Feature Article - May/June 2010

Measure for Measure

Maximize Value Form Your Incentive Program

By Rick Dandes

Whether it's forecasting the return on an incentive award program over time, evaluating financial feasibility or even deciding when to terminate projects, measurement of return on investment is critical. After all, executives and managers are under close scrutiny to prioritize projects based on their expected returns.

Performance-improvement programs that really work often are designed based on a strategic approach to deliver value above and beyond the investment.

And, why not? In these challenging economic times, with corporate executives scrutinizing every dollar, chopping unnecessary spending and keeping close tabs on the appearance of excess, only the most essential programs are likely to survive. Department managers and personnel are being asked to do more with less—or in some cases making the tough decisions to do less with less—so understanding how to maximize value from an incentive program is key to its success.

"Corporations worldwide are scrambling to find effective ways to not only attract and keep the best talent, but also to elevate their performance, productivity and service levels to new heights," said Michelle Smith, vice president of business development for Salt Lake City-based O.C. Tanner, a company that provides employee recognition awards and programs for service, sales, performance and employee motivation services.

"Embodied in this quest is the ability to align individual behaviors with strategic corporate objectives," she said. "And, importantly, to motivate and reward those who meet or exceed those objectives. In today's economy, organizations must achieve maximum return on investment (ROI) in their people to boost corporate performance and gain a competitive advantage."

It's what distinguishes and differentiates top-performing companies from those that might not be around next year.

Research suggests that companies that recognize and incent their employees, partners or customers outperform their competitors by at least 30 percent to 40 percent in revenue growth, net income and stock performance. Moreover, the employees influenced by incentive programs are busy spending their day influencing other vital corporate assets—customers. The link between customer satisfaction and loyalty, and employee satisfaction and loyalty has been firmly established: Profitable and loyal customers are the result of engaged employees.

"Putting incentive programs to work for you is far more than a good idea," Smith said. "It's a profitable plan. In an increasingly competitive market, the data suggests that incentive and recognition programs can no longer be viewed as a discretionary expense, but should be viewed as a vital and strategic tool to ensure corporate growth and survival."