The times have, most certainly changed! Gone are the days of having an incentive program because everyone else is doing one. The economic downturn created a new reality that is ... FINALLY... based on maximizing profit, cash flow and return on investment; eliminating wasteful expenditures and embracing the fact that the organization doesn't exist without engaged employees to make, serve, sell, market, create and develop your products, services and business opportunities for and to your customers.
Smart leaders are digging deep into their memories of how to manage in tough times, even if those lessons were only in theory. Smart employees realize that when they truly give their all to an organization they hold the keys to their own personal success as well as the success of their organization. Smart managers coach, mentor, inspire, recognize, help and train their employees to be successful and Smart organizations not only understand but act on the new reality.
Reasons why incentive and recognition programs are a valuable tool for building employee engagement, customer engagement, business value while increasing cash flow and profit.
1. Disengaged workers cost the economy $300B or more per year Source: Gallup
2. 85% of a company's market value is now calculated on intangible assets, which is defined as knowledge, reputation and human talent Source: Brookings Institution
3. The S&P 500 averaged 45.6% cumulative stock return (1998 - 2005) but Fortune’s “Best 100 Companies to Work for” saw a whopping 200.6% return Source: Russell Investment Group analysis, 2006
4. Organizations with higher than average levels of employee engagement also realized 27% higher profits, 50% higher sales, 50% higher customer loyalty levels and 38% above-average productivity. Source: Gallup
5. The organizations that invest more in talent management significantly outperform their competition across every measure of business - including earnings per share, gross profit margin and market capitalization per employee Source: Harvard Business Review, 2007
6. 41% of customers are loyal because of good employee attitude Source: Enterprise IG 2004 and MCA Brand Ambassador
7. 68% of customers leave because of poor employee attitude Source: Enterprise IG 2004 and Parkington and Buston Study of the US Banking Sector, Journal of Applied Psychology
8. 70% of customers' brand perception is determined by experience with People Source: Enterprise IG 2004 and Ken Irons, Market Leader
9. 56% of HR Managers surveyed are concerned that their top talent will leave for another job as the economy improves. Source: CareerBuilder and USA Today's most recent Job Forecast nationwide survey of employers (summer 2010)
10. 47% of your top performers are currently looking for a job Source: Leadership IQ
11. 66% of employees are influenced to stay based on incentive programs Source: Maritz 2005 poll
12. 74% of employees 18 - 34 link their future with a company to incentives Source: Maritz 2005 poll
13. A 5% increase in employee retention can generate a 25 to 85% increase in profitability Source: “Putting the Service-Profit Chain to Work,” Heskett, James L., Jones, Thomas O., Loveman, Gary W., Sasser, W. Earl, and Schlesinger, Leonard A., Harvard Business Review, March/April 1994.
14. 48% of employees trust their organization’s senior leaders – the people who set the tone for organisational culture and need to inspire high-performance and commitment. Source: BlessingWhite - The state of employee engagement 2008: Highlights for UK and Ireland
15. In performance improvement programs, non-cash rewards are two to three times more effective than cash rewards. Source: Study by Scott Jeffrey, Ph.D., described in “Right Answer, Wrong Questions” from September 2004 Issue of SalesForceXP . Also supported by People, Performance and Pay, O’Dell and McAdams, and The Compensation Handbook. Cited by Maritz
16. Incentive programs reported an 80% success rate in achieving their established goals when the correct reward was offered Source: Incentive Federation Study
17. Executives stated that in order to achieve the same effect of incentive travel, an employee’s total base compensation would need to be increased by 8.5%. Source: The Return on Investment of U.S. Business Travel - Oxford Economics USA - Sept 2009
18. Incentive travel investments yield an ROI of more than $4:$1. Source: The Return on Investment of U.S. Business Travel - Oxford Economics USA - Sept 2009
19. Both employees and managers say they highly value incentive programs. Nonetheless, 98 percent of survey participants complained about their implementation. A program’s success and return on investment, obviously, depends on how well it’s operated. Source: "Incentives, Motivation & Workplace Performance" Forum for People Performance Management and Measurement
20. "Properly structured incentive programs can increase performance by as much as 44 percent, but only a small number of incentive programs contain all of the elements necessary for success." Source: Incentives, Motivation & Workplace Performance, International Society of Performance Improvement, 2002.
As incentive ROI consultants we couldn't be happier when we heard Melissa Van Dyke, president of the Incentive Research Foundation state, "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."
The new reality really is about a holistic approach to maximizing people performance which absolutely impacts business performance whether positively or negatively... and we're here to help you!
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“Old” Incentive Programs
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WINning formula - ROI Incentive Program
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- Created in a silo by a departmental program manager -- many times without much thought as to how it affects other departments
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- Created by a departmental program manager, with the input of other departments (i.e. finance, operations, HR)
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- Designed in-house (78% of organizations do not use the expertise of incentive companies) without the proper tools and insight about how the incentive program will affect the P&L, cash flow & balance sheet or the people impacted by the program – both as participants and those excluded from the program
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- Designed and monitored by ROI incentive consultant (73.5% of respondents to the SITE Index survey, April 2010, want to learn how to build ROI/ROO into their incentive program)
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- Financed by a line item entry in the departmental budget
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- Financed by the incremental net profit directly attributed to the incentive program
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- Eliminated when program manager could not prove return on investment or return on opportunity
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- Retained and/or expanded when ROI/ROO proven
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- Designed without true understanding of behavioural science
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- Designed to maximize ROI and motivational impact
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- Perceived as being a frivolous, fluffy unnecessary expense
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- Proven to be directly responsible for changing behaviour attributed to increase in cash flow and profit
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- Reward chosen by program manager based on program manager’s preferences
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- Reward chosen after the analysis and budget calculations performed
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- Bigger budgets for group travel programs slashed during economic downturn. Other reward type budgets also reduced.
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- Budgets for group incentive travel, individual incentive travel, experiential rewards and merchandise increased as a result of proven ROI/ROO
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- Group incentive travel included luxury, golf, spa and free time
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- Group incentive travel includes more teambuilding, meetings and “giving back” to communities hosting group
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- Believed that cash was a good motivator
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- Realize that cash is not a reward, rather it is compensation and that non-cash rewards, as well as timely and personalized recognition, deliver a much greater return and costs a lot less than cash
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- Hit or miss as to the results… especially when key components aren’t fully understood prior to, during and after a program.
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- Can predict the results, adjust as necessary based on external factors such as competition, economics, legislation or environment as well as a myriad of internal factors.
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- “Saved” money by eliminating incentive company and buying from a retail establishment
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- Saved money by hiring ROI consultant to improve profit, cash flow and engagement scores. Saved even more money with a transparent at-cost pricing model in exchange for shared risk/reward in the program results
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