Making the Case for Travel (Part I)
July 14, 2008
When you need a healthier P&L, give your team some R&R
By Izabella Iizuka
With the ghost of a recession lurking around the corner, there's no shortage of stress clouding your top performer's mind. Just when you need your best people to be playing their best game, research indicates that fewer than 24% of American workers are working at full potential, 50% of workers do no more than they are directly asked to do and 75% of employees admit they could be more effective in their jobs.
Today, the biggest challenge companies face when it comes to their much-needed incentive programs is not breaking the bank, while also providing a program that's good enough to create an emotional engagement with employees. Considering that a sales incentive program can be one of the lowest-risk investments a company can make—with the potential for the highest return—the current economic situation should not matter, says Bob Dawson, chairman of the Incentive Research Foundation (IRF) Research Committee, and vice president of sales and marketing for Custom Design Marketing.
Surprisingly, the economic situation might make travel an especially interesting reward, since traveling is a treat employees might not consider getting themselves when the budget is tight.
The first step for any sales manager is to ensure his company understands the value provided by sales incentive programs. That's an especially important consideration when the reward is a trip to somewhere exotic, which might be viewed even more skeptically by some bottom-line-minded executives.
"Procurement and purchasing professionals need to have a better understanding of what the incentive program really is all about," Dawson says. "Generally, any department that is on the outside looking in at an incentive program only sees the sizzle. They hear about the exotic trips, but they do not see what that did for the company."
"Many incentive travel programs are not designed to be properly measured, so they are considered 'discretionary' and, therefore, ripe for cutting," adds Ira Ozer, vice president of business development for Meridian Enterprises, a full-service performance improvement company specializing in incentive programs. "It is critical to include ROI planning and projections as part of the strategic program design process, so that we can help them and their 'internal client'—our true customer—to determine the financial benefits of incentive programs."
Keep Your Eyes on the Prize
Even before you consider your audience, you must decide which problems you want to combat within the company, such as low sales, low quality, low productivity, poor customer service, turnover or absenteeism. "Incentive travel planning is not about how to buy hotel rooms, airline tickets or cruise cabins," Dawson says. "It's about how to change behavior that will impact your financial outcome. In companies where incentive programs are well developed, properly planned and implemented, these programs are seen as investments, not just an expense."
In fact, a good incentive program won't cost the company anything if the award is earned based on incremental improvement. "In order to maximize their potential for ROI, sales leaders need to spend the time upfront to properly plan their program," Dawson says. He adds that the recipe for success consists of structuring rules that are viable and can demonstrate an ROI, and monitoring the program throughout.
"It is important to first ensure that the program has been designed to pay for itself from incremental profits and provide an ROI," Ozer says. "It has to do with the extra dollar the employee made. You spend 10 cents on setting up the program, 60 cents goes to the award, the company keeps 40 cents and you're all set."
Companies that look at incentive programs based on cost alone might change their prize destinations because of budget trims, inflation or the weak dollar. But they would be wise to think carefully about their employees first, including their personalities, income level and lifestyles. That's because, according to Dawson, the reward you provide must be something that the target audience could not (or would not) buy on their own. "Perceived value is very important," he says. "Any reward choice that is made without first performing a complete analysis of the intended audience is a mistake."
Seeking concessions on travel components or removing aspects of a program due to budget will only serve to create a less-than-memorable experience for the participant, he adds. Indeed, an unknown resort somewhere in the Caribbean might provide the lowest cost for the trip, but it may lack the quality that well-seasoned travelers would expect. Such a destination would work for a young, entry-level sales audience, but not for older principals.
With increasing fuel costs making airlines cut seats and raise prices, travel rewards can be among the most expensive incentive programs. Besides, if what your employees really need is cash, why offer travel instead?
The key is "separability," Ozer says. "People tend to mentally separate cash from non-cash items. Cash is grouped with compensation—money for spending, saving and investing. Even if you give a significant cash award, it will probably be spent on day-to-day stuff."
"Cash is compensation, especially for top-performing employees," Dawson adds. "It has a real value (the dollar amount), but little perceived value. Cash rewards will disappear amid the employee's bills, and it might be hard to take away since it might be unconsciously taken for granted."
"Money is probably not going to solve whatever the person's problem is," Ozer says. "A trip will really enhance their life, and it will be memorable. As long as the person remembers, he feels incentivized. In addition, people talk about their trip, making it very promotable. No one likes to talk about money, or they talk it down, whereas they brag about trips."
In short, travel is a tangible reward that works more effectively as a motivator than cash or cash substitutes. "This is true except where compensation is not adequate for the job, in which case, an improved cash bonus system delivered via paycheck, stored value card or gift cards should be considered," Ozer says. "An incentive program should be layered on top of compensation that's already adequate. If all that people need is money, no incentive program will work."
Editor's Note: Check out the September/October issue of Sales & Marketing Management for Part II of this article, which will examine the issues associated with individual versus group travel, as well as methods for calculating ROI.
Sales & Marketing Management Magazine
This article is brought to you by Sales & Marketing Management, the leading authority for executives in the sales and marketing field.
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