It’s an age old question, how do you measure the value of your Incentive Programs budget AND why should anyone believe the results that you report? To deliver results (or the value of your program) that are believable, your Incentive Programs Budget ROI must:
- Be balanced, with qualitative and quantitative data
- Contain financial and non-financial perspectives
- Reflect strategic and tactical issues
- Satisfy all key stakeholders
- Be consistent in collection and analysis
- Be grounded in conservative standards
- Come from credible sources
Clearly, this is not an easy task. As you measure the value of your Incentive Program budget, there are six measurements to consider:
- Reaction and Planned Action includes items such as relevance, importance appeal and motivation.
- Learning addresses information, knowledge, capability and skills
- Application is about the use of the information, knowledge and skills
- Business Impact includes productivity, quality, errors, sales, customer satisfaction, etc.
- Intangible Measures which will address ways to isolate the effects of activities such as communication projects.
- Return on Investment is the ROI%, your benefit/cost ratio and the payback period
Isolating the effects of your incentive program
Start by establishing a control group to measure the performance of participants against non-participants. Then use trend-line analysis of the performance data (for whatever you are measuring – sales, sick days, training, etc.) With a control group in place and trend-line available you can begin forecasting performance data. Then you can layer on:
- Participants estimate of the program impact (for example, how much more will they sell)
- Their manager’s estimate of the program impact
- Data from industry experts and prior studies
- Calculate/estimate the impact of other factors
- The alignment of Incentive Programs to business needs
- Clear documentation of the contribution of the program and a baseline to assess results against expectations
- Justification and support to defend the requested budget
- Identification of process areas that need to be redesigned or eliminated to improve program return
- An overall enhancement of the program value – showing believable ROI
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