by By Lisa Grimaldi | June 01, 2009

Spherion mainHistorically, when the economy has shown signs of decline, reward trips have been easy targets for corporate cost-cutters. But the challenges incentives have been facing since last fall are unprecedented. Virtually no area of the industry has been untouched by the recession, as well as public and political outrage over perceived excesses. As Christine Duffy, president and CEO of Fenton, Mo.-based motivation-services firm Maritz puts it, "our world has changed, and it won't go back to the way it was."

Yet, the need for incentives to help drive American business remains strong, as M&C found in talking with top industry experts and planners, and companies are adjusting their programs to reflect current realities as well as the eventual post-recession landscape.

How firms' incentive programs are faring this year and for 2010 is highly individualized. A number of industry experts have begun to express cautious optimism about the future of rewards. "We have started to turn the corner on people being afraid of running programs. The rate of cancellations for 2009 has stopped," says Fay Beauchine, president, engagement and events at Minneapolis-based Carlson Marketing.

Beauchine and other insiders attribute the apparent shift, in part, to vigorous efforts by the U.S. Travel Association and meetings industry coalitions to educate Congress and other government bodies on the distinction between performance-based incentives and CEO bonuses. They also cite increasing attention by the press to the good that incentive programs can provide businesses, and the fact that well-structured programs are designed to pay for themselves (see "The Case for Incentives," May).

For an inside look at how Nationwide Financial Services recently reworked its incentive program, click here

Steve O'Malley, vice president, strategy, practice and industry relations, for Maritz, told M&C in late April, "In the past three weeks, I have heard more hope and positive news from hotels and destinations [about incentive business] than I have in the in past six months."

O'Malley does, however, believe companies will continue to be conservative with programs and budgets for the next few years, because the pain of the downturn still will be fresh.

Adding and subtracting Getting companies to "put their oar in the water again," as Fay Beauchine puts it, and reinstate incentives going forward is one aspect of the new reality the industry is now facing. And programs are evolving to ease the process in a number of ways.

• Adding a charitable component. Whether it's helping to build a home via Habitat for Humanity or collecting donations for the American Red Cross, experts say volunteer activities increasingly will become a part of incentives, for two reasons.

First, participants find them very motivating, particularly when they can see how their efforts help individuals. Second, more and more companies are being very careful about their public image; if their rewards programs get publicity, they want it to be for positive reasons, such as the implementation of give-back projects.

• Closely monitoring results. Measuring the outcomes of programs -- and sharing them with the company's stakeholders and board -- is more crucial than ever.

"What will come from this time is that our industry will now do a much better job of calculating return on investment of their programs," says Mary Bussoni, senior vice president, ITA Group, an incentive firm based in West Des Moines, Iowa. "We've all paid lip-service to it for some time, but it has taken on new meaning now."

• Consolidating rewards. Some companies that used to run numerous programs are now condensing them into a few to save on costs, says Carlson's Beauchine.

• Creating trips for two. Presenting winners with vouchers for trips for themselves and a guest were popular about 10 years ago but lost steam when companies began to miss the opportunities to conduct business that group trips could provide. But pros say individual travel rewards are making a comeback with firms that want to keep their programs under the radar.

Carol Ann Payne-Johnson, president of the Travel Corner, a meeting and incentive firm based in Smyrna, Ga., is planning individual travel rewards for winners of an insurance firm that was originally going to hold a group program in Bali this summer.

• Emphasizing engagement and retention.
Experts say smart firms believe in the need to take care of their best people even in down times. "It's a huge mistake to think your employees have nowhere else to go," says Steve O'Malley of Maritz. "That's not true; your best employees always have options. Keeping them engaged and giving them thank-yous and rewards are instrumental in keeping them."

• Quieting the bells and whistles. Companies are looking to trim budgets in ways that won't diminish the reward or negatively impact the overall program. They are offering fewer sponsored activities (tours, sports, group meals), dropping top-name entertainment and contracting fewer speakers -- often using the firm's top executives as motivational presenters.

• Staying closer to home. While some companies will continue to hold their programs in long-haul destinations (Asia, Europe, etc.), many incentive professionals say the majority of their clients are selecting destinations closer to home for budget reasons (for some newly popular destinations, see "Low-Profile"), while others are doing so expressly to stimulate the U.S. economy.