Incentive Travel

This article provides a step-by-step guide to developing a travel incentive program for salespeople, dealers, and nonsales employees. It incorporates the new emphasis on integrated strategies that address all of the factors that affect motivation and performance.

INTRODUCTION

If your company is like many others, it probably uses incentive programs when it wants to increase sales or tackle some other critical sales, productivity, or quality problem. For many companies, incentives are a simple proposition: Do this and you'll get that. Fortunately, this simple proposition often works, but your company will get much more mileage out of its incentive programs if it recognizes all the factors that affect performance: motivation, skills, understanding of the goals, recognition, and ability to measure progress. This step-by-step guide will help you develop an incentive travel program that addresses all of the critical factors involved with performance improvement.

To make your incentive program as productive and measurable as possible, create an Incentive Planning Worksheet outlining all the steps of your plan. We have provided recommendations for Worksheet headings where appropriate below.

STEP 1: UNDERSTAND THE ROLE OF INCENTIVES.

Incentives are used to get people to focus both on your goals and what they can do to achieve them. Offer your employees, sales team, or distributors a valuable enough incentive, and they'll do anything they can to meet your goal. But, you'll be wasting your money if, to do it, they sell unprofitable business, offend a lot of customers, or convince customers who would have bought anyway to buy during the contest period. Incentives work best when they focus people on sales, productivity, or quality goals, as well as the specific steps they can take to achieve those goals.

Companies use non-cash incentives, such as incentive travel, to distinguish their incentive campaigns from cash compensation or pricing issues, so that the campaigns do not become an expected part of an employee's, agent's, or dealer's income. Travel is used in business to recognize and thank people for performance in a way that the recipients can never forget. It is used to create bonds between people and to communicate the organization's vision so that everybody involved is on the same page. Nothing beats cash as a form of compensation or bonus, but it's a poor way to demonstrate appreciation for people who have gone the extra mile for your company, and it's dangerous if your company does not intend to run incentive programs on a regular basis. And, it cannot replace the recognition, bonding, and communications power afforded by group travel events.

Incentive travel can range from elaborate international trips to small outings at a regional resort. What makes each program similar is the emphasis on achieving serious business goals. However, no incentive trip, no matter how powerful, can mask problems caused by shoddy products, poor management, or misguided marketing.

STEP 2: IDENTIFY THE SPECIFIC GOALS OF YOUR INCENTIVE PROGRAM

Specifically define what your company wants to accomplish in concrete terms, i.e., sales, unit volume, defect percentages, customer satisfaction levels. Make sure that you can translate the goals into specific numbers measurable from one comparable time-period to another. Sample goals: Increase sales by ten percent in dollars in first quarter 1999 versus first quarter 1998; decrease number of product defects from two percent to one percent of production in 1999 versus 1998; increase percentage of repeat customers by ten percent in 1999 versus 1998.

List the internal and external factors that could affect your goal, such as competition in the marketplace, introduction of new technology in your manufacturing process, a major new advertising campaign, or labor problems resulting from an expired union contract under bitter negotiation.

Review your company's overall goals, as well as its mission statement, to make sure your goals are in line with the big picture.

Incentive Planning Worksheet: Spell out in a sentence or two your specific goals, along with the factors that could negatively or positively affect the outcome.

STEP 3: DETERMINE THE NEED FOR AN OUTSIDE SUPPLIER

If the potential audience for your incentive program involves an annual budget of $50,000 or more, chances are you can get help from one of about 100 to 150 incentive companies and corporate travel agencies that handle one or more aspects of incentive programs. Otherwise, your company will probably have to use its own resources to run the program. If your company can't find an agency to handle all aspects of its program, it can do the planning, communications, training, and tracking itself, utilizing: a travel agency for ticketing and/or hotels; a destination management company for ground transportation and event planning at the destination and sometimes at the hotels; and the local tourist board for promotional materials. Cruises are an excellent option for companies with small groups seeking an easy-to-organize group incentive travel experience.

STEP 4: DETERMINE THE PEOPLE WHO CAN HELP

Specify the people inside or outside your organization who can have the most impact on achieving your goals, such as internal salespeople, dealers, dealer salespeople, production employees, delivery personnel, etc.

Incentive Planning Worksheet: List the people by title, function, or name, depending on the size of the company. Provide a description for each group involved with your program, including your estimates of their demographics, interests, hot-buttons, problems, etc.

STEP 5: INVOLVE THE PEOPLE IN YOUR ORGANIZATION WHO COUNT

After identifying the people who can help you meet your goals, hold participative meetings with them to find out: 1) is your goal feasible? 2) what is standing in the way of your meeting it? 3) what actions can these people take that could help you meet your goal, and 4) how can they measure or monitor the quantity or quality of those actions?

These meetings work best when using an outside facilitator who knows how to make sure each participant's ideas are fully voiced so that the findings represent a consensus view. No more than eight representatives of the audiences involved should participate.

This process should yield specific recommendations on: 1) what you or the company can do to achieve the goal, i.e., increase advertising, improve research, obtain new technology; 2) what the people involved can do, i.e., make more sales calls, learn new assembly line techniques or, in the case of retailers, put up more displays; and 3) how you can measure their progress.

If your incentive program is part of a long-term effort to make your people more performance-driven, you may want to conduct a written survey that measures their morale, knowledge, interest, demographics, lifestyles, etc.

Incentive Planning Worksheet: Spell out the specific findings of this process, organized by what your company can do and what the target audience can do to achieve your goals. Make sure you note those obstacles perceived to be standing in the way of success.

STEP 6: DETERMINE YOUR OVERALL INCENTIVE STRATEGY

Here's where you specify your goals and what people must do to achieve them. In other words, what actions, if undertaken more often or with greater care, could yield the desired result? You must also identify the time frame of the program and attempt to specifically estimate the sales or profit value of the accomplished goal. In other words, what is the bottom-line impact if your goal is accomplished?

Also, be sure to look at the problems or obstacles suggested by your involvement effort and determine to what extent you can address them. If you can't address any of the problems identified by your group, you'd better reduce your goal.

Obviously, this process is based on the results of Step 4, so that everybody concerned feels that your final strategy reflects their input.

The most important question to answer in this step is: how will people qualify for their awards? You can choose between two basic options or use a combination of the two.

Open-ended incentive programs award all people who achieve a predetermined level of performance. It's called a plateau program if you divide those levels into three to five specific increments, with the award level changing at each increment rather than at every increment of improvement. The open-ended approach is more difficult to budget but generally gets better results, since it gives you a better chance of motivating the 60 percent of people in your organization who generally function at average but not exceptional levels.

Closed-ended incentive programs single out only the top performers, such as the ten people who improve their performance the most. These programs are easy to budget but tend to recognize the people who probably would have performed well anyway.

You might want to have a program that uses both an open-ended program to reward the average performers who improve as well as a closed-ended approach to select the top performers who excel and merit repeated recognition.

Another frequent option is the so-called plateau program, that enables people to win ever-increasing levels of awards based on specific sales or productivity increments. This structure is used to motivate people to push themselves a little harder when they have come close to achieving the next award increment.

Other recommendations:

Compare your goals to past history: has your company ever obtained that rate of improvement before?

Make sure that you can measure performance in specific terms that you can benchmark against earlier-year periods.

Make sure that the actions promote both productivity and quality. You don't want to meet a goal if service, customer satisfaction, and quality suffer.

Take into account what it will take to track or administer your program. Will extensive record-keeping or complex computer programming be required? If so, your program is probably too complicated.

Incentive Planning Worksheet: Write a two- to three-paragraph description summarizing your strategy so that you can clearly articulate it to all concerned.

STEP 7: DETERMINE HOW MUCH YOU CAN SPEND

In Step 5, you estimated the bottom-line impact if your goal is accomplished. If it's an incentive program to increase sales, that's easy. Most companies have determined estimates for profit margins on incremental business. Incentive programs to improve productivity and quality require more judgment. What is the value of decreasing defects by ten percent versus the year before; what is the value of increasing customer satisfaction? Generally speaking, your arguments will carry greater weight with accountants if you are conservative in your estimates. Also, some seemingly subjective goals have highly objective measures. For instance, improved customer satisfaction can be measured both by surveys and the rate of customer retention, whose profit impact generally can be quantified. The profitability of increasing the number of calls performed per year by service technicians can be determined by multiplying the cost-per-call (total service employee's costs divided by number of calls) by the actual number of calls and comparing the result with past history.

After determining the dollar-impact of your program, determine an amount you are willing to invest in achieving your goal, usually determined as a percentage of the total. For instance, surveys by Incentive magazine indicate that companies invest up to 20 percent of anticipated incremental sales in the awards, communications, and training necessary to achieve their goals.

Incentive Planning Worksheet: State the anticipated dollar-impact of your program, specify the percentage you are willing to reinvest, and the dollar amount into which this translates .

STEP 8: SPECIFY THE AWARDS

Many organizations shoot from the hip in award selection when, in fact, this is one of the most critical steps in program planning. The awards you select not only can have a direct impact on motivation, they can also affect the way people view your company and the campaign. If your program asks people to make significant changes in the way they do business, your award selection had better relate to the effort involved, or people will do little more than pay lip service to your effort. If you give away cheap or low quality awards, people will think your company is cheap and low-quality. If you use cash or the same travel award options every time you run an incentive program, people will come to expect your programs and will begin to view them as compensation rather than as recognition for a goal accomplished.

Awards should be: directly commensurate with the actions needed to obtain them; available to all who improve performance; reflect the quality and image of the company giving them; frequently changed from incentive program to program. An element of surprise can help prevent employees or dealers from expecting or getting hooked on incentives.

You will probably need to determine two to three different award levels: the top tier, or most expensive, for truly exemplary performance; a middle-tier for significant improvement; a starter-tier for anyone who has improved performance.

Finally, you will have to consider how those awards will be delivered and by whom, along with what form of communication. The greater the recognition value of your awards, the greater the impact.

Incentive travel awards options include: group trips organized by an incentive company; group trips organized by the sponsoring company with the help of a travel agent, destination management company, cruise line and tourist board; individual travel, provided by incentive companies or incentive travel companies, as well as hotels and airlines.

Incentive Planning Worksheet: Spell out the types of awards you have selected for your program along with what they will cost. Be sure to leave room in your incentive program for communications, administration, and training, which can easily eat up half of any incentive budget. Determine which type of supplier can give you the best combination of service and awards for your needs.

STEP 9: SPECIFY THE TRAINING, COMMUNICATIONS, AND ADMINISTRATION YOU'LL NEED

You should make sure that the people involved in your program have the training they need, that they clearly understand the goals and the steps they can take to achieve them, and that they get regular feedback that shows their progress and makes suggestions. Your measurement program might involve special training and your communications a newsletter or other regular mailers. If so, you might want to consider including some promotional products or teasers. You might have to develop a simple software program to track results. You will need to specify this now so that you can make the proper allocations in your final budget .

Incentive Planning Worksheet: Specify exactly what you will do in training, communications, and tracking systems, along with estimates of how much you will spend and an accounting of who will do what to see to it that each step gets done.

STEP 10: WRITE THE RULES

Every "contest" has rules, and an incentive program is no different. Rules provide a blueprint for exactly what you expect from the participants in a program, which is why you should probably write them down before finalizing your budget. Your rules should specify precisely what is expected of people and cover every loophole while remaining simple and easy to follow. Rules should specify: time period; who can qualify; how people can meet their goals; how they will be measured; what specifically will be awarded and when; what is not included in the program; what actions will not be allowed, any disclaimers, etc. These rules are not unlike those you see written on advertisements for consumer sweepstakes.

This is a good time to review the potential tax or regulatory consequences of your program.

Incentive Planning Worksheet: Write your rules just as you will on the incentive promotional material, numbering each element and keeping them as simple as possible. Show them to an attorney, especially if your program involves outside organizations or contractors, as well as to a friend, family member or other person uninvolved with your business, to make sure the rules are clearly understandable. If it takes anyone more than a few minutes to grasp what they have to do, the rules are too complicated.

STEP 11: FINALIZE THE BUDGET

After you've determined the overall amount you can spend, and the amount of awards, administration training, and communication you will need, it's time to develop your final budget. Here, you allocate the anticipated overall budget by category as well as finalize the budgeting strategy. If you are using an open-ended budget approach, you will want to create a spreadsheet with various 'what-if' scenarios based on different performance levels. A budgeting rule of thumb: Budget your costs for a best-case scenario. The accounting department won't mind if you spend less than budgeted if results don't meet your expectations; you'll probably encounter more problems if costs soar far beyond your budget, even if sales or program results far exceeded your forecast.

Your budget has to take into account every aspect of the travel program, which can include airlines, ground transfers, hotels, meals, events, incidentals, meeting rooms and supplies, and more.

Incentive Planning Worksheet: Create a budget spreadsheet showing the most you expect to spend on each aspect of awards, training, and communications.

STEP 12: DEVELOP YOUR CAMPAIGN

Much like advertising, incentive programs begin with a formal launch, proceed through a specified time period, and end with an assessment or measurement period. The training, communications, and feedback should operate under a unified strategy with similar themes and reinforced messages. The theme should reflect the goals of your campaign, those of your company, and whatever is being marketed to the consumer or employees. Make sure any acronyms you use have no unintended double meanings, and make sure the image conveys quality and authority. Use humor, but use it carefully--if you have a hunch that something will offend somebody, it probably will. Specify what devices you will use to communicate your program, how you will deliver it, and how frequently. Take advantage of free promotional material available from travel suppliers.

Incentive Planning Worksheet: In a one-page condensed marketing plan format, spell out your game plan, including: overall theme, method of program launch, type of training and when, type of communications along with how and when delivered.

STEP 13: GET THE APPROVAL OF THE PEOPLE WHO COUNT

Using your Incentive Planning Worksheet as a guide, create a memo outlining your program and submit it to: some representatives of the group you consulted in developing the program; management; the accounting department; the heads of other departments in your company that could be affected by your program. This is your opportunity to catch last-minute problems and make appropriate adjustments.

STEP 14: LAUNCH AND THEN REGULARLY MONITOR THE PROGRAM

Using the game plan outlined in Step 12, get going. Do as much work as you can at the beginning on your communications and tracking effort so that you meet all of the deadlines specified in your plan. Make sure that everybody involved knows that your program has launched and what they have to do to win, even if it involves personal phone calls to participants. You don't want to hear later that people didn't understand what they were supposed to do. Review performance reports as they come in and look for possible problems or improvements individuals or groups can make. Include advice or other useful information with standings reports sent to participants.

Incentive Planning Worksheet: Check your progress toward your game plan to determine if any course corrections are required. Perhaps more training is needed, or more communications emphasis on a specific subject. Maybe there's something an employee has discovered that others can use to improve a process.

STEP 15: CELEBRATE SUCCESS

When your program concludes, make sure you have a system in place to quickly celebrate success. People should know as soon as possible when an overall goal is reached, as well as their part in it. Make sure your awards are delivered rapidly and with a personal touch, so that people feel your genuine appreciation for their achievements.

STEP 16: STEP BACK AND REFLECT

Did your program accomplish exactly what you wanted it to? What worked? What didn't? How did the people involved feel? Consider another meeting with key participants or a survey.

Important considerations:

If you're planning a new campaign, change everything, including the timing, awards, communications. You don't want your program to become predictable or expected.

While you may change the goals and measures, track the same performance measures from the program(s) before. This enables you to see what happens with performance in areas not being emphasized in your current incentive program.

Bruce Bolger is editor/publisher of Sales Marketing Network, a former editor and publisher of Incentive magazine, and a consultant with nearly 12 years' experience helping companies develop more effective incentive campaigns. He has written extensively on the topic of incentives for major business publications.

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