ROI Ahoy! Three Takes on Measuring Return On Investment

When the Incentive Research Foundation started looking at measuring the return on investment (ROI) of travel programs and sales programs several years ago, the incentive industry’s response was lukewarm, says Rodger Stotz, chief research officer of the St. Louis-based IRF.

“We did not see the groundswell that has occurred since late 2008 and early 2009,” Stotz says. “After the economic downturn, every program in every industry requires justification, and as an industry we have done less than we should have in terms of justifying these programs.” 

In the past, he says, the attitude towards incentive programs was, “Sales seem to have gone up, everybody had a good time on the trip, there seems to be a good feeling about it. People were also saying, ‘Why do we need to spend the time and money validating [the ROI] of our incentive program when it’s so obvious that it worked?’”

But now that ROI has come front and center, he says, “It will be interesting to see how it plays out over the next year as budgets come up for renewal and some businesses are showing signs of survival and recovery.”

Even so, interest does not always translate into action, says Fay Beauchine, president of the Site International Foundation, and president of U.S. engagement and events for Minneapolis-based Carlson Marketing. 

“It’s not coming as fast as I thought,” says Beauchine, whose organization is the research and education wing of incentive travel industry association Site. “About 30 percent of companies measure ROI beyond satisfaction surveys. Everyone is interested but few are ready to add the small cost to already depressed budgets.”

Still, she does agree that ROI measurement is coming. “It is key to renewing budgets,” she says. 

Recently, the IRF released the results of “The Anatomy of an Incentive Travel Program,” an in-depth study of one company’s program that showed both the benefit of measuring the return on investment in incentive programs and the difficulties of doing so. 

“To begin with, the company leadership’s commitment to incentives is strong,” Stotz says. “The classic quote from the CEO was, ‘The incentive program will be the last thing to go before we turn out the lights.’” 

And the company, which agreed to the study on the condition that it remain anonymous, is not content to just run the same old program year after year. The travel program “has been in use over 10 years, and the organization continually revisits, re-values, and renews it,” Stotz says. “The year we looked at it, they held roundtables to brainstorm best practices. It is not a cookie cutter.”

And yet, the company does not measure ROI in an actual dollar-spent versus dollar-gained manner. One of the post-study suggestions the IRF research team raised was that “there was an opportunity to be more analytical with the return,” Stotz says. “The organization’s response was, ‘We are comfortable with what we are able to see.’” 

This included an increase in sales, a primary goal of the company’s incentive program. Another metric of importance to the firm was retention: The top 10 percent of participants—those who earned the incentive trip—have a longer tenure with the company than non-earners, Stotz notes. And their performance is better over the long term. 

In fact, one immediate result of the study was that after reading the results and recommendations, the firm increased the program’s budget, which they had only intended to hold steady in a difficult year. 

Another result is that this case study proved so popular that the IRF is working on another “anatomy” study focusing on an all-employee recognition program that uses incentive travel as a motivator. 

Going forward, the IRF is about to release a pair of new studies that will help companies and incentive professionals with the mechanics of measuring ROI. The first is an update of the organization’s eight-year-old Master Measurement Model, which provides a guide to methods and specific metrics that can be used to benchmark performance improvement in a wide variety of job types. 

“Everything from customer service to manufacturing will be looked at,” Stotz says. It will be unveiled during the IRF’s daylong educational workshop at the Motivation Show on Tuesday, Oct. 12. The second study is a survey of the current types of awards being used, looking for trends in what is popular. 

The big research news from the Site International Foundation right now is the release last month of its first “Site Index: Annual Survey,” which builds upon the three narrower Site Index reports released in the last 12 months—on the economy, technology in the motivation industry, and measurement of ROI and return on objectives (ROO).

“We’re calling it an annual analysis and forecast for the motivational events industry,” Beauchine says, adding, “We’re enthused about how the Site Index has taken off. With respondents from more than two dozen countries, we have a robust panel so our survey is not just U.S.-focused.” 

The overall results are encouraging, she says. “It seems like motivational travel is still a great motivational tool.”

And despite her concerns about how few companies have started investing time and money in measuring ROI and ROO, the latest Site Index does show that three-quarters or more of the respondents believe such measurements will be a requirement of programs in the next 6 months to three years.

That said, Beauchine says, “What I have figured out, in looking at a lot of research this year, is that anticipation is preceding reality, in some cases by a great degree,” when it comes to a real resurgence of incentive travel budgets and programs.

“All the surveys show optimism,” she says. “But when you ask the real questions about spend, it’s pretty flat.” The Site Index shows that 62 percent of respondents expect the use of incentive travel to increase in the next six to 12 months, and 84 percent predict a major improvement in one to three years. But more than two-thirds of those respondents felt incentive travel spend will not change in the next six months. 

Beauchine adds: “Everyone was way more optimistic about 2010 at the end of 2009.” And although 2010 is turning out better than 2009, she says, “People are not declaring victory, because there’s plenty of [corporate incentive buyers] still sitting on the fence with their budgets.”

The Forum for People Performance Management and Measurement at Northwestern University is working on several studies that are in the process of wrapping up, says Jennifer Rosenzweig, research director of the Forum and a partner in Dragonfly Organization Resource Group, a consultancy that helps companies attract and engage the best talent.

The first is a case study of a large insurance company. It will be released at the end of this year or in early 2011. The Forum’s researchers looked at the relationship between employee engagement and customer satisfaction, and its impact on the performance of the firm, which offers life, health, auto, and home policies.

The key takeaway, Rosenzweig says, is “if you build a strong relationship with customers as well as employees, you’ll see a big lift in the bottom line.”

The study, “The Employee or the Company: The Relative Importance of People versus the Company Brand on the Customer Experience,” used surveys to look at the way the relationship between employee engagement (in this case, of the insurer’s agents) and customer satisfaction (with their experience with their own sales agent and with the company as a whole) affects employee performance using two metrics: customer retention and account growth.

One surprising finding, Rosenzweig says, is that more than 93 percent of the customers surveyed reported being more satisfied with their agent than with the organization as a whole—although the company’s scores were good. 

Another is that while a customer’s satisfaction with his or her own agent resulted in better performance by that agent, the customer’s satisfaction level with the company as a whole had no effect, which leads the study’s author to conclude “the customer’s experience with the agent is more important than the customer’s experience with the brand in driving performance, or stated differently, the person is more important than the brand (emphasis is made by the report).”

Once that is understood, the importance of employee engagement becomes clear: In cases where the agent was highly engaged and the customer was highly satisfied with that agent, performance—as measured by account growth—was twice as good as when the agent was highly engaged or the customer was highly satisfied, but not both. And performance was nearly six times greater than when neither agent engagement nor customer satisfaction was high. Retention was not affected, however.

So while having an engaged workforce is important, the study found, it is not enough. A good customer experience is also necessary.

The Forum is currently working with organizations as diverse as the American Red Cross, insurer AFLAC, and McDonald’s on another study that relates to this topic, Rosenzweig adds. 

“We are studying the idea that organizations are a spectrum of different ideas,” she says, pointing to the relationship between the employee and the organization, and the relationship between the organization and the customer, among others. “They are all important, but the ability to align them is key,” she adds. “Organizations exist in relationships, and nurturing them is strategic—it will affect the bottom line.”

The Forum’s researchers are still analyzing the findings, but one thing that is clear, Rosenzweig says, is that aligning the various factions behind a shared set of values and purposes is key. These results will also be out by the end of this year or early 2011.

For more information or to download copies of these studies, visit:

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