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PRODUCTS AND IDEAS THAT INSPIRE PERFORMANCE

Premium Incentive Products Magazine - Products and Ideas That Inspire Performance
Positive Direction
State of the Industry Shows Continued Growth

Industry pros concur that the state of the incentive industry is continuing to move and grow in a positive direction.

"As our 2016 outlook study showed, the industry is still positive and growing. The IRF has tracked the net optimism score (NOS) of the incentive travel and gift cards/merchandise side of the market since 2008. Net optimism shows the number of individuals who feel the economy is having a positive impact less the number saying it is having a negative impact on programs," said Melissa Van Dyke, president of the Incentive Research Foundation.

Net optimism for the incentive travel and gift card/merchandise sides of the market was at 26 percent and 14 percent respectively in late 2016.

"These are still positive showings, but they are down from highs of 40 percent or more over the past two years," Van Dyke said. "Net optimism correlates highly with budget growth. So, we anticipate the market to continue to grow, but at a slower rate perhaps than in the past few years."

Richard Blabolil, president of Marketing Innovators International Inc., in Rosemont, Ill., added that the economy is allowing companies to invest in their employees.

"Although the return on investment is more pronounced in good times, investing in your greatest asset, your people, is equally as critical in hard times," he said. "The upswing in the economy (wage growth and corporate performance) allows for more perceived risk taking. Companies can test programs, contests and award schemes to engage employees and channel partners. There is more room for trial and error in positive economic environments."

A Positive Direction

For sure, the industry is moving in the "right direction," Blabolil said, "Because Corporate America, the buyers, are moving in the right direction.

"Companies are aggressively pursuing employee engagement strategies, and partners in our industry are responding with new ideas—mobile platforms, a diversity of award options, analytic support and employee marketing strategies," he said.

There also is an increased focus on the American worker.

"The concept is to be attentive to each individual's needs at every touchpoint through onboarding, development, anniversaries and achievement from 'hire' to 'retire,'" Blabolil said.

Michelle M. Smith, vice president, marketing, O.C. Tanner, a Salt Lake City-based company that specializes in employee recognition awards and programs for service, sales, performance and employee motivation services, believes this an exciting time in the incentive and recognition industry.

"It's never been more competitive, but we also have more tools, more options and more research to help us deliver a wonderful experience—and a wonderful result—for clients," Smith said, adding that clients are continually raising the bar, seeking new ideas and methods to improve program performance, and expect incentive and recognition professionals to deliver sustained and quantifiable results.

Studies conducted this year have shown what is affecting the incentive industry the most, such as increasing demand for non-cash rewards, incentive travel, etc., as indicated in the IRF 2017 Trends Study.

"An inability to credibly demonstrate competency in these areas will likely take us out of consideration," she said. "We have to continuously embrace new tools and new insights to remain competitive and to grow as professionals."

While increased competition, new research, and the introduction of new technologies and methods might feel overwhelming at times, they are all working together to deliver a much more robust incentive program, which is good news.

In addition, Smith believes the Great Recession did the industry at least one favor: "Many leaders discovered the power and value of recognition and incentive programs to define a company culture and fully engage employees in the organization's goals," she said. "Not every leader has made the transformation, but many more are on board and receptive to our industry than I've ever experienced."

Industry Research

Studies conducted this year have shown what is affecting the incentive industry the most, such as increasing demand for non-cash rewards, incentive travel, etc., as indicated in the IRF 2017 Trends Study.

Van Dyke said the five biggest findings from the last year comprise the following:

  • Changes in the labor market are driving increased demand for non-cash rewards and recognition.
  • Emotion is an important part of business now.
  • Top-performing businesses use non-cash rewards at a greater rate.
  • U.S. regulations are making it difficult to design and execute programs.
  • In many instances, budgets are not keeping up with rising costs.

Meanwhile, Smith cited the study, "Using Behavioral Economics Insights in Incentives, Rewards, and Recognition: The Neuroscience," as being her favorite one from the IRF this year.

"The insights in the study," she said, "help those of us selling incentive and recognition programs to better understand human motivation, and to ultimately create more compelling and effective programs."

Neuroscience is the study of the brain and nervous system, and Behavioral Economics explores why people sometimes make irrational decisions, and why their behavior does not always follow traditional economic models.

"Over the past few years, interest in these topics has grown significantly as incentive professionals sought a scientific approach on how to effectively motivate people and modify their behavior," Smith noted.

"The conventional approach (that rewarded behaviors are repeated) supposes that tangible rewards and punishments are solely sufficient to drive the desired employee performance or consumer choice," Smith said. "While an extrinsic approach is serviceable and relevant, Behavioral Economics posits that an overreliance or sole focus on extrinsic motivators is based upon an in incomplete understanding of human motivation and therefore inefficient."

"Because behavioral economics recognizes that 70 percent of human decision-making is emotional (as opposed to rational), it proves to be a more useful tool than traditional economics in helping program designers understand what actually motivates people, why some incentives are more effective than others, and how they can strategically apply these principles in their programs," she said, adding that incorporating proven techniques from behavioral economics into motivation programs produces a competitive advantage and higher levels of employee productivity, engagement and retention compared to programs that rely solely on monetary incentives.

Companies have a variety of types of people in their employment—multiple generations, cultures, ethnicities, beliefs, styles, opinions, etc.

"Programs are about inclusion and addressing the individuality, team dynamics and subtleties of 'the person' in programs," Blabolil said. "Therefore, the design and then award mix is about addressing choice and variety, but at a level that makes decision-making by the award-winner plausible, inspiring and rewarding, rather than complicated and ominous."

All awards have merit—from merchandise, gift cards and prepaid cards to travel and experiential events.

"The IRF studies are integrating science and intellectual components with the emotional appeal of awards," Blabolil said. "Creativity and accelerated performance comes from program design, trusted intent and meaningful, relevant rewards."

Significant Awards

Experts say various types of non-cash awards are important in incentive programs today.

"Our research shows that all types of non-cash awards including travel, gift cards, award points, merchandise and electronic cards are all important parts of an organization's non-cash rewards strategy. Eighty-one percent of all businesses using non-cash rewards use more than one award type," Van Dyke said.

Over the past 20 years, according to the Incentive Federation, there has been a dramatic jump in the number of U.S. businesses using non-cash rewards, rising from 26 percent of all U.S. businesses in 1996 to 84 percent of all U.S. businesses in 2016..

Over the past 20 years, according to the Incentive Federation, there has been a dramatic jump in the number of U.S. businesses using non-cash rewards, rising from 26 percent of all U.S. businesses in 1996 to 84 percent of all U.S. businesses in 2016, as indicated in the IRF's 2017 Trends Study.

Awards support the integrity and intent of the incentive program.

"The design of the program builds on the trust and authenticity of the relationship between the company and the employee," Blabolil said. "The awards amplify this by being meaningful and relevant to the recipient. The mix of merchandise, gift cards, and individual travel delivers the 'last mile' of the experiential journey."

Today, there are fewer incentive designers who rely solely on tangible rewards in driving behavior and optimal performance.

"Instead, program designers recognize the importance of both intrinsic and extrinsic motivation, and this is what's driving the increased interest in Neuroscience," Smith said.

"In a single instance of giving an award, an organization allows the recipient to acquire status (and potentially goods or services), to bond with their team or the person giving the recognition, to more deeply comprehend what's important to their employer, and to defend the very deeply held belief that they're good at what they do and have chosen the right organization for employment. These are all powerful drivers of engagement and reinforce the basic principles of recognition and incentive program design.

"But," she noted, "How do incentive and recognition professionals decide which rewards to use and how exactly to use them?"

Factors such as a person's age, profession and background all play into the impact a reward has on them. However, Smith added, for an effective campaign, incentive professionals also should give careful consideration to these subtle but significant variables adapted from "How to Effectively Harness Behavioral Economics to Drive Employee Performance and Engagement" by the IRF:

  • Ease of Selection: Incentive programs should focus on using nudges to make the reward system user-friendly and to maximize the program's emotional impact. Emotionally compelling rewards hit the mind harder, are remembered longer, produce quantifiably better results and influence the internal brand the most.
  • Reward Type: Employers need to move beyond programs that rely solely on monetary rewards, but instead use a variety of rewards in strategic combination to complement each other. Award programs should offer tangible awards and formal recognition more frequently, while using experiential rewards (trips or spa treatments) more sparingly. The latter tends to deliver more intense happiness, while the former serves as a permanent reminder of appreciation.
  • Motivation Type: Consider rewarding top-performing teams as opposed to using a system in which team members all compete for a single reward. In today's workplace, cooperative incentives are more effective and valuable than competitive incentives. Also, don't underestimate the value of rewards that reinforce internal (intrinsic) motivation, which creates a long-lasting desire to perform well by increasing the recipient's self-esteem by establishing a sense of purpose, fueling a desire to live up to expectations, or helping the recipient master new skills. And celebrating reward-earners publicly has measurable, favorable effects on productivity.
  • Personalization: Who does the recognizing and how personalized or public that recognition is can have an impact on the recipient's emotional response and, ultimately, their productivity. One person may value and appreciate public recognition, while another might respond more favorably to private acknowledgement from an esteemed colleague. Similarly, employers need to depart from a generic, one-size-fits-all model and incorporate creativity and personalization (based upon what matters to the individual) into rewards.
  • Timing: Surprise a recipient with their reward immediately after the goal has been achieved to make it more meaningful. A reward that is explicitly promised in advance to a program participant if he or she achieves a particular goal loses its impact much more quickly than a reward received unexpectedly in recognition of reaching a goal.
  • Desired Impact: Rewards programs that prove employers truly care about their employees are the most effective. Implementing emotionally meaningful incentives in programs has benefits that extend beyond improving employee productivity. The more valued a company's employees feel, the better the internal brand impression, and those employees act as brand ambassadors who extol the company's virtues to job candidates, current and potential customers, vendors and the media.
  • Purpose: Ideally, every incentive and reward program will align to the company's purpose in some way. If employees believe in the company and its vision, trust their leaders, and develop caring relationships with the people they work with, then the employer becomes an asset that employees will instinctively protect. In this case the employee feels like an owner as opposed to a renter and will act accordingly.

Industry Challenges

In the IRF's 2017 Trends Study, it indicated that one of the biggest challenges facing the incentive and recognition industry today is the rapid succession of changes in government regulations that pertain to incentive program design and execution. In the study, it indicated that nearly 60 percent of respondents in the latest IRF Pulse Study had indicated that they agree or strongly agree that government regulations are making it more difficult to design reward and recognition programs.

Van Dyke said that "The churn created by changing regulations and costs that are exceeding budgets will be our biggest challenges moving forward."

To boot, Blabolil noted that tax reform might be the single most influential factor in the near term regarding the use of incentives.

"Depending on how Congress views the effectiveness of corporate incentives and whether government should play a role of 'incenting' companies to drive productivity and engagement, or whether they believe that it is totally in the hands of corporate American, will be a key by product of tax reform," he said.

"The paradox is that if incentives are so influential and important to Corporate America," he added, "Congress may conclude that they do not need to participate in its deployment or 'tax benefit.'"



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