
Over time, the Lab Tactical Team has mostly encountered commission programs that pay single amounts to a sales person based on a number of orders. A tally is taken at the end of the month, commissions are paid and we flip the calendar. Sometimes our clients supplement salesperson income with milestone rewards of achievement, paid quarterly or annually.
We’ve begun replacing this model with a payment structure that is based more on profitability sharing between the company and it’s sales team. The best way to do this is by sharing with your team either a portion of the revenue they create or a portion of the payments that are posted against the gross sales sums they bring to your billing team.
If you’re nodding along with approval so far… we’ve got you for at least a few more paragraphs, so please read on!
Once you have identified that you want to move your commission plan to a percentage-based model, it’s important that you collect enough data to test it. If you aren’t confident in the way that a change will work, it will be hard to explain the mutual benefit of a re-designed bonus program.
We recommend that you look at least the prior 12 months of production by referral source and salesperson. From here, we can drill into our data in several ways, including heat maps, collection ratios and referral trends. It’s important to look at a data set that’s large enough to be confident in. If you need help organizing this data, please contact us.
Using this data allows you to mold commission plans more closely to the changing revenue cycle we face in post acute healthcare. If your cash flow is tied to a recurring rental, but all of the commission for the product is paid up front it creates an unstable ratio because in most cases, rental products are not taken to their fur rental term 100% of the time.
If I paid a commission of $25 for a CPAP on month one, but a patient returns the CPAP after eight months, I have paid more to my salesperson for that referral than for a patient that completes a twelve month rental to purchase term.
In short, pulling together this information, studying it and implementing a more logical approach can be consuming. We suggest completing this step before moving on to the implementation phase.
2. Prepare appropriately for implementation of your more logical plan.
Here are 3 tips on implementing a percentage based commission program once you’ve designed and become confident in it.
- Assume that you’ll need to answer more questions from your sales team that you planned.
- Temper what you learned in step 1 and focus on relaying the structure and historical data as you’d like to present it to your team, not holding them accountable for their performance.
- Implement the plan for a period of no less than 6 months.
Certainly, implementation of a new commission program requires planning, scheduling, and conversation. Often, our clients take the same time they redesign this program to match better product lines with higher commission amounts.