Feature Article - September/October 2009

Measuring Up

Reframing Incentives & Rewards to Emphasize ROI

By Dawn Klingensmith

It is the best of times; it is the worst of times.

It is time to innovate; it is time to get back to basics.

It is time for the incentives industry to educate customers, politicians, media and the public. It is time for the industry to reeducate itself.

"It used to be true that our industry did better than most during recessions," said Bruce Bolger, executive director of the Enterprise Engagement Alliance (EEA), a Falls Church, Va.-based trust that will be guiding the incentives industry through an image makeover and a return to fundamentals. "That's no longer true. The industry has been hurt. I've never seen anything like it."

The economic crisis along with a spate of negative publicity surrounding incentive trips are forcing short- and long-term changes to take place. Opulence is out. For the time being, incentive travel has been somewhat scaled back. The industry will be rebranded, with emphasis on the concept of engagement.

Most important, incentive programs need to have built-in metrics that enable companies to validate return on investment, because that's how incentive planners can justify funding these programs in times of aggressive and sometimes desperate cost-cutting measures.

Fortunately, just as it's needed most, the research showing that incentive programs work has reached a critical mass. Incentive planners can draw from it to make their case. But that's not good enough. They need to be able to prove that their programs in particular benefit the bottom line, and by how much. How can they measure and communicate a program's worth? How can they justify implementing, retaining or revamping an employee incentive program?

"The same way they should have been doing it in booming economic times — by quantifying the objective at the very beginning," said Jim Dittman, president, Dittman Incentive Marketing, New Brunswick, N.J.

Although the Incentive Research Foundation's (IRF's) Master Measurement Model of Employee Performance states that "every job and every task can be measured," thereby proving incentive programs pay off, buyers and sellers of incentive products have often been guilty of skipping this step. The industry has seen widespread implementation of incomplete programs—in other words, users have been investing only in rewards and recognition and not in analysis. In fact, recent research by Globoforce, a program provider based in Southborough, Mass., showed 42 percent of all organizations are not measuring their program results in any way. While in some cases that's indicative of buyers' faith in incentive programs, it's bad for business. In these trying times, many incentive planners lack hard data to show upper management, shareholders, politicians and the public that well-designed rewards and recognition programs are wise investments rather than expendable perks.

Aside from continual analysis, rewards and recognition initiatives should be part of a comprehensive package that also includes training and communication programs, in order to maximize ROI, Bolger said.