Value Validation

New thoughts on the ROI of incentive programs

By Alex Newman

Tracking the ROI on your incentive programs isn’t some make-work project for businesses, says Rick Garlick, a hospitality sector expert specializing in employee engagment. “It could actually protect you in an economic downturn.”

Garlick is vice-president, strategy consultant, with Magid’s Travel, Leisure and Hospitality (THL) prac-tice in Minneapolis, Minn. He has been researching incentive programs for a while, ever since the recent “Great” recession when rhetoric around “wasteful spending negatively impacted incentive programs.” He recently spoke to the Global Meeting & Incentive Travel Exchange emphasizing how important it is to develop metrics to measure ROI on travel incentive programs.

The programs do work, he says, especially with employee engagement which is a big predictor of productivity and profitability—you just have to know what you want to accomplish and how to measure once done.

It’s especially important now, he adds, when many indicators point to an economic slowdown in the next year or so. When that happens—and it will, he insists—the smart companies will already know what programs to keep to ensure a hedge against economy dips.

The bottom line for incentive programs, he says, is profitability and whether a program pays for itself. How you get to increased profits depends on the industry, and every industry is different. So, it’s important to choose the program based on what drives your business—and what best motivates your employee population.

If it’s straight sales, productivity and profitability are easier to measure, Garlick says. Trickier is trying to measure undefined outcomes, and in the travel and hospitality industry, where most of his consulting is done, the route to profitability is a little more roundabout.

Among travel companies surveyed by Magid, strengthening employee engagement and the relationship between employees and management were important.

One of the most successful HR metrics, Garlick has found, is the employee attitude survey conducted simultaneously with employee performance reviews. While a lot depends on the questions asked, the goal is to determine employee intentions to remain long-term, and whether they’d recommend this place of work to someone else. You could also be direct and ask in the survey how fair and effective employees consider incentive programs.

Once you understand performance drivers, you can select an incentive program to encourage that result, whether it’s sales or employee engagement and loyalty.

Sadly, only one in four companies tracks its ROI on incentives, based on a recent study, says Garlick. “Many companies are fuzzy on why they keep an incentive program, and often it’s because they’ve always done it that way. That response makes me nervous because if you aren’t determining what’s effective now, you won’t know what works—or doesn’t— when the next recession hits. When times get tough companies cut programs—and it may be the wrong program you cut.”

other articles in this section

Noteworthy: Hamilton Princess & Beach Club, Bermuda

Cards vs. Cash

Good Times

Value Validation

Trip Trends

Sailing Away

The More, The Merrier

Holiday Angst

Making the Connection

Make an Impact

Mutual Appreciation

Healthy Options for Incentive Trips

A Rewarding Experience

Cruising the Rhone River

Celebrating Employee Milestones

How Do they Do It

Eyes on the Prize

Healthy employees = Healthy company

Measuring ROI

Hawks Cay Resort, Duck Key, Florida

Good Sensations

How to Design an Effective Gift Card Incentive Program

Fogo Island Inn, Fogo Island, Newfoundland

The Case for including Spouses on Incentive Trips

Hard Rock Hotel Riviera Maya

On-site Gifting

Rim to River Hiking in the Grand Canyon

Sparkling Hill Resort, Vernon, BC

Creating incentive trips that appeal to everyone

The Brave New World of Gift Cards

Award Show Winners

Capella Marigot Bay Resort and Marina

Take me to the river

Click + Praise

The Science of Incentives

Incentive trips go family-style

Knock-their-socks-off gifts for hard-to-buy-for executives

Building a Better Program

Perfect Pampering

Indulge Me!

Customized Recognition Programs

Virtual gift cards, the new reality

Gift Cards that Give

Go with a Pro, in the Spa and on the Greens

Chartering private jets

Offsite Employee Engagement

Behaviour-based Recognition

Canadian tax implications for employee gifts

A Christmas Bonus with all the Fixin's!

Peer-to-peer recognition

Everyday Green Heroes

Recognizing Environmental Actions in the Workplace

Reward and Recognize Every Day!

New Year, New You!

Co-Branded Cards

Last-minute gifts and rewards

Double Pampering Hits the Spot!

Hidden Gems: Cobble Beach Resort

Gamification

Free and Fab Employee Rewards

Incentive Programs Used by the Pros

Think Local for Corporate Gifts

21st Century Gift Cards

Time for an Incentive Travel Update

Reward Best-Practices for the Holiday Season

Small Product, Big Impact

Spa Rewards, Done Right

Staying Motivated

Gift Giving Guidelines

The Pros and Cons of Gift Cards

Eco-Friendly Corporate Gift Ideas

Green Guides

Travel Rewards Strategy

Speaker Gifts that Shine with Gratitude

Tax Treatment of Incentive Travel