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A month or so ago the press was ablaze with condemnation for AIG because they held a group travel award for independent agents in California at the Monarch Beach St. Regis Hotel. The press had a field day highlighting the expense of the trip - $20K for spa treaments, $7k on golf - and my favorite - $5K at the bar. The total bill was about $450,000. One of the articles said they had about 110 travelers so add in another $700 per person for airfare and you're just over $500k. Based on 110 people, they spent roughly $5,000 per person for the trip. The cost is pretty much in line with what most companies spend on their grand travel awards for top performers. I've seen them as high as $10k per person and as low as $2k per person - so they're not off the mark for their program.
It's pretty typcial for most companies that use an independent distribution channel to reward and recognize their top performers. By definition, independent distribution channels can choose what products to sell and what companies to work with and therefore it makes a lot of sense to connect and network with the people who sell your product.
It's is unfortunate that the AIG program operated one week after the bailout discussions in Washington DC. Man - timing IS everything.
Painted With The Same Brush
My point of this post is that all the press that AIG got from this rather mundane and normal activity (group travel for top performers) will poison all other incentive and influence programs that have been planned for the near future. Almost every industry will be having conversations about their programs and will be asking themselves "is there going to be any negative fallout from running the program?"
Companies that may have just had layoffs - should they cancel their program? Companies that have postponed some capital expenditure - should they cancel their program?
The problem is that these decisions are being made based on "impresssion" not fact. Because the program gives the impression they are spending money foolishly they don't want to be lionized in the media or within their employee base. The truth is that in many cases, these programs have increased sales or at least allowed the company to maintain sales in a tough economy. In other words, the programs typically pay for themselves and if they weren't conducted the company would probably be in worse shape.
It's a tough, tough call. Not to mention the cancellation fees associated with group travel - they can amount to upwards of 50% of the total cost depending on the contract and how close to program operation the cancellation occurs.
My prediction is that because it is a tough call the companies will bend and cancel most, if not all, the incentive travel for 2009 if there is any hint that it could be at the expense of jobs or other business expenses that seem more "normal."
Unfortunately, these things have a habit of metastasizing and affecting other companies, whether they have the same issues or not. Incentive travel is a fabulous way to gather top performers together, hob-knob with executives, build relationships, talk business and hear what is going on in the real world of business within an industry. I believe personally - there isn't a better way to reward those folks that can really make or break a business.
2009 will be a tough year. And because these programs are typically planned at least a year in advance I'm sure someone is cancelling 2010 stuff as well. Short-term strategy my friends... short-term strategy. Relationhips are built during good times and in bad - and I'd submit that the work done on relationships during bad times is where the real payoff resides.
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Marketing and Incentive Design Consultancy
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