Re-inventing Incentives
Unique challenges are forcing change upon the current incentives business—and designing its future.
By Dalia Fahmy
Fun and luxury.
Those two words once defined most of the incentive events organized by Arabian Adventures. Frédéric Bardin, senior vice president of the Dubai-based company, says clients from the U.S., Europe and Asia rewarded their employees by buying them as many thrills as possible. Now, burned by backlash against lavish events in the wake of the financial crisis, companies want to buy more educational incentives that have a deeper purpose.
Organizations are demanding incentive events that either relate to business objectives or promote social responsibility—a more meaningful experience, Bardin says.
As a result, Arabian Adventures recently introduced a safari program in which participants visit a wildlife conservancy, donate to the park’s upkeep and learn to read animal tracks.
This change in mood has affected the way vendors in Dubai’s event industry do business. Bardin puts it bluntly: “We used to be a ‘bling bling’ destination—now we are not.”
This shift isn’t limited to Dubai. Incentive professionals around the world are rethinking their strategies along similar lines, and that is forming a significant shift in the look and feel of incentive programs.
More Consistency, Buy-In
Behind the scenes, a similarly important change is taking place: companies—and with them vendors—revamping their incentives strategies to make them better integrated into an organization’s fiber. This requires more consistency and more buy-in.
Consistency may have been a goal in the past, but it was often poorly implemented. In the days when money was no object, companies often had several incentive programs running parallel without much thought to how they worked together. In the future, companies will focus on coordinating efforts.
“Once companies started to pare down out of financial necessity and integrate their programs, they started asking questions about why they were doing each program,” said Michelle Smith, CPIM, vice president of business development at corporate incentives vendor O.C. Tanner.
The result has been a better understanding of how different elements of an incentives program fit together.
“It helped them connect the dots and realize that you have to have consistency,” she said.
Buy-in is another trend that has often been talked about but is now finally poised to take off. With less money to spend and more demand for meaningful programs, companies are looking for ways to better design their programs and deliver them with a passion that doesn’t ring hollow.
As a result, event planners are involving human resource departments, division administrators and direct supervisors in order to find ways to customize programs for particular individuals. Part of this effort involves educating employees who usually aren’t touched by incentive programs and explaining to them how programs contribute to the company’s bottom line. This helps make programs more effective and removes some of the stigma associated with sending employees on a “fun” trip while everyone else is stuck in the office.
“If you have departments that don’t really understand what the incentive does for revenue generation, they are going to be much more willing to criticize,” according to David Ryder, managing director and principal of Veer Consulting in Scottsdale, Ariz. “It’s easier to have effective incentives if the constituent pool is larger.”
Navigate the New Normal
To make themselves useful even when companies can’t pay for programs, vendors have been focused on building their relationships with clients through guidance.
Advising shell-shocked clients has been one of the cornerstones of strategy for David Gabri, president and CEO of Associated Luxury Hotels International (ALHI), a company that acts as a sales agent for thousands of independent hotels. The firm has been busy compiling data about the value of incentives and sharing it with clients, so they are prepared to defend their budgets in the next round of negotiations with corporate decision makers.
“We try to be of value,” he said. “If there’s one benefit to this downturn, it’s that it has allowed us to pull together data that proves the case for the value of meetings.” (See the January 2010 issue of One+, page 76, for complete details.)
O.C. Tanner’s Smith says the firm has been helping clients remember why they implemented incentive programs in the first place.
“We are holding the line with our clients and making sure they know they need talented people more than ever,” she said. “You can’t control economic factors in the marketplace, but you can control, to some degree, your employees’ performance.”
No Future Without ROI
As demand begins to build up, incentive professionals are becoming more optimistic about the future. Professionals expect 2010 sales to exceed 2009, with a return to pre-crisis levels expected by 2012. FutureWatch 2010 survey found a 2.8 percent expected growth industrywide for this year.
As volumes slowly return to pre-crisis levels, the types of incentives offered are changing considerably. Clients and vendors are actively redesigning their incentives strategy in order to guard against criticisms of the past while taking advantage of emerging trends.
Foremost on everyone’s mind is ROI. A buzzword before the crisis, ROI is now a headline leading every conversation about the future of incentives. In fact, incentive professionals who didn’t believe in measuring results before the crisis learned their lesson the hard way.
“As an industry we have always measured ROI, but many clients pushed pack,” O.C. Tanner’s Smith said. “What we all discovered during the crisis was that if you couldn’t justify the value of your incentives, there was a likelihood [the events] were going to get cut substantially.”
Innovative incentive vendors understand it’s not enough simply to design a program and hope that the metrics fall into place. In fact, incentive planners are increasingly designing programs with specific outcomes in mind, in order to facilitate measurement. By the same token, companies are no longer content simply measuring an incentive program’s ROI as a standalone item, and senior executives want to know how the program fits into the company’s overall ROI strategy.
“We’re moving away from a time when programs came as part of an overall engagement strategy to a time when these incentive programs are part of a total ROI strategy,” said Melissa Van Dyke, president of the Incentive Research Foundation.
And vendors will have to adjust accordingly.
“Being able to put together a program is not as valued as it was in the past if you can’t also provide the ROI,” Van Dyke said.
Smart CSR
Another big shift in strategy is the addition of more corporate social responsibility. Companies can’t lose sight of the fact that they’re trying to reward top performers with valuable perks, but the good incentive designer finds ways to combine those perks with a meaningful message.
“A smart incentive will keep the company in good stead in the court of public opinion while doing something really worthwhile,” Veer’s Ryder said. “It has to be something that’s perceived as benefiting the greater good.”
A day-trip of team-building exercises, for example, might focus on providing some kind of community service. Ryder has no doubts that such incentives, if designed well, can be especially appealing to the younger generation of employees.
“The millennial generation is very plugged into the green movement and CSR,” he said.
In addition, as long the economy continues to suffer, companies will try to spend their incentive budgets domestically in order to show that they are supporting the U.S. economy.
Enrichment as Incentive
Offering young employees the opportunity to plant trees ties into another trend: personal development.
Broadly speaking, personal enrichment, or personal development, refers to incentives that identify the personal interests or ambitions of individual employees, and gives them a chance to pursue those interests.
A top salesperson who loves car racing, for example, might feel more rewarded with a training session at the Indianapolis 500 than a pricey trip to Paris. Especially for highly paid employees, companies are focusing more on creating unique experiences than spending lavishly on perks that the employees can buy for themselves.
“The concept of employee enrichment takes engagement to the next level,” said Karen Renk, CAE, executive director of the Incentive Marketing Association. “Companies who want to recruit and retain top talent are going to be people-centric organizations, meaning they are concerned with their employees’ well being on many levels. Experiential rewards tie well into that.”
Personal development can also refer to offering employees a better work-life balance, by giving them more time to spend with their families, paid time at work to pursue pet projects or offering wellness programs. Wellness programs can easily be justified as a necessary expense to keep workers healthy and bring down healthcare costs, and they are becoming more popular with employees, resulting in a happier, more productive and more loyal workforce.
It’s not a coincidence that personal enrichment has emerged as one of the most powerful trends in the wake of the economic crisis. Experts say it’s a natural complement to another sweeping trend: more attention to personal interactions. Incentive professionals are adding a personal touch to many of their programs, in order to make participants feel more appreciated without adding significantly to costs.
Whereas in the past incentive participants may have simply been flown to an expensive resort and spoiled with an expensive package of activities and meals, they might now have a chance to spend time with the company’s CEO instead.
“I’m not saying the personal interactions weren’t real before, but they were overshadowed by the extravagance,” ALHI’s Gabri said. One+
DALIA FAHMY is a regular contributor to One+ as well as other business publications.