by Lisa Grimaldi | June 01, 2008

Jonathan T. HoweThough no one wants to mislead or disappoint incentive winners by switching the rewards or even canceling, market changes or unforeseen economic woes might leave little choice.

As a protective measure for the program sponsor, Chicago-based attorney Jonathan T. Howe, Esq., right, of Howe & Hutton Ltd., recommends including an adjustment clause in the fine print of the program plan or anywhere the incentive is promoted, such as in the contest rules or on a website that promotes the incentive.

Howe suggests the following wording: “This incentive program is designed to provide you, the potential award winner, with an outstanding experience. Conditions, unfortunately, might change for many different reasons, some of which are beyond our control, and might require the company to alter or even cancel the program as a result.

“Additionally, management might find it necessary to change the rules for eligibility and participation levels. It is necessary for the company to retain and reserve the right to amend or otherwise change these rules or to terminate the program without liability as the company solely deems appropriate.” -- L.G.

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In these fiscally challenging times, with so many companies under the gun to keep spending down, it would seem like a no-brainer to eliminate any costs except those essential to the firm’s bottom line. At first glance, incentive programs would seem like one of those expenses that could painlessly be put on a back burner or even eliminated.

That was the case for troubled mortgage lender Countrywide Financial Corp., which canceled two incentive programs that were slated to take place this spring in Hollywood, Fla., in the wake of a financial meltdown earlier this year. And at Citi Commercial Business Group, a Harrison, N.Y.-based division of Citigroup that handles commercial real estate, plans for this year’s incentive program are on hold due to companywide belt-tightening, according to Barbara Blumhof, manager, trade shows and events.

On the other hand, not all incentive professionals regard such cutbacks as inevitable -- or advisable. “Fifteen or 20 years ago, there was a knee-jerk reaction to cut programs when the economy looked bad,” says Karen Renk, executive director of the Naperville, Ill.-based Incentive Marketing Association. Companies today, she adds, are far less likely to respond this way, because they have learned how important it is to keep employees engaged and productive through motivation and recognition, even (or especially) in the face of downsizing.

Following are the examples of two firms -- both in hard-hit industries -- that feel incentive programs, now more than ever, are essential to their survival, as well as advice from pros on how firms can keep their programs up and running during a bumpy economy.

Keeping rewards in gear

Michael J. Kennedy, manager, retail development, at Cerritos, Calif.-based Isuzu Commercial Truck of America Inc., has kept the company’s Winners’ Circle program for sales reps active despite a merger, a sell-off and a run of three CEOs since he began to oversee the travel-based incentive program in 2000. He’s now planning the trip for 2009.

“If you polled our salespeople, it would be right up there as one of the reasons they want to work for us,” Kennedy says of the incentive program. “There would be a revolt or coup if we took it away. It would be devastating to business. We are, after all, a small fish in a big pond [of commercial trucking firms]. We have the annual program in order to keep the attention of salespeople and managers, who also sell other brands of trucks.”

The Winners’ Circle is a tiered program, with platinum and gold winners earning a lavish tropical getaway each February; silver winners win a travel reward to a domestic destination, such as Las Vegas; and bronze winners are rewarded with merchandise.

Though Kennedy says the program ends up paying for itself in increased
sales, he does have constraints. His yearly budget has not increased since 2001, and if sales projections go down, he says, the program budget similarly shrinks, which translates to fewer winners.

“It is a big challenge to provide the type of service and innovation our winners have come to expect,” Kennedy says, noting that a majority of them are repeat winners. He credits the team at Ambassadors International, the incentive and meeting firm based in Newport Beach, Calif., for their negotiating skills in getting his group value-added extras such as comped receptions and room upgrades, as well as for their ability to find lesser-known or new hotels that dazzle attendees but are less costly than some bigger-name properties. For example, the just-opened Agua Caliente Hotel and Spa in Desert Hot Springs, Calif., will host the silver winners in 2009.

The key, says Kennedy, not only is to take winners to a great destination, but to prevent them from having to “dig into their pockets” for anything during the trip, to help make the program more enticing than his competitors’.

Kennedy demonstrates return on investment for the program with a report that goes to higher-ups at Isuzu Commercial Trucks. “We do a recap of sales for the year and show what the percentages are from winners,” which, he adds, are always significant.

While the company’s business projections for 2008 are mixed -- shortfalls were expected the first half of the year, followed by more upbeat predictions for the third and fourth quarters -- Kennedy is planning ahead for his 2009 trip and beyond. “It’s shortsighted to cancel programs,” he says. “I won’t say the spending won’t be reduced, but it won’t be canceled. It’s all about how you present the program and its street value -- the enjoyment participants get from it.”


Piggy BankFollowing are smart ways to trim the expense of an incentive trip without sacrificing the impact of the reward.

* Shorten the program. Just one day fewer can result in huge savings for the
host organization.

*Loosen the structure. Does every meal or activity have to be hosted by the company? Increasingly, participants appreciate some free time and unplanned meals.

*Drop a tier. If you traditionally use a five-star property, switch to a four-star or hold the trip during a shoulder season rather than peak.

* Piggyback.Hold the incentive just before or after another event, such as a sales meeting or industry conference, to cut down on travel costs.

“Just be sure to maintain the integrity of the event, making sure it’s a once-in-a-lifetime experience and the recognition remains in place,” says Lynn Randall, strategic meetings consultant for Fenton, Mo.-based Maritz. -- L.G.