The $90 billion incentive program industry is in the throes of change. In fact, the very phrase “incentive industry” has a new meaning, as more and more end-user companies recognize that incentives are just one tool—albeit a powerful one—among many used to improve organizational performance. Other motivational factors include education and training, recognition programs, leadership and people-management improvements, employee empowerment, advanced communication programs, and technology. Performance improvement remains the goal of motivation, but the means for gaining that improvement are based on what’s best for the end-user company and are related to its corporate culture and the depth of its own resources.
As the new incentive program marketplace has evolved, so have the companies serving that marketplace. In particular, many companies have broadened their scope by adding services—either in-house or through outsourcing arrangements—that go well beyond the services offered by the traditional incentive program company. In fact, the industry has evolved to the point where three distinct types of service providers now exist:
- Full-service incentive program companies.
- Limited-service incentive companies.
- Award fulfillment companies.
The problem for end-users results from the fact that all of these companies can claim that they serve an end-user’s incentive program needs in a variety of ways—offering such services as “gap analysis” or talking in terms of “motivation deficits”—whether they have the skills and resources to apply these tools or not. The Internet further blurs distinctions, because one company’s website offers much the same as another, regardless of the size of the company making the claims and promises, or its resources, or its experience related to the end-user’s specific incentive program needs. How does one determine what a supplier does versus what it claims to do?
TYPES OF INCENTIVE PROGRAM COMPANIES
Full-service incentive program companies. These companies generally have the most comprehensive service offerings, reflecting the broadest definition of performance improvement. The full-service incentive program company starts with an analysis to determine the client’s core business issues. They offer a variety of communications, training, measurement, and reward services with a consultative, solutions-oriented approach. The performance-improvement solution they offer may include one, or a combination of, key performance levers, including employee education and training, communications, management training, and incentives. By conducting the necessary research about the company, by determining what group of people can positively affect its business goals, it can recommend targeted applications to properly motivate that group’s performance. Hiring a full-service incentive program company means starting with a clean palette, and applying precisely the right strategies for the situation with no pre-ordained solution.
Limited-service incentive program company. The limited-service incentive program company can provide incentive programs from design through operation, including the support services of promotion, administration, and awards. It can offer a range of “off-the-shelf” programs with less sophisticated design and with limited financial modeling capabilities. These companies typically focus on current users of incentive programs and assist with the development of communications campaigns and rules structures associated with incentive programs. They generally deliver group incentive travel and/or non-travel rewards (merchandise, certificates, debit cards, etc.).
Award fulfillment company. Award fulfillment companies typically deliver “product” in the form of group incentive travel and merchandise awards. They generally provide only the award and related administrative components of an incentive program, which may involve a catalog (hard copy or online) and the delivered item, trip, or card (debit, credit, or stored value). They generally do not provide extensive support services for such programs, other than those required for award fulfillment. Award fulfillment companies operate with lower overhead and often consist of smaller companies dedicated to a specific aspect of the fulfillment business.
THE CONSULTANT MODEL: ANOTHER PERSPECTIVE
Here’s another perspective on the incentive program marketplace. Think of it in terms of the four types of consultant/adviser that an end-user company might use.
Level I – Overall business strategy consultant.
These companies consult on core business and motivation issues. They might charge a consultancy fee in addition to fees for specific services rendered.
Level II – Companies that offer strategic resources.
These companies supply services to help execute the strategies. They understand high-level discussions and strategic selling, and offer solution sets that match the end-user company’s overall strategy. They participate in the strategic process.
Level III – Companies that supply services at a tactical level.
These companies assist in working out the details to support the strategy. They do not assist in working out the strategy, but in developing ways to ensure that proper implementation of the strategy.
Level IV – Companies that assist with the logistics.
These companies execute the elements to ensure that the strategy and tactics are implemented according to plan.
By this measure, full-service incentive program companies operate at Levels I through IV, offering strategic resources, execution tactics, and logistical assistance. Limited-service incentive companies tend to operate at Levels II through IV, offering tactical and logistical help related specifically to incentive programs. Award fulfillment companies tend to perform Level IV functions, offering primarily logistical assistance. Companies at the top end of the strategic hierarchy can typically perform all of the Level I – IV functions; those at the bottom usually specialize but may drift “upstream” based on economic conditions or because they have successfully run a program for a long-term client.
While its current resources may focus on a specific level, a hired incentive company may be asked to extend services because the client likes its pricing model and trusts the relationship.
CONFUSION IN THE INCENTIVE PROGRAM MARKETPLACE
For the end-user approaching the incentive program marketplace, plenty of opportunity for confusion exists. The problem starts with terminology. The industry still lacks agreement on the meaning of many performance-related terms—even terms such as “full-service incentive program company” and “limited-service incentive program company.” Since all three categories of companies can influence performance to differing degrees, definitions become easily blurred.
The problem is not so much that companies deliberately mislead potential customers, but rather a lack of precision in their use of terminology. Thus, if a company calls itself a “full-service incentive company,” but can’t provide insight on industry trends or offer a number of alternative solutions, its definitions may fail to sync with the terminology used by others in the business. Expertise is also an issue. What constitutes an “incentive professional” with regard to the design and operation of an incentive program? The industry does not yet have formal training or certification standards to help buyers make better distinctions. Also, as companies seek to broaden their scope beyond traditional incentive offerings, they must develop—or outsource—the expertise necessary to fulfill these programs. Outsourcing begs other questions. Can a company claim “expertise” in such areas as program design, training, or leadership if it outsources these functions? That will depend largely on the depth of the relationship it has with the company providing these outsourced services. Clients may have difficulty determining whether the company offers seamless services from multiple suppliers or truly delivers everything from one resource that has the expertise to integrate all the requested services in-house.
A company’s marketing claims also can create confusion. For instance, each of the three types of companies serving the incentive program marketplace can claim to provide an incentive solution, but the range of those solutions can vary widely, along with the expertise that suppliers can apply to those solutions. Although supplier claims may sound similar, the end-user needs to understand the inherent bias of any supplier. Various suppliers may make the same claims, but their recommendations could vary considerably based on the services and expertise resident in or available to the specific supplier.
DEFINING YOUR INCENTIVE PROGRAM NEEDS
As a first step to sorting out conflicting claims in the marketplace, end-users have to determine their level of need with respect to incentive programs. If an end-user has experience with the offerings of the various suppliers, has experience in using and administering such programs, and knows what it wants, then the next step is easy: An award fulfillment company might best meet its needs.
But what about companies looking for help with performance improvement? Many have only a general idea of their problem and how to solve it. They may ask such questions as: What is the real performance problem? Is it a matter of training, motivation, communication? Would a recognition/reward program help, or do underlying cultural issues need addressing?
Potential customers should know if they can determine the root cause of their performance issues and the goals of their organization prior to the development of a program. They should ask themselves these questions:
- What results are we currently experiencing, and what results do we desire?
- What is preventing us from achieving our desired result? How do we identify those factors?
- What solutions will improve the result?
If a company hasn’t identified the performance issues, it should probably consult with a full-service incentive program company to help identify and put the performance issues into context and to help better understand the key business challenges. If it feels that it has the issues defined and requires the help of a company to address those issues through the use of incentives, then a limited-service incentive company can provide a solution as well.