Meeting industry professionals have been sounding the call: Now is the time for planners, especially those in the insurance and financial arenas, to come forward and educate upper management on the value of incentives, before further programs are suspended or cut altogether. But if planners can’t marshal the data to demonstrate that value, management may just think there is a kernel of truth to the disparagement of incentives by the media, Congress and the public.

Why might a planner fail to provide a rigorous rationale for sales incentives, which represent a $127-billion-a-year industry? Well, it’s not for lack of literature on the topic. The meeting world is suffused with studies, white papers and books on both the general value of incentives and ways to show that value for one’s own programs. It’s a matter of sifting through the work of organizations like The Incentive Research Foundation (IRF) and Site, as well as authors such as Jack Phillips and Don E. Schultz, to find the most relevant case studies, survey results and methodologies. If need be, a little guidance can come from external planning partners. Companies whose bread and butter is designing and facilitating corporate meetings will naturally have on hand the latest research to justify those events.

One such firm is St. Louis, MO-based Maritz Travel Co., whose vice president of marketing, Chris Gaia, observed, “Since all the press has come out and congressional conversation around bailout status and why corporations are running programs, we’ve actually made the Site Foundation research and Jack Phillips material more available to clients. We’ve had meeting planners ask for the information, but also the event owners and marketing.” Jack Phillips, Ph.D., is the chairman of the ROI Institute.

Why Does Your Program Work?

Despite the slew of white papers and case studies explaining why incentives work, Gaia feels that the ultimate goal nowadays is showing why one’s own programs work. “With the increased level of scrutiny around the programs, we’re advising clients to do the research on their individual program, so that they are beyond reproach, if you will. The question is coming down to, ‘Why are you, XYZ company, spending $1 million on an incentive travel program or on a merchandise program? How do you know that creates value for you?’ So it’s hard for someone to stand up and say, ‘Here’s a study that was done four years ago talking about the value of incentives.’ It’s a whole different discussion to say, ‘Here’s the value it created for my company: 15 percent of our channel was able to qualify for the incentive program, which generated X amount of incremental value for us, and taking away the cost of the program, we netted an extra incremental income of Y.’ You need to have that kind of specificity around your program and your expenditures in today’s environment.”

ROI data may not only prevent a program from being discontinued, but also may enable a better assessment of where cost cuts can be made, an initiative many companies are taking. According to “Effects of a Down Economy on the Incentive Industry,” an IRF survey of incentive travel providers, corporate incentive travel buyers and suppliers conducted last year, 81 percent of respondents felt the down economy is having a negative impact on their ability to plan incentive travel programs (compared to 48 percent vis-à-vis merchandise non-cash programs). Most frequently mentioned budget cuts/reductions include: number of total qualifiers (56 percent); awards budget (56 percent); onsite gifts (48 percent); and communications (38 percent) and administrative (35 percent) budgets. The survey results were released at the 2008 Motivation Show, where Bob Dawson, CITE, chairman of the IRF’s Research Committee, delivered a talk on the use of incentive research. “I’m amazed that this research is available to planners, it’s free and they don’t use it,” said Dawson, also vice president of Kirkland, WA-based Custom Design Marketing. He recommends planning departments set aside a time every week to review latest studies, which are “not hundreds of pages. The actual study material is very voluminous, but all these organizations, IRF, IMA, Site, we have it broken down into simple, easy-to-read reports that you can download from the IRF Web site (theirf.org) for free. They’re written for planners and incentive buyers to be able to take and use.”

White Papers

Many white papers serve the purpose of raising awareness and guiding more in-depth research, especially when it comes to measuring ROI, a topic that has proved worthy of entire books. For example, the Site International Foundation’s recent white paper “Measuring Results of Incentive Programs and Meetings in a Down Economy” is an ROI measurement overview that covers a “basic” approach comparing: performance against program objective; a more involved model developed by Ryerson University in Toronto; Dawson’s company-wide performance measurement strategy; a Maritz Incentives methodology; and Phillips’ approach to quantifying the “intangible” benefits of a meeting. Planners can get an idea of how each of these methods works and then use the reference list to seek out further information on the one they choose.

The point is to do the homework necessary to justify incentives, and not merely follow other companies’ lead in implementing them. According to Ira Almeas, president of East Hanover, NJ-based Impact Incentives & Meetings, “Many of the studies out there are really helpful, but they haven’t been applied by too many people. The reason I think is that sometimes firms implement an incentive program because, for example in the insurance industry, ‘Our competitors run incentive programs so we need to run them,’ as opposed to, ‘This is why we need to run a program and this is how we’re going to be able to raise the bar and get the best ROI.’?” The latter, of course, requires actual analysis, ideally supported by the latest research. It also requires planners to take on a more strategic role in regards to their events, something that has long been advocated but is now especially vital as meetings (and planners) become more “endangered” in corporate America.

Meeting Planner Roles

“For those who see themselves as a meeting planner in the real literal application of the word, responsible for logistics and execution, it limits their ability to then consult with their clients about the overall value of their services,” noted Jennifer Rosenzweig, director of research for the Forum for People Performance Management and Measurement, “because the purpose of the trips is where the real conversation is in terms of potential value. And that then sets the stage to make good use of the research.”

For example, one of the Forum’s recent studies, “Making the Case for Sales Incentives to the Tune of 10 Percent ROI,” focuses on a major Midwestern financial services company’s incentive program. The analysis revealed that sales of the firm’s most profitable but hardest-to-sell product line nearly doubled during the program, resulting in a 10 percent return on investment. The format of the white paper is digestible and ready to be put to use in making a general case for incentives or as an ROI measurement model.

Importantly, many studies that aren’t devoted exclusively to incentives are still relevant to them, such as the Forum’s “Testing the Internal Marketing Model.” The study focuses on how a company can build its brand internally and increase engagement across the organization. “One of the best practices is that you consciously make decisions about how to motivate your employees to reach key business goals, and that motivation can come in the form of a sales incentive,” Rosenzweig explained. “Another best practice is that you’re working to create a cultural identity, and face-to-face meetings are ideal because of the communications that are part of the process, the buildup to the event itself and then the delivery of the content is conveying some clear messages about what we’re about as a group of people with a common goal.” The choice of incentive destination, gifts and so forth also serves to define the firm’s brand. In addition, the Forum has been studying what it calls “Employee Lifetime Value,” which is the long-term financial contribution of employees, whose knowledge and skills are considered an intangible but all-important asset of a company.

“We published three different white papers. The researchers identified the different ways employees bring value to an organization and even created a formula to calculate it,” said Rosenzweig. One of those value sources is employees’ internal social capital, such as their ability to work together. And incentive trips can certainly foster social relationships among qualifiers. “They might see the trip itself as a cost of running the incentive program, and the payoff as the sales increase. But in executing the trip they are creating value,” she added. “That’s something incentive planners can put in their arsenal about why their clients need to continue to invest in these programs.”

Of particular interest to insurance meeting planners, the Forum is working on a study analyzing the relationship that insurance customers have with the company and its brand, as compared with the relationship they have with their agent. “They’re trying to understand where the differences and relative strengths are,” said Rosenzweig. “And if in fact the relationship is with the agent, then that is an insight that the company should be clear about because then you want to really engage that particular agent and find ways to better align it with the organization, which tightens the connection to the downstream client. So then you have a sales incentive program that not only rewards performance but helps connect the agent to the company as a whole.”

With the working title “The Relative Importance of Personal Relationship versus the Corporate Brand,” the study is expected to be completed this fall.

Other studies specific to insurance and financial firms are available from the IRF, which in January released a Vertical Market Study of incentive programs in six industries: pharmaceutical, electronics, automotive, commercial banking, insurance and telecommunications. “Most organizations do a global look at the industries,” said Dawson, “but we received a lot of feedback from people saying, ‘That’s great about how incentives impact business, but what about my business? I’m in pharmaceutical.’ The survey covers all the aspects of planning your incentive program: How did you set the rule structure, what role does management play, how do you select the award, and so on.” The percentage distributions of responses to such questions by nearly 300 commercial banking and insurance survey participants are tabulated in Appendix A: Vertical Market Segmentation. The report allows a planner to get a quick sense of how their industry in general managed incentive programs last year, and compare that to their own approach.

In addition, the IRF does a quarterly trends survey of incentive buyers and suppliers, and in the spring of last year the survey asked, “What does the entry of purchasing and procurement have on your plans for incentive programs?” Dawson indicated. “And overwhelmingly, 79 percent said, ‘Yeah, they’re looking at my budgets.’ And do you think it’s something that’s here to stay? And again overwhelmingly they said, ‘We have to prove regularly what we do does work.’?”

Reward Preferences

Meanwhile, Maritz has been gathering illuminating research on just what kinds of rewards really motivate employees. These studies move from proving the value of reward programs to improving that value, thus facilitating strategic program design. In 2006, Maritz polled 1,002 full-time employees in order to compare companies’ reward practices to employees’ preferences, finding, for example, that “only 27 percent who want to be recognized by non-monetary employee incentives, such as award merchandise, gift cards or trips, are recognized that way.” In 2007, Maritz categorized employees based on reward preferences, from Award Seekers (22 percent), who “want rewards that have both monetary and trophy value”; to Nesters (20 percent), who “are turned off by rewards that take them away from home”; to Bottom Liners (16 percent), who “are really only concerned about the monetary value of rewards.” Showing that all employees are not motivated equally was an important research project, but Maritz continued by putting the theory into practice.

For example, Maritz worked with OneAmerica, a privately held financial services firm, to help tailor its multiple incentive programs to producers’ preferences. A survey of producers, conducted by Maritz, revealed differences in what the younger and older demographic groups wanted in an incentive program, as well as some similarities: both groups desired time with the CEO, for instance. According to Gaia, incentive trip qualifiers see value not only in the diversion and “bragging rights,” but also in “getting a chance to talk with senior leadership. They want to see that you’re the kind of company that they’re going to be comfortable recommending to their clients. They also want to voice what they see is important and learn how they can create more value for them and their client. Well, here you are in a time of financial turmoil and you’re going to lose that communication channel to your most important salespeople? That’s a huge risk to the company.”

Web-Based Tools

BB&T, a Wilson, NC-based financial services firm, utilized Maritz’s Motivation Insight tool to conduct a study of its overall recognition programs (including incentive trips) to better align them with employee preferences. The tool deploys a Web-based employee survey, advanced data analysis and a decision support tool, with the ultimate goal of matching the right options to the right employees. “Over the years we have provided a lot of recognition to our employees, but this really gives us an ability to evaluate and determine what type of recognition motivates employees the most,” commented Beth Davis, PCE recognition manager. Maritz made a case for the tool with background studies on workforce motivation. “I was familiar with some of the studies. They brought a lot of great information to the table that really helped us,” Davis said. “I find Maritz on an ongoing basis to be an excellent resource. We worked together to develop the survey questions and the audience, and we did decide to open it up to all employees. We did a lot of promotion on our intranet site to say it’s available and used the term ‘What floats your boat?’ But there was no pressure to participate.”

The tool automatically produces a variety of results, such as percentage-based overall rankings of employee preferences (with accompanying graphs) and preferences by department. “We were able to look at what the banking network employees wanted versus what folks in the support department might want. There are all different ways you can segment the information,” Davis explained. “And it’s very user-friendly. You don’t have to be a research scientist.” Davis’ department is currently analyzing the data and expects to make final recommendations concerning the structure of BB&T recognition programs this year.

“We went into it with a huge menu of items to determine what our employees really wanted, from backstage concert passes to TV screening tickets. Now we’re asking what’s realistic based on the economy and the need to stay competitive. Hopefully we’ll be able to provide departments with some solutions and alternatives.”

Thus, through assiduous research, in-house planners and marketers can make informed proposals to improve the company’s recognition programs. As can independent planners, like Almeas: “Recently a client called us and said that based on the economy and by direction from their CFO, they want to change the structure of their 2009 sales program from open-ended, which means that everyone has an equal opportunity of qualifying if they reach a certain goal, to a closed-ended program, where only a certain percentage of the top salespeople will be awarded the trip,” he related. “I immediately said to the president of the financial communications company, ‘I’m going to send you some white papers from the IRF [e.g., “Incentives, Motivation and Workplace Performance: Research and Best Practices” (2002)] that support why closed-ended programs don’t work.’ I was able not only to give the CFO the studies, but also executive summaries so he could quickly take a look at it and say, ‘You know what, he’s got a valid point.’?” Because they admit fewer qualifiers, closed-ended programs tend to be attractive to firms looking to cut costs in the incentive area, but they have the detriment of not incentivizing the producers that most need it.

Increasing Productivity

Said Almeas, “According to the ‘80/20 rule,’ 20 percent of the people are always going to qualify because they’re top performers. Out of the remaining 80 percent, chances are 40 percent are never going to be top producers. The 40 percent that’s the middle is really the core that most companies want to concentrate on: How do you increase productivity for them? With a closed program, where only 20 percent can qualify, perhaps the 40 percent core feel that they will never be able to win, especially in this economy. So they don’t even go for it, and the whole incentive program becomes counterproductive because what you want is to engage more people than you normally would in reaching their goals. The end result of incremental sales really comes out of all the people that didn’t reach their goal but still increased their sales. And that point comes out in some of these studies.”

Clearly then, research can be applied to the purpose of justifying one’s incentive programs with case studies, industry stats and ROI measurement, as well as to the goal of designing the programs more effectively. Neither initiative can be eschewed given the current skepticism about the incentive industry. “Professionals in the meeting industry need to quickly support the benefits before the programs get cut,” Almeas said, “because it’s very easy to put the budget for incentives on the cost side versus the profit side, and that’s the problem that a lot of companies are facing now.” Of course, planners needn’t be alarmist or defensive when engaging meeting owners. It’s best to “speak softly” and carry the right research.    I&FMM