The overwhelming majority of U.S. companies do not offer travel as an incentive reward, according to the Society of Incentive & Travel Executives, and the reason is a lack of credible data that can show senior management and procurement departments a return for their investment. Pursuing ROI is a "disservice" to the incentive industry, according to a research paper the association launched last year on the "myths" of meetings measurement.
However, some incentive industry consultants said the industry needs to be able to quantify its value to senior executives, and that ROI could be a useful and achievable goal in growing the industry.
According to Rodger Stotz, chair of the SITE Foundation research committee and vice president and managing consultant for Fenton, Mo.-based Maritz Inc., a survey by The Incentive Federation Inc. showed that 74 percent of U.S. businesses do not use non-cash incentives, and that percentage remains steady. There are a variety of reasons why companies avoid non-cash incentives, Stotz said, including poor design of incentive travel programs and the need for additional administration a company might need to run a program. Procurement has had a heavy influence on incentive programs as well, he said, and pursuing quantifiable results for a reward trip remains a valid goal for the industry.
"Throughout business in general, starting particularly in the 1990s and on through the slowdown in 2001 and 2002, there's been a major push by business to better understand the impact of various programs and initiatives and investments they make," he said. "Businesses as well as the industry are looking at what are the various measures and impact of these programs."
There are two main methods for measuring the effectiveness of an incentive, Stotz said: a "post-hoc" approach by forming a control group after the meeting has concluded to compare with a control group that did not participate, and a "pre-program" baseline of control groups that are formed before the event takes place.
Companies looking at implementing metrics for an incentive program often will first look at objectives. Once the return on objectives is set, measuring ROI can begin, he said. "The objective can be quantitative or qualitative," he said.
Maritz developed its own employee-polling and data-analysis tool for calculating the effectiveness of corporate incentive travel programs
(Meetings Today, Oct. 17, 2005). The tool compiles employee survey results into a calculator to project the effectiveness of a hypothetical trip.
"For the past 25 years, we've been using ROI because most of the people that use incentives try to boil everything down to money and ask: 'Is it worth the money we're spending?' For the past five years, we've tried to get them away from thinking about the money and begin thinking about the return on objectives," said Bill Boyd, president and CEO of Sunbelt Motivation and Travel Inc. and former SITE president.
Incentive buyers can develop percentage-based metrics to show whether their goals were met or exceeded, Boyd said.
"What has complicated that process is all this stuff with procurement. When procurement comes back on the scene, they are just interested in the money. Then, we say that talking to procurement about return on objectives may not be the smartest course of action to take. Maybe what we should do is start talking about return on investment again," Sunbelt's Boyd said. "Most of Sunbelt customers are trying to figure out a way to work with procurement but still preserve themselves as the final decision makers," he said.
Last year, SITE published the first in a series of five white papers on measurement in the meetings and events industry. The paper said ROI for incentives is not a valid goal for the industry.
"ROI has been cast in the role of knight in shining armor coming to rescue the damsel in distress," according to the paper. "The damsel in this case is every meeting and event executive looking to justify their area of spending, much in response to procurement entering the fray. The real issue, though, is that we are doing ourselves a disservice by pursuing return on investment."
Other marketing disciplines, such as advertising, have not been able to show conclusive ROI, but they use industry-created terms such as reach, frequency and impressions to measure results. The meetings industry has not yet created similar terms, according to SITE.
"The poorly fashioned 'smile sheets' that currently exist in the form of event surveys do little to improve the perception that meetings and events are a secretarial task," SITE executives said.
However, Boyd said incentive programs have an edge over advertising and marketing because they are quantifiable in some respects.
"When you talk in terms of marketing or advertising about reach, audience and demographics, you're talking about a subjective figure that can never be quantified. When you're talking about return on investment, you can quantify how much money the program cost, what your return was, and that difference between the two is your return on investment. In that sense, we're head-and-shoulders above what advertising firms or what marketing firms subjectively produce for their client base," Boyd said.
Still, 74 percent of companies do not use non-cash incentives.
"It's a matter of education. We have not done a good enough job of education or selling our profession to the U.S. business world. We don't advertise in CFO magazine or The Wall Street Journal and I think we should begin to do that," he said. "Look at the potential for growth."
Barring an unexpected crisis, this year is "onward and upward" for the incentive industry, he said. "Business is strong and projections are good," he said.