Departments - November/December 2011

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A Positive Outlook for Incentives
Industry Trends Focus on Optimism, Recognition Trends & More

Incentive/Recognition Industry Starts to Stabilize

After more than four years of turbulence in the incentive and recognition industry, there are now indicators of a trend toward stability in both merchandise and travel programs, according to a new report form the Incentive Research Foundation (IRF).

"What we are seeing is the new 'normal,'" said IRF President Melissa Van Dyke. "The general buying outlook for merchandise and travel program planners has moved from negative or flat, to slightly positive. There's an underlying current of normalization—even suggesting growing optimism."

The reason behind the uptick in confidence is a downturn in the correlation between incentive programs and outside drivers. According to the IRF pulse study, the influence of factors such as financial forecasts, competitors' reactions and sensitivity to program extravagance has declined. Even the economy, which many consider the dominant force affecting every business decision, is lessening its grip on incentive travel planning, with half of respondents saying they feel no pressure to change destination. More than half of the respondents claim that the economy has either no impact or a positive impact on the implementation of merchandise programs. An optimistic three-quarters of those queried expect no change to their incentive budgets, with a few even predicting a slight increase.

In all, a near 80 percent of planners are looking forward to a positive 2012.

Looking forward, corporate social responsibility and integration with sales management tools are on the horizon. One in four respondents indicated they now use a CSR component in their incentive programs, and one in five indicated they have integrated their program with other sales management tools.

Cash Is Not King

The widely held belief that cash incentive awards are always the most effective employee motivator has been questioned in a new research review conducted by the IRF and the Incentive Federation. Examining a wide variety of studies in various industries, the audit found that non-cash awards can actually capture an employee's imagination far better than cash—thereby motivating them to increase performance. For business executives focused on the bottom line, this study proves extremely valuable and forces the question: "Does your company have the right award mix in place?"

"When used properly, non-cash awards, like merchandise and travel, have indeed proven to be more effective and therefore more efficient than traditional forms of compensation when used properly in a total-rewards mix," said IRF's Van Dyke. "Our research review showed that non-cash's influence over people can often be more powerful—and as such more profitable—than cash alternatives."

Van Dyke said non-cash incentives such as travel, entertainment and merchandise are being increasingly used by smart businesses as a way to control spending and motivate employees. "It is a real competitive tool in an economy defined by growing austerity," Van Dyke said.

According to Incentive Federation Chairman Karen Renk, it is incumbent on the incentive and recognition community to teach the nuts and bolts of non-cash strategies to business leaders and demonstrate how they can serve in a game-changing way.

"The current business economy is challenging everyone," Renk said. "Like any other business expense, the funding of reward programs attracts intense scrutiny from business leaders looking to slash costs. For that reason, the importance of these findings cannot be overstressed: Travel and merchandise awards often produce greater bottom-line benefits than other incentive alternatives. It is nothing short of a game changer."

Jeff Broudy, chairman of the IRF board of trustees, concurred. He said such measurable outcomes include increased sales, decreased waste and reduced absenteeism.

"Tangible awards capture employee attention," Broudy said. "That attention yields better performance and drives several practical business outcomes. The old notion that cash is preferred by employees and is therefore always more impactful is not true. Businesses need to change with the times, and their award strategies must as well."