THE WAR FOR TALENT – HOW CORPORATE SOCIAL RESPONSIBILITY AND INCENTIVE TRAVEL HELPS COMPANIES RETAIN KEY EMPLOYEES Consider this: A company with “highly engaged employees” can expect to generate annual increases in net income of 13.7%. Those without this level of engagement may suffer a reduction of 3.3% in net income annually. (Towers Perrin-ISR) What does 13.7% net income translate to in real terms in your business? Can you afford to ignore the “soft issue” of employee engagement? Do you know which strategies to adopt to increase employee engagement? Introduction Incentive travel is again a buzz word among human resource managers, and it is sought out by prospective employees as part of their package. From a company’s perspective, there is no down side to offering incentive travel to staff, as the trips only have a cost if the desired results are met, which means that the employees’ performance will improve to such a level as to pay for the cost of the incentive trip (if not, the trip does not take place and the company pays nothing) and increase profits. As well as acting as a motivation and retention tool, incentive trips can be structured to include management and leadership skills. Business meetings can also be incorporated into a trip, to further knowledge sharing, skills development and networking, with potentially further tax advantages. Further, by incorporating a Corporate Social Responsibility (“CSR”) element to a trip, wherein your team can actively participate in helping local communities, team building and employee engagement will be enhanced, and profitability further increased. Corporate incentive trips have been used by human resource managers for years to help motivate and stimulate staff, and reward good performances. They are also deployed to create a corporate culture that will attract the best employees, and retain them once hired. This is important at a time where 1 in 3 senior management anticipate changing jobs within twelve months and up to 47% of top executives are currently looking for another job.1 If the war for talent was hidden by the recession it is, once again, in full view and raging fiercely. Companies need to take steps to retain their appeal to the most talented employees. Incentive trips, especially those with a CSR-element, should form part of an HR Director’s arsenal to attract the top talent, who seek to be rewarded and recognised, and to work for a company who shares their values. This white paper seeks to validate the reasons why HR Directors and Managers should include incentive travel as part of their benefits package in order to increase motivation
1
Re-engaging with Engagement, The Economist Intelligence Unit (2010)
http://www.economistinsights.com/sites/default/files/LON%20-%20PL%20%20Hay%20report_WEB.pdf
and retain staff. It will also demonstrate how incentive based travel trips with CSR at their heart can lift employee engagement, raise productivity, build a compelling corporate culture, develop the next generation of leaders and breakdown cultural barriers within an organisation. HR Directors’ most pressing concerns There are many pressing concerns for the human resource community in finding and retaining good employees. According to the Society of Human Resource Management2, the leading priorities for HR Directors include: − Retaining and rewarding key employees − Developing the next generation of corporate leaders − Creating a corporate culture that attracts the best employees − Remaining competitive in the talent marketplace − Breaking down cultural barriers − Teaching the next generation of leaders to make sustainable win-win choices − Providing a good employer/employee experience CSR-focused incentive trips help HR managers with all of these issues as this White Paper will demonstrate. How do incentive trips help HR Directors solve their most pressing challenges? Incentive travel programs are more effective in lifting performance and sales than offering cash to employees. This may be surprising as it would generally be assumed that cash would be the preferred choice for most people. However, a study conducted for the Goodyear Tire & Rubber Company demonstrated that while the performance of a group of participants rewarded with cash and another group rewarded with tangible incentives improved during the program, the increase in performance and productivity shown by those receiving tangible lifestyle and travel incentives was nearly 50 percent more than those of the other group.3 The International Society for Performance Improvement prepared a study that identified incentive programs as having a positive impact on individual employee performance by as much as 22% and in the area of team performance by a considerable 44%. This information mirrors studies undertaken by the Incentive Marketing Association's Recognition Council4, which found that companies who use travel incentive packages for the purpose of incentivizing their employees outperform those that do not by 30-40%. Global Meeting and Incentive Travel Exchanges wrote in their 2014 paper 'Emerging Meeting Markets, Recognizing Opportunities beyond the US Border' that: “incentive travel is more likely to be spoken about to other employees when a person gets back from a trip and this has a greater impact of the perceived benefit of the incentive than a cash based incentive would. The anticipation of a trip is compared to that of waiting for an impending gift and serves to motivate employees to work harder than the cash based incentive would, which may not bring the same touch of extravagance to their lives.” 2
http://www.shrm.org/Research/SurveyFindings/Articles/Documents/SHRM-Challenge-HR-2022-
Spotlight.pdf
3 4
Alonzo, V. “The trouble with money.” Incentive, 1996, pp. 26-31 www.incentivemarketingfoundation.com
Incentive trips generate a positive return on investment in two main ways: - employees are well rewarded, more satisfied and therefore more productive, and - these employees want to stay with their employer, thereby reducing expenses related to recruiting and training new staff Incentive travel offers companies the chance to5: -
Motivate staff to higher levels of sales, efficiency and productivity, risk free
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Build an attractive corporate culture
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Retain key staff
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Attract new staff
According to the Incentive Research Foundation (“IRF”): “Employees are motivated by both the incentive travel award they can earn and the recognition afforded to them by the corporate leaders when they participate in the travel event. They are also excited about the opportunity to network with other high performers and share best practices. They are very proud of their achievements and the fact that they are recognized as being the best of the best. Their overall contributions to the organisation’s success are considerable.”6 This compendium of benefits serves to create a compelling proposition in favor of incentive travel. Incentive trips: financially risk free and 400% ROI Due to the financially risk-free nature of incentive travel – in that they only take place if targets are met or exceeded and are, therefore, self-financing –questions about which department funds the trip are irrelevant. The positive impacts that such trips generate are felt by the participating teams, including HR and sales, whilst even hardnosed finance functions can’t argue with the enhanced sales and profitability of the business. By way of example, Saracens Rugby Club regularly sends their players on short incentive travel trips to relax and rejuvenate them and to create an even stronger bond between team mates – for example, after winning a big match, the players went straight to New York for 3 days – Saracens culture (and results) is acknowledged as the way forward for professional sports teams. An Oxford Economics report has found that incentive travel investment yields an ROI of more than $4: $1.7 Thus incentive travel programs are implemented in order to have a positive effect on sales, increase productivity and retain key employees8. As we will show, by including a CSR element, a company can reap even more rewards, and an even greater brand and financial
5 6 7
8
Incentive Research Foundation, Anatomy of a Successful Incentive Travel Program http://theirf.org/direct/user/file/pdf/IRFincentiveTravelCaseStudy_FINAL.pdf http://www.ustravel.org/sites/default/files/09-10-09_Oxford%20Economics.pdf
An Integrated Viewpoint of Incentive Travel Value, The Incentive Travel Council (2014).
ROI. The paper will also show that by including a professional leadership development facilitator on a trip companies can generate massive rewards in terms of developing future leaders, improve the decision making capabilities of their people and observe how well teams react and behave when placed into an environment that is far removed from their day to day one. An experienced Incentive Travel provider can arrange this. Keeping up with the competition IRF surveys show that on average, 36% of event planners are increasing their budgets year over year. This serves to inform HR managers that incentive trips are being used by other companies, and as a competitive priority in the war for talent, they should consider doing the same, if they are not already. How to retain key staff and remain competitive in the talent marketplace The business threat from staff poaching, skill gaps and shifting demographics are forcing companies to place a new emphasis on the positive outcomes associated with incentive travel and recognition programs. The U.S. Department of Labor estimates that over 2 million job postings continue to go unfulfilled9 and, even though the ranks of people out of work remain high, companies are increasingly showing ruthless competitiveness by targeting the best employees of their competitors. Every forward thinking HR department is seriously examining strategies to retain their best people. They need to. The same labour data reveals more evidence of poaching. The number of “hiring events” per month can be as high as 4 million, even as “net-new” jobs added to payrolls stay stuck in the 200,000 range10. This confirms that highly desirable people who are currently employed are actively transitioning from one employer to another. It also suggests that “APlayers” are being poached in an aggressive manner. Competitive rivals and newly formed start-ups seek the industry experience and relationships of these rare A-Players who have the unique skill sets that the market place demands, a pattern that is expected to continue well into the future. An American Society for Training and Development report11 predicts that by 2015: · 76% of U.S. jobs will require highly-skilled workers · 60% of new jobs will require skills held by only 20% of the population Shifting demographics will further dilute the talent pool. The make-up of the workforce is dramatically changing. An estimated 10,000 employees will turn 65 today and will continue to do so every day for the next 20 years. How big of a shortfall will retiring employees be leaving employers? All told, some 76 million working Baby Boomers will need to be replaced with younger workers in the US alone. Certainly new candidates will continue to enter the workforce, but not in the numbers businesses need. In other words, the talent pool is set to shrink by some 40%. The next wave of workers is not enough to fill vacancies in a stagnant economy, let alone one that is starting to show growth.
9
http://www.bloomberg.com/news/2012-07-25/companies-say-3-million-unfilled-positions-in-skill-crisis-jobs.html
10 11
U.S. Bureau of Labor Statistics
2010 ASTD Bridging the Skills Gaphttp://www.astd.org/%20About/~/media/Files/About%20ASTD/Public%20Policy/%20BridgingtheSkillsGap2010.pdf
How to develop leaders? If the shortage of talented employees in general is being felt more acutely the situation is much worse where finding good leaders is concerned. In survey after survey, senior executives express concern that stiffening competition for exceptional individuals is curtailing plans for progress. The Corporate Executive Board reports that 60% of organizations feel constrained by the leadership shortage, while The Bersin Deloitte Advisory Board cites developing organizational leadership capacity as one of the three biggest business challenges companies face today.12 Bloomberg also rated leadership development among the top issues confronting HR professionals, while Industry Week Magazine called the lack of potential leaders the most pressing human capital problem of our time.13 Aberdeen Group (March 2013) reported that businesses felt that they will only be capable of developing about two-thirds of the leaders they would actually need to grow the business over the next three to five years.14 So what are companies doing about it? Aberdeen challenged HR executives to rethink their current leadership development practices and to take “a multifaceted approach� toward identifying, developing and retaining key talent. Reward and recognition platforms can align skills to the changing competitive landscape and link behaviour and values toward a firm’s broader business mission. HR managers can also use Incentive Trips to bring key top-performers together to learn from one another, to grow, and to engage them in solving key business issues. Progressive companies can even use attendees of these events as catalysts and mentors for the next level of leadership groups within their enterprises. Developing strong leaders through teaching the importance of external factors is done by providing employees with enough in-depth information about an issue so they can form fact based opinions and understand why it is important for companies to interact with communities. Incentive trips that include current senior management and key employees that are being groomed for senior executive roles can be powerful for developing leadership skills, especially when framed around the social issues that they encounter in the community-development aspect of a CSR-aligned trip. Leadership level corporate social responsibility programs are designed to bring more information to employees about the nature of the industry they work in. For example, a retail clothing store might offer incentive trips to countries where their product lines are made and allow employees a chance to see for themselves the overall supply chain within their marketplace and how business decisions affect communities in real situations.
How to provide a good employer/employee experience? Naturally forward thinking companies wish to provide their employees with a favourable work experience and environment, as this is conducive to higher productivity and retention. Simply by offering attractive incentive trips, companies can be seen to be committed to creating positive employee experiences, whilst the trip itself, with luxury 12 13 14
Predictions for 2013, Bersin by Deloitte, Jan 2013 Executives Fear Leadership Shortage, Industry Week, March 11 2012 See http://aberdeen.com/Aberdeen-Library/8409/RB-talent-leadership-development.aspx
hotels, gala dinners, and activities that may not be possible if travelling independently, is sure to create an enduringly positive employee experience. Add in a CSR element to such a trip and the experience will be taken to new levels as the employee will enjoy the unique pleasures of luxury alongside the sense of fulfillment they will get from helping people and communities less fortunate than themselves. Why add a CSR element to an Incentive Trip? There are multiple benefits, which will be felt right across a corporate organization, in employing a corporate social responsibility incentive travel program within a business. For example, the benefits of an incentive trip, such as increased sales, retention and motivation accrue even without adding a CSR-element to the trip However, when a CSRoutcome to the incentive trip is included companies can also expect to benefit from the following: -
Creating a corporate culture that attracts the best employees: When incentive trips are aligned with a company’s CSR values, the corporate culture can be further enhanced, with staff being excited and proud to work for a company that cares about the triple bottom line (People, Planet, Profits). This is compelling, and attractive to both existing and prospective employees.
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Team building: powerful team bonding takes place when employees work together to complete something that is of benefit to disadvantaged communities. Examples include building tangible structures such as a medical centre, computer lab, or library. When staff get back in their work environment they will have developed the synergy between coworkers that increased productivity demands Positive publicity and reputation enhancement amongst consumers and other influential stakeholders
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An expectation of greater sales and profits due to consumers preferring to buy from companies who are Socially Responsible15;
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The breakdown of cultural, geographic and departmental cultural walls within an organization where employees from different parts of the business have shared a life changing, volunteering experience. It is important that leaders understand the cultural backgrounds of employees in the first place whilst incentive travel programs help employees feel more connected on a global level, which will benefit the company in the long term;
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With increasing scarcity of resources, sustainability is set to be a mantra for business practice, and by focusing on CSR initiatives that are sustainable, leadership development facilitators can help a company’s current and future leaders make sustainable and win-win choices;
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Companies can build goodwill in existing and new markets through delivering sustainable, employee-driven CSR initiatives, for example the payback from having built a medical center in an economically disadvantaged area is that goodwill in the local marketplace will be established and will help sales in those areas;
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More engaged employees who are excited to work for companies that share their values (especially true with ‘Millennials’ e.g. young employees);
15
http://www.nielsen.com/us/en/newswire/2013/can-doing-good-be-good-for-business.html
On this last point about engaged employees, increasingly organisations realize that to be competitive they must inspire their staff to go the extra mile and feel passionate about the company and its future. Companies have to motivate their staff to expend maximum effort, and apply maximum creativity in their work for the benefit of the organisation as a whole. Most intelligent organizations now know that engaged employees are a powerful source of competitive advantage and increased profitability. Engaged employees believe in the purpose of their organisation and demonstrate that belief through their actions and attitudes. Research by Towers Perrin-ISR16 has proved that there is a link between employee engagement and financial performance, and it provides some compelling evidence. They studied 50 companies across the globe, looking at both their employee engagement scores and their financial data. Their analysis focused on the impact of employee engagement on operating income, net profit and earnings per share (EPS). Over the 12 months studied, organizations with high levels of employee engagement outperformed those with below average levels of employee engagement on all three financial measures. -
Operating income. Companies with highly engaged employees collectively saw operating incomes rise by $389.95 million or 19.2%, but companies with below average levels of engagement collectively saw it fall by $664.14 million or 32.7%.
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Net income growth. The group of companies with highly engaged employees saw net income grow by 13.7% or $121.38 million but it fell by 3.8% or £33.67 million among companies with low levels of employee engagement.
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Earnings per share. Organizations with highly engaged employees collectively saw earnings per share increase by 27.8% compared to companies with low levels of engagement which saw a fall of 11.2%.
The facts of the matter are clear. By adding a meaningful CSR-component to an incentive trip companies can achieve higher levels of employee engagement and achieving higher levels of engagement will generate higher profits and earnings per share. Keep in mind It is important for companies and the incentive travel houses they engage to bear in mind that a CSR-incentive trip has two functions: 1. Reward 2. Community “give-back” Both elements must be included if the trip is to motivate participants to higher levels of performance. So companies should keep using 5* hotels (ideally eco-luxury ones with a commitment to sustainability), offer gala dinners, and inspiring activities but combining this with real time and energy committed to helping the community where the trip has taken them is vital or the equation doesn’t work Examples Ideally, a company’s CSR-activity should be in line with their values and industry category. Examples of this would be:
16
http://dop.bps.org.uk/organisations/insights-research/the-business-benefits-of-employee-
engagement$.cfm
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On an IT company’s incentive trip to South Africa, they build a computer lab in a school, and equip it with computers, plus enjoy “Big 5” safari, Table Mountain and the wine lands.
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On a pharmaceutical company’s incentive trip to India, they build a medical clinic in a village in India that lacks medical care, combined with visiting the Taj Mahal and beach relaxation in Goa
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On a bank’s incentive trip to Belize, in addition to enjoying the jungle, Incan ruins and barrier reef, they also provide one-on-one mentoring and advice to microloan recipients A well informed and globally connected incentive travel house with a specialization in CSR-incentive trips can assist you.
Conclusion With the challenges facing HR managers in finding and retaining good employees, creating a compelling corporate culture, and developing the next generation of leaders, thought has to be given to how to attract the best employees by offering attractive benefits, and how to retain them once hired. Incentive trips help companies attract the most qualified staff and retain key employees. By aligning an incentive trip with a company’s CSR values, HR managers can solve other key challenges, including: Developing the next generation of corporate leaders Creating a corporate culture that attracts the best employees Breaking down cultural barriers Teaching the next generation of leaders to make sustainable and win-win choices − Providing a good employer/employee experience − Be more appealing to Millennials, who seek out companies to work for who share the same values that they do: of making the world a better place − − − −
Outside of the HR arena and in the sphere of other corporate functions benefits accruing to a company by implementing an incentive travel program with a CSR element include: - More engaged employees, and thus higher profits - An enhanced CSR reputation, and thus higher profits as consumers choose to buy from them ahead of their competitors - Stronger, more productive and culturally aware teams, and thus higher profits - Building goodwill in new and existing markets, and thus higher profits Clearly it is the star performers who are the priority to be retained, and top performing teams and executives need to be offered top level benefits. Incentive travel programs with a CSR-element offer a unique opportunity to reward employees who delivered stellar results and also to contribute to corporate citizenship in a way that gets employees involved who return more motivated, loyal, productive and engaged. In the raging war for talent, competitiveness, and market share, this is a compelling proposition, especially as it is riskfree.
Next Steps:
We hope this White Paper inspires you to use incentive travel with a CSR-element to retain your key staff (as well as motivate and reward top performers, and make higher profits!). Hands Up Incentives is the leading, award winning incentive travel organizer. Hands Up Incentives has won the IMEX Award for Commitment to the Community for 2014 and 2013. The company won these jointly with its clients and Hands Up Incentives would be delighted to help your company win this prestigious award. You can: - Check out Hands Up Incentives; view videos to see how inspiring CSR incentive trips are; and read insightful case studies about sustainable trips. Email Hands Up Incentives with an RFP at rfp@handsupincentives.com Call Hands Up Incentives on (201) 984 5372 (USA/Can) or 0207 193 1062 (UK) or +44 207 193 1062 (Rest of World) Download your Free Guide to Making Your Next Incentive Trip Amazing and Meaningful Sign up for your newsletter and get tips and news about staff retention and engaging employees