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After 25 years in this business, I have seen how instrumental travel experiences and awards can be to a company in reaching its goals. This type of travel is powerful, and when aligned to specific criteria, it will spur individual or team behavior modifications.
And now, when competition for talent is fierce and competitive advantages are a necessary part of any business in order to attract, retain and motivate them, incentive travel plays an even more pivotal role in a successful strategic business plan.
Incentive travel is defined as unique experiences thoughtfully designed to reward specific goals. If it's worth doing, is it as simple as hiring a travel agency and sending your top performers to a fancy resort? Absolutely not.
Goals, behaviors, attribution and communication
The whole purpose of incentive travel is to motivate people. Strategic incentives work best when an organization knows the behavior it wants to motivate, e.g., closing more sales, improving profitability, reducing expenses or successfully implementing a new technology. Once the goals have been identified, leaders need to break down specific actions employees can take.
For any incentive to work, leaders need to know who was responsible for specific results, and the individual or team needs to see their progress. If they can't tell how many sales they've made, how will they be motivated to sell more? If they don't know what is considered a successful implementation, how will they choose which actions to take? Clarity and attribution are key.
The final ingredient is communication. Beyond setting the desired goals, the rewards need to be communicated in a way that is clear and compelling. No one is going to participate in something they don't know about. At the same time, goals can be challenging, but they also need to be reasonable.
Components of incentive travel
While the trip is the most obvious part of incentive travel, it's not the only aspect. For a successful program, you'll need:
- Program design (e.g., what is being rewarding, who qualifies, how will it be measured)
- Clear, consistent and compelling communication
- Technology to track performance that is visible to administrators, leaders and participants
- Training
- Administration to keep all components running smoothly
- The travel reward itself, including food, accommodations, gifts and entertainment
- Follow-up after the trip to continue embedding desired behaviors into the culture
Calculating the outcomes
Given all these components, and the cost of the program, the natural question is to ask: What's the ROI? If you're going to invest in tools, technology and training, you need to know what outcomes you can expect.
ROI can be measured with two different types of metrics: the easily quantifiable and the purely qualitative. Quantifiable, or hard metrics are sales, profitability, costs and retention. Qualitative, or soft metrics include employee engagement, feeling recognized and valued, collaborating with peers, building relationships, enjoying a unique experience and memories.
Once you know what you can measure, there are three different ways to do the calculations:
- Basic ROI: For this, you simply calculate the gains in profits resulting from the program and divide by costs. This is the classic example of a hard measure and is usually enough to make a business case for most companies.
- Advanced: If that won't be enough, you can add other performance factors to the basic ROI, like the value and business impact of training, recognition, customer satisfaction and other soft measures.
- In-depth ROI: This goes beyond the direct gain (e.g., sales improved because the sales team was rewarded) and looks at the costs of operations, call centers, warehouses and other support functions to see if they improve in relation to the incentive travel program.
The ROI Institute offers a number of helpful measurement tools.
Bottom-line benefits
Incentives should be a core part of your business, as humans appreciate recognition. The more employees understand organizational goals and see how they play a key role in reaching them, the better bottom line for everyone.
And while there's a clear financial ROI that shows up in a visual, measurable bottom line (profitability, reduced expenses, increased retention), there is also a bottom line of harder-to-define benefits, such as feeling valued and happily motivated at work. You can't put a price on an engaged workforce.
Jason Mossotti is the divisional vice president of client services at One10.