BRUCE BOLGER IS A MAN WITH A MISSION: to get people to finally understand incentives. Two years ago, Bolger, president of Selling Communications in Irvington, N.Y., and several incentive industry leaders, in conjunction with Northwestern University's Medill School of Journalism, created a think tank — the Forum for People Performance Management and Measurement — to inform the public about the benefits of motivating the work force.
The first step, says Bolger, is to blow away the old stereotypes of dangling gifts in front of employees to perform. “All the research says that carrots are stupid,” he says. “Incentives are highly targeted marketing programs aimed at the people who can have the most effect on [company] performance.”
Brian Martenis has a mission, too: He is the sales incentive manager at Philadelphia-based Bayard Sales Corp., a floor-covering distributor, and he wants his company to launch an incentive program for employees.
Bayard alaready has an incentive program for dealers, which over the past four decades has helped the company to become a leader in its industry. Those who participate in it account for more than 60 percent of the company's annual sales.
Considering that history, one would think that convincing his company's senior executives to run a program internally would be a slam-dunk. But that has just not been the case.
Trouble at the Top
“My frustration has been the fact that here we are, one of the leaders of incentive travel, but we don't do anything with our employees,” says Martenis. “Sometimes those of us in motivation understand our company more than the people who own it.”
Even with a successful dealer incentive program, Martenis still finds himself defending what he does. In his 15 years at Bayard, he has often had to explain his expenses not only to executives, but also to company officials in accounts payable, procurement, and credit. “I can't tell you how many times, in the course of my career, I'll hear from the different departments heads: ‘I don't know what floor covering has to do with trips. What are we, a travel agency?’” he says.
He feels that his role within the company is “a lot more important” than people give him credit for. “When people treat me like a travel agent or anything other than an astute business person, I resent it.”
Martenis' problem parallels what is perhaps the incentive industry's biggest problem: Many senior executives don't connect incentives with business results. Only about 30 percent of U.S. companies have formal incentive programs, according to Bolger. Of that 30 percent, about one quarter apply “research-based principles,” meaning they have studied the effectiveness of employee motivation. (For a comprehensive list of research and sources that prove the effectiveness of incentives, complete with links, see CMI's Web site at cmi.meetingsnet.com/ar/meetings_surfing_incentive_trends/index.htm.)
Even for companies that do understand incentives, “It's sort of a halfhearted effort,” says Adrian Gostick, director of marketing, O.C. Tanner Co., a Salt Lake City, Utah — based consulting firm. “We hear from managers all the time that they're too busy or too focused on strategies, that this is the soft side of business,” he adds. “But really there's nothing more important than motivating your work force.”
Kimberly Ruby, event coordinator, Elmar Window Fashions, Willow Grove, Pa., knows that. Yet she encountered difficulty recently when she attempted to introduce an incentive program for Elmar installers. Ruby's proposal sought to increase sales and engender installer loyalty to Elmar, but management was hesitant because of perceived costs.
The company just had the best quarter in its history during the first quarter of this year, so the funds were available, says Ruby. The problem was more of a reluctance to change methods. “I'm not sure why there was a disconnect there,” says Ruby. “I think that perception was the problem.”
Internal and External Scrutiny
Different kinds of problems arise when a company is not doing well financially and executives have to deal with the reactions of shareholders, the board, and employees who learn that the company is starting an incentive program.
“The best thing to do — particularly if a company is struggling — is to start modestly and build toward more exotic and expensive trips as the program grows,” says Dee Hansford, president, Dee Hansford Consulting, Sacramento, Calif. “Maybe it's not a trip to Hawaii. Maybe they offer something that's a bit more affordable.”
Good companies don't suspend incentive programs because of hard times, but they may rethink them, adds Hansford. Perhaps they recognize employees by providing educational opportunities and sending them to a conference of their choice, or by using resources within the company, such as airline tickets, vacation homes, or condos.
As a result of corporate belt-tightening, sales compensation governance is a hot issue right now, states Todd McGovern, principal and Central Region leader, compensation, Mellon Human Resources and Investor Solutions, Chicago. Sales managers should expect continued analysis of budgets — particularly when sales are flat or down — from human resources and financial officers. “In a lot of organizations, the sales function owns and manages the incentives,” says McGovern. But now many executives are wondering if the fox is managing the hen house.
If sales departments are getting pressure, they may want to establish a governance committee made up of finance, human resources, and sales managers so that they can all have a seat at the table, says McGovern. He has seen a marked increase in companies adopting this approach. When the various departments understand their roles and their interaction with one another, it leads to fewer misperceptions, he says. However, it's important to have equal representation on the committee.
As an incentive program grows larger and matures, it is more likely to attract the attention of the procurement department, whose role is often to opt for the lowest price for a product or service. Therein lies the rub. “Lowest price is not always the product that's needed when … you're trying to get people to perform at exceptional levels,” says Jim Dittman, president, Dittman Incentive Marketing, New Brunswick, N.J. “They are almost completely contradictory.”
Procurement officers' misperceptions generally stem from the fact that incentives are such a new frontier for purchasing, says Kari Knoll Kesler, former sourcing specialist with ING Americas, Minneapolis, and Xerox Corp., Stamford, Conn. “It's likely right now that companies have inexperienced people procuring meeting- and incentive-related items,” she says. “It's not that they aren't good purchasers, it's just that there aren't a lot of resources and educational opportunities out there to teach them how to do it well.”
That said, Kesler has always approached incentive travel differently from any other type of meeting or travel purchase. “I don't think any purchasing person can afford to undermine the intent of incentives,” she says. “From a purchasing perspective, I hold that sacred. It's their money. I can help give them a million ideas on how to best spend the money they have, but it's not my decision to make.”
John MacKinnon, director of sales, Secure Dog Hosting, an Alexandria, Va. — based technology company, takes a unique approach when it comes to selling procurement and top executives on an incentive program. He calls it the “Sally Struthers close,” referring to the former star of “All in the Family” and late-night commercials for hunger victims. “Your heart bleeds for those kids. But Sally Struthers never says send me $300. She says, for less than a dollar a day, you can feed these kids.”
In making the case for incentive trips, he lays out the cost and then shows the revenue brought into the company by the top producers. Then he points out how long it would take to recoup those revenues if this person were to leave the company. “That's where I justify the expenses.”
Just as there is pushback within companies at the senior and finance levels, incentives sometimes create feelings of jealousy among nonsales employees. “If they see a significant amount of money being spent on the sales force to wine, dine, and entertain them with lavish incentive trips, and absolutely nothing is being done for nonsales people, it's almost impossible not to have a certain amount of resentment,” explains Dittman.
That's where recognition comes in. Recognition programs reward nonsales employees, and, while they usually don't feature the high-priced luxury items and travel opportunities that sales incentive winners get, they accomplish many of the same objectives.
Those trying to plan nonsales program often face the same level of resistance as those planning sales programs. Theresa Howell, manager, employee recognition, incentives, and rewards at Delta Air Lines Inc., Atlanta, can attest to that. Howell has headed the Delta program, which encompasses 60,000 employees and 15 business units, for seven years. “The biggest hurdle is getting management to support not only the funding necessary to do the program, but also the resources,” she says.
Howell runs the MyDeltaRewards recognition program as part of the human resources department. The program runs much like Delta SkyMiles, the company's frequent-flier program. All employees have opportunities to earn MyDeltaRewards points for different tasks and behaviors. For example, people in reservations might earn points for reducing their call handling time, while someone in community engagement might earn points for participating in a walk for hunger. Employees can redeem the points for a range of rewards — everything from baby strollers to flat-screen televisions and trips.
From a financial perspective, Howell has come up with creative ways to offset the cost of the program, such as tapping into vendor partners. Delta requires vendor partners — such as online hotel booking companies — to carve out some of the revenue generated from Delta reservation agents for her incentive program. Nonetheless, she has encountered a fair bit of skepticism, mostly from employees, who wonder, “Why is the company doing this, and are we going to have pay cuts because of it?” says Howell. So she created a well-defined communications strategy that outlines the rationale, measurement, and goals of the program to help satisfy employees.
She also has spearheaded a steady education process over the years on the value of employee recognition to executives. Employee satisfaction surveys and forums allow workers to voice concerns to executives; for example, they let it be known that trinkets and T-shirts don't cut it when it comes to motivation. The company's former recognition program featured these types of rewards, and employees didn't find them motivating, says Howell. “It was very shocking for leaders to hear that, to see the amount of money that was being spent (on T-shirts, mugs, coolers, etc.), and then to have employees say they don't feel recognized and aren't being valued for their contributions.”
Despite tough times for the airline industry, the incentive and recognition budget has increased at Delta over the past two years. “The company realizes that the emotional energy, and connection, and ties that leaders can have with employees are what makes the difference in the long run,” says Howell. “We can have the greatest systems in the world, but if we don't get our leaders engaged and hold them accountable for delivering the systems that are created, then we've failed.”
One Approach to
Never before have planners been under such scrutiny to prove the ROI of their incentive programs. Dee Hansford, president, Dee Hansford Consulting, Sacramento, Calif., advises planners to design a program that supports the organization's critical business goals, but most important, she says, is to communicate to top executives how the participants will influence those goals.
For example, explain that the winners who qualified for the incentive trip did so because their customers rated them between 98 percent and 100 percent on correctly answering any questions they had for the past three months. Tell them that when those kinds of scores are attained, the customer retention rate is X percent, and for every customer kept, the company adds $X to the bottom line.
“When you have data to back you up, it's much easier to go to your executive and say, ‘Look at our bottom line, look at our customer satisfaction, look how we improved our answer rate.’ When you show proof, very seldom do you run the danger of them taking the incentive program away.”
What Makes a Program Work?
“So often, incentive programs are improperly structured, and they actually de-motivate people,” says Bruce Bolger, president of Selling Communications in Irvington, N.Y. Bolger has written a new book, Principles of Results-Based Incentive Program Design (Incentive Marketing Association), with Rodger Stotz, vice president, managing consultant, Maritz Performance Improvement Co., Fenton, Mo., that seeks to answer the question “What makes a good incentive program?” In it, Bolger and Stotz lay out 10 building blocks:
- STRATEGIC PLANNING
An incentive program should address specific objectives with specific strategies and should be measurable.
- AUDIENCE IDENTIFICATION
This process helps you to understand the people whose actions are needed to achieve the program's goals.
- FACT-FINDING AND INVOLVEMENT
Find out what business conditions and internal problems could affect the desired outcome of the program.
- PROGRAM STRUCTURE
Determine the duration, who qualifies and why, and the actions required for recognition.
- COMMUNICATION AND TRAINING
Think of it as target marketing. Clearly explain the program to employees and executives.
- REWARDS AND RECOGNITION
Trips, cash, merchandise: Figure out the type of rewards to bestow upon recipients.
Calculate the fixed costs and leave flexibility for rewards based on performance.
- PROGRAM MEASURES
Measure the benefits of the program to the organization.
- TRACKING AND ADMINISTRATION
Make sure your employee and financial databases are in order for easy tracking.
- ANALYSIS AND FEEDBACK
Survey employees and managers so that you know what works and what doesn't.