Incentive programs are a proven business strategy touching everything from employee engagement and retention to productivity and ultimately the corporate bottom line.
Yet, the pandemic created a host of challenges for many businesses, including reduced revenue streams and tightened budgets. So, how are incentive programs faring today? How have they changed — or not — and how are incentive planners adjusting programs to meet today’s reality? Most important, are incentive programs still able to provide solid ROI to the companies that invest in them and how is that ROI delivered?
Rhonda Brewer, CITP, vice president of sales at Illinois-based Motivation Excellence and a SITE Board of Trustees member, notes that the pandemic has created some changes, but incentive programs are still going strong. “Depending on the industry, qualifier numbers have increased as well. After not having this tool to reward top performers for a couple years, businesses are eager to reconnect with their people,” Brewer says.
Incentive planners have always had to create extraordinary programs within a company’s budget but with many budgets decreased, they have to be even more creative today. “Our planners at Motivation Excellence are always looking at how we can deliver wow-inspiring programs within a client’s budget parameters,” Brewer says, “and one way to do that is by working effectively with strategic partners in the industry to provide value that planners can pass onto clients. That might be concessions in a contract or being able to commit to multiple incentive experiences with the same hotel partner, or our clients might sign a multi-year deal with our company. We’re always looking for ways to increase the value of an experience without blowing out a budget.”
Brewer says proving ROI on incentive programs is about data and analysis. There are several key factors. “The most important things to focus on are identifying what you want to measure, making sure you have the right data to measure ROI, executive level support and having a strong engagement plan.”
Having access to the right data is critical. “Is the data in one central resource or do we have to pull it from multiple sources to effectively measure? We’ve found that the process is most effective when we can help a client centralize all the information necessary to make the smartest financial deductions. It can be a huge bonus to an incentive program when we can offer this kind of business intelligence. When we have access to historical trends within a company and its vertical, we can make better recommendations on program rule structure,” Brewer says, adding, “Having regular meetings with our clients to see if anything needs to be adjusted is important.”
The economy has been an ever-changing dynamic in the past couple of years, and it can have an impact on programs. But what Brewer has found is that incentives work regardless. “No matter the economy, those participating in an incentive program out-perform those who are not participating, proving without a doubt the programs are effective.”
Because incentives are often set in exotic destinations, it might seem that destinations themselves can affect ROI; however, Brewer says what destinations actually impact is ROE — return on engagement. “With the right destination appeal, your engagement level increases,” she says. That too supports success because employees are motivated to produce in order to qualify for trips to those types of destinations.
What also impacts incentives in this post-pandemic world are ongoing supply-chain issues and lack of product availability. Brewer says product availability could potentially affect programs through 2024. The work-around comes down to creating the right rule structure and goal for a program. “Goals and objectives can change and that can make it more difficult at times to achieve. I think the hardest thing now is creating rule structures for some industries where product availability is a challenge. We’ve seen a lot of supply-chain issues, and that decreases the availability of producing products in some verticals.”
For companies where sales productivity is the standard measure, that’s a problem. But there are options. “In that scenario, we offer alternatives to rewarding on sales. Training, engagement and loyalty can be maintained during the times when sales are stagnant due to supply. And actually,” Brewer says, “although ROI is talked about a lot, many incentives are structured as loyalty programs.”
Regardless of how a program is structured, she says a strong communications plan is important so everyone understands the rules and how they can win.
Dahlton Bennington, CMP, CMM, managing director, PROfound Planning in Orlando, says the pandemic changed a lot, yet incentives remain as important as ever “Incentive, recognition and reward programs are being employed more than ever to align remote and decentralized employees, and are relied upon for engagement, retention and building culture.”
Bennington believes there are three main things incentive planners should focus on in terms of ensuring ROI. The first is fiscal responsibility and budget alignment. The second is 360 degrees of stakeholder overall satisfaction and planned action resulting from the program. “For me,” she explains, “incentive stakeholders include those who are incentive eligible, who qualify for the incentive and attend, as well as those who host the program and/or leadership.” The third focus is the business impact achieved as a result of employee motivation.
While Bennington doesn’t believe the pandemic impacted how ROI is proven for incentive programs, she does believe it created a more urgent need to do so. “As leaders are more focused on developing positive organizational culture, recognizing employees and striving to retain top performers, incentive programs are a natural fit.”
Bennington sees the role of destinations as an important one in terms of driving employees to achieve. “The desirability of a destination and selected property drives incentive-eligible associate performance.”
There are also outside factors affecting incentive success today. “Limited hotel availability, lack of experienced workforce and increased supply-chain costs are our biggest challenges in curating unique, personalized incentive experiences that drive attendee satisfaction,” Bennington says. “This is, of course, directly linked to a program’s ROI.”
Staffing issues can be a factor as well, depending on where the shortages are. “I believe staffing issues are a contributor to the increased value of incentives to drive organizational performance and retention,” she says. “At the same time, lack of labor for key destination suppliers is a great hardship to incentive planners.”
The economy itself can be a factor but less so than one might think. “Incentive programs deliver extraordinary value to the organizations that employ them and often do so regardless of the status of the overall economy,” Bennington points out. “At the same time, smart organizations will align their reward plans and spend to the performance of the organization and perception of incentives at the current time.”
She also notes that the overall economy is less a factor in employees being able to qualify than what is happening within the company itself. “For our clients, I would say an incentive-eligible associate’s ability to qualify is much more relative to the organization’s current business levels than anything else. While some organizations are thriving and orders are pouring in, others are experiencing a softening market and are working harder to stimulate business. When the metrics are set correctly, the caliber of qualifiers should be consistent.”
The pandemic hasn’t appeared to change how hard it is to qualify or how much employees want to qualify. The drive to be the best or most successful remains pretty much the same regardless of massive world changes in the past three years. Incentive programs are still doing for companies what they have always done.
“I would say the bragging rights of being No. 1 or best in class is certainly the most coveted and something that top performers will strive for,” Bennington says.
Alex Eckerle, director of product and solution design with Maritz Motivation, references many of the same factors others have when it comes to proving ROI: “Help clients identify their optimum business objectives and outcomes, design a strategic program focused on company objectives and build a rule structure that drives behavior toward those objectives. Like others, she points out that the objectives must be measurable and supported with data to prove ROI, and that having access to the right data is important.
Eckerle says a client’s budget is still the biggest factor in creating a rule structure to determine qualifiers, but how to use the budget has changed somewhat since the pandemic. “A fixed budget typically requires rule structures that focus on incenting a defined percentage of your population (for instance, X$ in spend per person times number of qualifiers = total budget).
However, she continues, “A desire for greater personalization and rewards that are meaningful to an individual post-pandemic means thinking differently about how to spend the budget.”
One option is to add budget flexibility for open-ended structures, such as anyone who hits their target wins. “These open-ended rule structures, while having the potential to have more winners and thus drive a larger budget, are designed to pay for themselves as you don’t win unless your individual impact is much greater than the cost of the individual reward,” Eckerle says.
Dave Minnelli, senior director, event analytics, with Maritz Global Events, has a somewhat different take on the big picture of incentives today in the post-pandemic world. “Organizations are evaluating the design of their programs. More and more clients are asking questions around rule-structure design, data and how to measure whether their program is meeting their objectives,” he says.
He adds, “Although some clients have reduced the overall number and/or size of their incentive travel programs, just as many have increased the number or size of their programs. Some clients have also shifted to other types of incentives, such as individual incentive travel or points-based programs to reward their teams.”
In today’s economic reality of rising costs, Minnelli says some clients are adjusting programs. “In some cases, they’re reducing the number of qualifiers to maintain their budget and in other instances they’re increasing their budget to account for the higher cost of travel, while maintaining incentive program size and high-quality experiences.”
While he doesn’t believe that the pandemic has impacted how hard it is to qualify or how exactly employees qualify, he does believe it has created an opportunity to help prove ROI. “KPIs may be different based on the intended behaviors — sales growth, market share growth, product penetration, etc. Crafting the right program design, the right mix of incentives and the right budget is key to successful ROI.”
Minnelli says that while the overall economy doesn’t impact incentives significantly, inflation and supply-chain issues do. He explains, “Incentive programs are more resilient to a recession because they are tied to sales and revenue. When companies have to make cuts, they’re less likely to cut incentive trips. However, it’s more expensive to execute incentive programs given inflation throughout the travel and rewards supply chain. Event budget cuts due to inflation are forcing attendance reductions in some cases.”
And, he adds, “In some industries that rely heavily on supply chains that have been constrained since the pandemic, including automotive and manufactured goods, incentive participants are having more difficulty achieving sales goals due to product backlogs.”
Staffing shortages, too, have been a negative factor according to Minnelli. “The pandemic hit the travel industry hard, with the in-person events industry essentially shutting down for 18 months. Subsequently, our industry has been challenged to rebuild talent quickly post-pandemic. While many of the individuals hired in the industry are veterans returning to work, nearly half are new to the industry, which creates some training and continuity challenges. Incentive travel program attendees are VIP guests and worked hard to win, thus they expect a great experience. I’m happy to say the industry is finally moving past this, so we’re now seeing very few ‘hiccups’ across the entire travel supply chain and quality experiences our guests deserve.”
Minnelli says, “A top-end recognition program, if not supplemented with other ways individuals can earn, can sometimes drive less ROI. A rule of thumb is that a top-performer program will typically motivate double the number of individuals who can achieve it. Let’s say a company is recognizing the top 5% of its sales force in an incentive travel program. That typically means that the top 10% are motivated to achieve the incentive, while the remaining 90% are not motivated and may not perform to their potential. Supplementing incentive travel with other incentive programs that reward behaviors through individual travel, merchandise, gift cards, etc., can help move the middle by motivating the next 70% of the organization. A 5% improvement in the middle 70% of your population will drive more impact than a 5% improvement in the top 10%.”
Crystal Zawilinski, CMP, CMM, CEM, sales director, meetings and incentives at Fox World Travel in Wisconsin, says the pandemic actually proved to organizations the strong need for incentive travel, “The need to bring together top performers or customers became more even apparent when in-person events were absent. At the same time, companies are making incentive travel a priority, so qualifiers are even more motivated by travel than they were pre-pandemic,” she says. “Even further, companies are prioritizing unique experiences and potential qualifiers are taking notice. At Fox World Travel, we’ve seen strong engagement from potential qualifiers and great excitement after they qualify for the trip.”
She also says the number of qualifiers varies depending on the industry and how the company is doing. “The results are mixed because the pandemic affected each industry in a different way. Some industries had record years and are seeing large qualification numbers while others struggled and are producing slightly smaller programs.”
As for ensuring ROI, Zawilinski says it comes down to careful analysis. “Any incentive program needs to start with smart goals, ones that carefully identify the areas in which the company wants to grow its business, whether it’s increasing sales in a profitable product category, incentivizing a sales team to increase productivity or boosting margin on existing sales. Companies need to present a clear picture of how to track these numbers at key times prior to, during and after the implementation. Using specific metrics during each phase of implementation will present a true picture of the success of an overall incentive program.”
However, she cautions, success is about more than revenue gains. “While many organizations only evaluate revenue increases when looking at the success of incentive programs, it’s important to measure other successes, such as employee engagement/retention or customer/brand loyalty. Taking a holistic approach to this evaluation will provide a better understanding of the overall ROI and success of the incentive program.”
While some companies have reacted to the overall economic instability in the world today by scaling back or eliminating incentive programs, Zawilinski cautions against taking that “drastic measure.” In fact, she points out, as others have, “A properly designed incentive program can recover costs or even increase revenue for the organization.” She adds, “Having an incentive program in place can jump-start the positive momentum necessary to properly emerge from economic downturns.”
She adds, “One of the biggest trends we’ve observed over the past few years is more younger qualifiers than we’ve seen in the past. As tenured workers are retiring, this has enabled larger numbers of younger associates to qualify for incentive programs. With this change, companies must continue to evaluate their ROI, metrics and attendee demographics to keep their programs fresh and enticing.”
Experts across the board believe not only that incentive programs provide valuable ROI, but that current economic uncertainties make them more important and valuable than ever. The data, they say, is the key to measuring ROI. If incentive planners have the data, they can prove the ROI. C&IT