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The "Evidence-Based" Case for Incentives (2009)
DownloadsEvidence Based Case for Incentives
- Take A Deep Breath
- Performance Can Be Measured. Incentives Tied To Measures Drive Performance
- Incentive Program Design Process Defined. Results Equal 45% Improvement
- Value of Incentive Travel Can Be Measured
- Rewards & Incentives—Key Elements of Employee Lifetime Value
- What To Do In Turbulent Times…
- Supporting The Industry—Complying With The Policy
- The Incentive Industry Is Important—To The Economy & The Country
- Summing It Up
- The Incentive Research Foundation’s Goals
All too often, the general public reacts to stories like AIG and Wells Fargo emotionally—with little effort to fully sort out the facts. Certainly, the current economic and political climates have created pain for many; however for companies to avoid incentive program usage on the grounds that such programs are extravagant or “frills” that they can do without is clearly an emotional reaction and not based on clear thinking or facts.
Over twenty-years of evidence-based research data from the Incentive Research Foundation (IRF) provide clear proof that incentive travel, motivational meetings, and business events improve business performance. In addition, these initiatives have resulted in many good, steady jobs for unskilled and white collar employees.
This paper highlights a variety of research studies and their “evidence-based” findings. Funded by the Incentive Research Foundation, these studies shed light on the value and appropriate use of incentives and incentive travel in today’s marketplace. They clearly demonstrate that these business tools offer significant benefits that make them more important to implement than ever.
The research on the Master Measurement Model highlighted how incentives can be tied to the performance of white and blue collar employees so that both good and exceptional performance can be rewarded.
This research provides detailed descriptions and examples of how to create and design performance measures to which incentives can be tied.
Performance measures offer both the employees and the organizations a “win-win.” Employees gain a clear understanding of what is important to accomplish in their jobs, they are rewarded when these performances are achieved and the organization has an effective communication and reward process that delivers improved performance.
In these times of global competition in a marketplace demanding high quality and reasonable prices, application of the Master Measurement Model study is more important than ever for organizations large and small.
Incentives, properly designed, implemented and continually evaluated, can and do provide measureable benefits. The study, Incentives, Motivation and Workplace Performance: Research and Best Practices (2002) found that individual incentives resulted in a 27% improvement in performance and that team incentives improved by 45%.
The Performance Improvement by Incentives Model (PIBI Model) is an eight-step Best Practices Model for program design. Providing step-by-step guidelines, incentive program managers can use the PIBI Model to assess and fine-tune their current processes for maximum business results.
The recent focus on incentive travel has raised issues about the purpose, value and appropriateness of this long-standing business tool. These issues have been studied by the Incentive Research Foundation in several studies. In Determining the ROI of Incentive Travel Programs, the purpose, objectives, metrics and value of the investment were addressed. This study highlights:
- The need for rigorous planning;
- The process for establishing effective goals and objectives;
- How to establish the value of the program.
This research not only establishes a process for “designing in” the value of an incentive travel program, it also sets a bar for all incentive programs to meet. This study removes the excuses for sponsors to ignore the need to measure the benefits and value of incentive travel programs.
Think of the importance of having this information and data on all current incentive travel programs in the current economic environment. Why would companies discount this highly effective, positive strategy?
The Incentive Research Foundation is a Founding Trustee of the Forum for Performance Management and Measurement, which extends the reach of its research funding. Two examples of how this supports the incentive industry are the Forum’s research studies on:
- Internal Marketing Best Practices
- Employee Lifetime Value: Measuring the Long-Term Financial Contribution of Employees
The study on Internal Marketing Best Practices highlights that recognition, showing appreciation for and valuing employees, enhances employee engagement. As referenced in this study, “Employee engagement is a result of an efficient and collaborative work environment where employees feel involved and motivated. The organizations use simple, effective tactics to focus on employee well-being through fundamental work appreciation tactics.”
The study goes on to identify key tactics used to address employee engagement, which includes rewards and incentives. For example, a fast-growing investment bank with assets of $1.1 billion hosts an annual travel award for top-performing employees and their spouses.
The Employee Lifetime Value Study identifies two key tactics that increase the value of employees: training and rewards. This and other research clearly demonstrates that integrated approaches—where the focus is on employees, distributors and customers—results in the highest engagement and performance levels.
In 2005, the IRF took a look back to “see the future” in the study entitled: Survey of Incentive Travel Program Business Strategies. This study captured the experience and perspective of incentive travel executives as they reflected on the business post-9/11. Those turbulent times provided a learning opportunity for the industry as to what can happen and how various responses worked.
In short, this report aims at providing answers to those interested in creating future-oriented competitive methods as a response to external forces and events, such as strong fluctuating economic times. The study was prophetic in that it states “the threat of recession will remain, and the recovery of the economy will depend more on the global economy and will be increasingly influenced by safety and security issues.”
The study identified a critical checklist for incentive travel companies to create the foundation for improved business performance:
- Carefully monitor external forces, including economic, political, technology, ecological and socio-cultural;
- Assess the characteristics of the company’s finance, marketing, human resources and operations departments;
- Analyze competitive methods or strategies;
- Assess the company’s creative assets;
- Evaluate program successes.
The US Travel Association is providing Congress with a model policy for corporate boards regarding meetings, events, and incentive/recognition travel, which includes strong references to “legitimate business purposes,” and being “cost justified.”
The IRF research has built a resource for both incentive companies and end-users to comply with this policy. Specifically, there are a number of studies that examine the use of incentive programs and their ROI, including:
- Assessing The Impact of Sales Incentive Programs: A Business Process Perspective (2007)
- Measuring the ROI of Sales Incentive Programs (2004)
- An Exploratory Study of Sales Incentive Programs (Forum)
- Determining The Return on Investment of Incentive Travel Programs (2001)
- The Long-Term Impact of Incentive Travel in An Insurance Company (1995)
- Tracking the Long-Term Impact of Incentive Programs (1994)
These timeless studies offer a wide variety of examples of pre- and post-program methodologies for assessing the impact of incentive programs that are highly pertinent today.
Finally, the IRF tracks the incentive industry periodically through an Industry Profile Study and more frequently with Pulse Surveys. These data are especially important in the current economic and media hungry environment.
The report entitled The Market for Incentive Travel, Motivational Meetings, and Special Events yielded this industry market data:
|Total (Billions, 2006)||$77.1|
The 2008 Industry Trends Pulse Survey shows the economic downturn is already impacting the industry. For example, 78% of respondents agree the economy will have a negative impact on incentive travel programs and budgets; 49% believed the economy in 2009 will have a negative impact on their ability to plan and implement merchandise non-cash incentive programs.
In addition, growing sensitivity that programs will be perceived as “too extravagant” can impact the type of program awards offered. For example, respondent agreement that they were sensitive to such perceptions grew by 30% in only two months:
Agree (Sept., 2008): 45%
Agree (Oct., 2008): 75%
This heightened sensitivity is understandable. The appropriate response for incentive managers is to "right size" their awards, rather than react by eliminating programs.
These studies show that:
- The meetings, events, and incentive travel industry are economic engines; and
- The current financial crisis is impacting the industry.
The IRF has (and continues to be) an important resource to the industry. It stands alone as the independent, time-tested research provider. This resource has been important in the past, but it is now critical as the industry enters the “new world” of government controls and an extended economic downturn.
The Incentive Research Foundation, a non-profit foundation, is chartered to research and educate business on the effective use of incentives and incentive travel. The IRF has dedicated over 20 years to creating a better understanding of incentives, how they can be effective management tools, and identifying trends in their use.
This material is copyrighted and the sole property of The Incentive Research Foundation. It is not to be reprinted or reproduced in any way without prior attribution to The Incentive Research Foundation. Copyright 2009.