Pharmaceutical companies would improve sales revenue by investing in commercial operations that promote business innovation, employee engagement, organization alignment, and ensure a reasonable ratio between district sales managers and frontline sales representatives, according to Fox School of Business research.
The study was commissioned by TGaS Advisors, a benchmarking and advisory services firm, and division of KnowledgePoint360®, a global leader in communications, information and workflow services to healthcare professionals and the pharmaceutical and biotechnology industries.
“We focused on factors likely to impact pharmaceutical sales because data for this area are more robust, but the value of investments in sales operations should be read as a proxy for a broad range of commercial operation functions,” said George Chressanthis, the professor of healthcare management and marketing at the Fox School of Business who led the study team with Eric Eisenstein, assistant professor of marketing, and Fox PhD student Patrick Barbro.
According to Chressanthis, this is the first such independent research study on the effects of qualitative versus quantitative measures of commercial operation functions on business performance. Internally reported data from 26 pharmaceutical companies were analyzed for the period 2005-2011 and was complemented with qualitative survey data on commercial operations’ cultural attributes assessed by strategic account executives at TGaS Advisors.
The research team was given complete access to their database, with all analyses, findings, and recommendations independently developed of TGaS Advisors. All company specific data elements and names in the research were kept confidential, in keeping with contractual obligations, but did not affect the course the analysis.
The research showed that three factors within a company’s commercial operations organization are particularly important in determining U.S. business performance:
- Commercial operations’ cultural attributes, specifically innovativeness and responsiveness, which drive employee engagement and organizational alignment, are critical. These attributes are most powerful in affecting sales when working synergistically and in concert with quantitative investments in commercial operations support.
- Company scale and spending to support sales professionals that allow for more products to sell and leverage specialized commercial operations functional support for sales representatives to be more effective in their role.
- The number of sales representatives whom district sales managers supervise has a direct bearing on their ability to provide necessary levels of sales force effectiveness activities such as coaching, mentoring, on-the-job training, and managerial support to representatives, which in turn has a quantifiable impact on business performance.
The findings suggest that executives can significantly improve commercial performance by investing resources to:
- Create stronger alignment between functions and foster a culture of commercial innovation, organizational alignment, agility, and urgency. Quantitative investments in commercial operations will yield sub-optimal returns without the right structure of cultural attributes to support these business activities.
- Support improvements in sales professionals (i.e., through information, systems, business processes, training, etc.).
- Ensure an optimal number of sales representatives reporting to each first-line sales manager.
The Fox School research team has presented study findings at the following conferences: Pharmaceutical Management Science Association Annual Conference in May 2013 (Bonita Springs, Fla.), International Health Economics Association 9th World Congress in July 2013 (Sydney, Australia), and the American Marketing Association Summer Marketing Educators’ Conference in August 2013 (Boston).