Four years ago, Fireman's Fund Insurance Company made a leap of faith by launching an incentive travel program to spur profit growth. It was a leap because there is still no accepted way to measure the effect such trips actually have on sales and competitiveness. But with four incentive trips now behind him, Fireman's Fund Vice President of Corporate Administration and Communications David Kliman has become a believer.
He's far from the only one. Insurance companies have been sponsoring incentive travel programs for decades, convinced that they not only boost sales but offer "softer" benefits as well. Those benefits include relationship-building between the home office and the field, a sharing of skills among qualifiers, and an increase in agent loyalty. But the question remains: Where is the hard evidence that incentive travel programs are worth their cost?
Fireman's Fund: A Focus on Values Companies like Fireman's Fund are finding that evidence in a formal return-on-investment measurement process. The Novato, Calif.-based company compares its revenue increases during the qualifying period to the cost of the trip, and constantly reviews the whole program. Two or three marketing vice presidents, along with members of the creative and corporate events teams, meet every two weeks throughout the year to examine and tweak nearly all aspects of the program. A meeting early in the qualifying year might focus on the marketing materials to be distributed to agents, for example, while a post-trip meeting goes over the trip in "excruciating" detail, including sales figures and the results of qualifiers' surveys.
"These meetings ensure that the company's meeting professionals are involved in strategic decisions," Kliman says. "The event team's voice is considered a critical component in developing the incentive program."
About 80 of the company's independent agents make the cut each year, along with five to ten company employees who have been named Employees of the Year. Kliman believes agents are more excited about the company and more loyal today than when he came on board 14 years ago, and he says the incentive trip is part of the reason for this change in attitude. He also credits the insurer's establishment of "shared values" five years ago. These include teamwork, honesty, courage, action, and sensitivity.
Each year, Fireman's Fund staff members nominate peers who they believe best represent those values as Employees of the Year. The Board of Directors bestows upon five to ten of those employees the John Meyers Award, named after a Fireman's Fund CFO who died of cancer three years ago. These award winners join qualifying agents on the incentive trip.
Business sessions during the trips focus primarily on the shared values, Kliman says, not on new products or the company's business strategy, and the John Meyers winners serve as living examples of those values. In post-trip surveys, he says, agents report that they are most impressed by those staff members and by Fireman's Fund's dedication to practicing what it preaches.
"People realize having that level of commitment to the highest ethical standards is what sets businesses apart," Kliman says.
Rewarding Ethics: Kansas City Life In 1996, Kansas City Life began promoting ethics among its agents by creating the Quality Agency Award, to be handed out at its annual general agents meeting. The award recognizes ethical excellence among agencies rather than sales performance. When selecting the winner, explains Jack Hayes, the company's senior vice president and chief marketing officer, the company looks at persistence, the number of customer complaints, and level of service at each agency.
As a direct result of the new award, he notes, agencies have renewed their focus on ethics, leading to an overall drop in customer complaints and an improvement in the ratings customers give agencies on surveys sent to them after they buy policies. Hayes says incentive trips reap similar results by tapping into agents' desire for prestige and recognition among their peers.
Kansas City Life agents have 24 months to qualify for two incentive trips--an exotic trek to a foreign land and a less elaborate trip in the U.S.--held in alternate years. The top tier of agents attends both trips, while the second tier qualifies for the domestic trip.
"I have agents tell me this is one of the most important things they do," Hayes says. "It's amazing how much more important it is to them than money."
Among the benefits they cite: the opportunity to network with peers and the top brass, learning about new business strategies from other agents, the pride of meeting the sales goal, and the chance to go on a trip they could never pull off on their own.
In the past five years, Kansas City Life agents have doubled their sales, and the number of qualifiers for the two trips has climbed 40 percent to include just over 200 of the company's 800 agents. Hayes says the improvements may be the result of successful incentive programs, but there is no way to prove it. "I think the financial people are always questioning it," he says. "And people who don't understand the business can't understand why you'd spend half a million dollars on something like that."
Solid Relationships: Pacific Life Jaimee Niles, assistant vice president of meetings and professional relations at the Pacific Life Insurance Company, says incentive travel is worth the price--even if she doesn't have a precise method of calculating its impact on agent performance. "I look at it as a reward and a way to build relationships," she says. "What value to do you put on relationships? If there were a way to quantify this, we would do it. These trips are part of the culture of the insurance industry."
The Newport Beach, Calif.-based company's incentive program consists of overseas trips and educational symposia at company headquarters. Together, the meetings cost about $3 million and are held in alternate years.
Niles believes incentive travel is part of the reason agent sales have increased for the past several years at
Pacific Life. She attributes the improvement to many factors, including good management, timing, and luck. She puts incentive travel under good management. Agents consistently rank trips above money as a desirable reward, says Niles, so the company gives them what they want. "Travel turns people on," she says. "If you create an emotional experience, people will feel good about you."
Keeping Top Sellers: Lutheran Brotherhood Tom Joyal, assistant vice president of events planning at the Minneapolis-based Lutheran Brotherhood, has been planning incentive trips since 1979. He points to another apparent benefit of a strong incentive travel program--agent retention, which saves the company money in the long run. "Recruiting and maintaining a resource is a high priority," he says. "Hiring and training someone is very expensive."
At the company's two annual incentive meetings, qualifiers interact with their peers, general agents, and top executives in a relaxed setting. "It's great bonding," Joyal says. "There's always creative tension between the sales force and the home office. It's good when you get some togetherness." And when employees feel connected to their employers, they are less likely to leave. The Lutheran Brotherhood's agent retention rate over a five-year period is 30 percent--high for the industry.
The trips, which combine business meetings, awards dinners, and recreation, also give the company's 1,600 agents a reason to stretch themselves, Joyal says. About a third of all agents qualify to go on one of two trips. The top two tiers are sent to the more exotic location, and the top sellers on each trip are awarded with extra nights.
"Once they do it, they always want to go back," he says. "When you have people telling you 'no' 50 weeks a year, it's nice to go somewhere for a week where they tell you you're great."
If there's a drawback, it's the program's $3 million price tag. Every year, the investment increases as the company tries to top the previous year's sites. Of course, agents are selling more each year to qualify. "It's a blessing and a curse," he says. "Just like anything else, you can always go up, you can never go down."
Joyal says the program has come under scrutiny only once. About 10 years ago, a former executive suggested that the Leader's Club, the lowest level of qualifiers, was too pampered. General agents came to the defense of those agents, because they generate much of the agencies' business. In the end, the Leader's Club remained part of the incentive program.
Positive Feedback: F&T Life Bill Hess, executive vice president of F&T Life in Syracuse, N.Y., says his company's incentive travel program is scrutinized continually. "We question it all the time," he says. "So far, the answer is we believe it's worth the money."
F&T spends less than $200,000 to send 60 out of 400 agents to a resort once a year for business meetings, along with some fun and recreation.
"We know to a majority of top producers this conference is very important," Hess says. "There are a lot of repeat qualifiers, and without the conference we wouldn't get that amount of production. They tell me that."
Here to Stay Many insurance executives believe the only way to prove definitively the impact of incentive trips on their companies is to cancel the programs and see what happens. But none of them are willing to do that because they believe a company without incentive trips is at a competitive disadvantage.
Since Fireman's Fund introduced its incentive travel program, profits have increased "exponentially" above the annual cost of the trip, according to David Kliman. The company hasn't seen a profit rise of that magnitude in many years. "We tie it to the incentives," he says. Fireman's Fund may have jumped into incentive travel late in the game, but it has committed a lot of resources to making it work.
"Once we did it, we did it in a big way," Kliman says. "It's been enormously successful."
In his 26 years as an agent, Tom Cooper has been on so many incentive trips that he's lost count of them. Cooper works in a Germantown, Tenn., agency primarily selling Kansas City Life policies. Qualifying for the company's trips, he says, "ceases to be a goal and becomes a way of life."
What would happen if Kansas City Life--or any other company--suddenly stopped holding its annual incentive? "It would be a big mistake," Cooper says. "It would be one of the first signs that the company has ceased to care about the agents. They would start to lose loyalty."
Shelly Rowe, chairman of Kansas City Life's general agents advisory cabinet, has seen the world on a dozen incentive trips in her 25 years as an agent. She says the 20 full-time agents she oversees in Denver value the trips highly. "Agents by nature are competitive if they have a carrot out there that keeps them motivated," she says. "And these are nice, beautiful carrots."
Madelyn Flannagan, director of research and information at the Independent Insurance Agents Association, says the feelings of the Kansas City Life agents mirror those of most agents who work with insurance companies with long-standing incentive programs. "It's always been a huge draw," she says of the trips. "But it's sort of a fringe benefit. It's not why agents are in the business."
She says agents strive to win the trips for the prestige, to enjoy the camaraderie of being with other successful salespeople, and to meet the people at the top. "Then you know who's making the decisions," she says. "You know who you're talking to everyday. It builds team spirit."
Bob Dawson, executive director of The Business Group, an incentive marketing company in Fremont, Calif., believes insurance executives must begin quantifying the impact of incentive programs, in part so that they can defend their use during lean times. Several years ago, Dawson earned his Certified Incentive Travel Executive designation from the Society of Incentive and Travel Executives with a thesis on calculating the return on investment of incentive programs. Since then, more and more executives have begun talking about. But talk is all it's been, Dawson says, because measuring the ROI for incentive trips takes time and effort.
That may be fine for now, but what happens when someone challenges your agents' annual five-star getaway? "Companies are not into spending money. They are into making money," Dawson cautions. "If you're not measuring where your returns are coming from, you're making a big mistake."
Even though insurance companies may not eradicate established incentive programs in tough times, they may scale back their funding unless an incentive planner can demonstrate why that strategy could backfire. As Dawson sees it, most qualifiers have been on multiple trips and will realize the company is cutting corners by the decrease in the quality of the destination, the length of the visit, or the number of perks. The company's top agents will feel undervalued and production will drop off. Companies actually should increase their investments in incentive programs during economic downturns--a hard sell, he says, unless executives follow the ROI philosophy.
Dawson says the key to measuring results is establishing specific objectives. Those objectives, such as a certain percentage increase in sales, must take into account the environment within the industry and the company at the time of the program. For example: Is the insurance marketplace expanding or shrinking? How does your company rank among competitors? Will there be major changes in the company during the qualification period (such as a new product)? Who are your customers and what is the forecast for their finances? Using the answers to these questions, a company can set its sales goals, Dawson says, but no one can see into the future. Sales figures and economic conditions must be re-evaluated every month during the qualifying period, and the incentive program should be changed if the predictions were off-target. "If you don't track it every month, you are going to miss something," he says.
Dawson says most of the work calculating ROI begins after the trip is over, and it's more than just comparing the cost of the trip to the increase in sales. It involves everything from surveying participants to taking a comprehensive look at sales figures for qualifiers and non-qualifiers. That means companies should examine sales based on the demographics of the agents: their region, income, gender, and age.
Dawson says companies should pay most attention to the agents who just missed qualifying to figure out how to encourage them to work harder next time. "The people who almost made it are the people who paid for the trip, and most companies ignore them," he says.
For example, if a large number of industry veterans did not qualify even though they possess the necessary skills, the incentive trip may not have appealed to them. If newer agents fail to improve their sales figures after a couple of years, they probably need better training. "It's kind of like doing detective work," he says.
After 28 years, Richard Ross got out of the incentive travel business because he thinks companies are over-reliant on the programs to instill loyalty among their employees. "There is very little measurement or accountability," he says. "Because [incentive travel programs] are a part of the corporate culture and routine, they are not managed with rigor."
Ross, president and CEO of The Ross Group, a Boston-based consulting company, has changed his focus to performance management. He says the real way to nurture a strong sales force and keep turnover at a minimum is to establish a clear set of values, to follow them, and to communicate them to the workforce.
Once-a-year getaways that bring together the top performers with corporate leaders, he says, cannot make up for poor communication between executives and the entire agent field. "If you have 1,000 agents and only 10 percent show up on your incentive trip, have you changed anything?" he asks. "If you exercise one part of your body, the rest remains weak."
Companies should plan programs to reach every agent and employee, says Ross. Today's workers value education and, he says, not just cash rewards and vacations. "I think insurance companies could go a long way by rethinking their people strategy," he says. "It's a general problem in business."