Melissa Van Dyke, President Incentive Research Foundation Transforming Measurement: Improving ROI in Incentive Programs Programs

Agenda TimeTopic 5 minJust after lunch. Renew with video of transformation 6 minPast: Quick Recap of MMM Study – Benefit Reports 4 minPresent: Simple ROI Calculations – Absenteeism Example 20 minImmediate Future: Extended ROI Calculations – FREE IRF Tool 10 minDistant (but close) Future: Human Capital Analytics

THE MASTER MEASUREMENT MODEL BENEFIT AND FEEDBACK REPORTS “The Way We Were” 3

Master Measurement Model Step by Step Measure Performance Dollar Values Program Budgets 4

Vital Elements Base Data New Data New/Base Data Weights Weighted Results 5

Measuring Performance: 3 Tenets  Balance  Weight  Criticality 6

Proposed Family of Measures Weighted calls per rep25% Total service cost per weighed call 25%* Time between visits 20% Customer satisfaction survey scores.20% Time to complete paperwork 10%* * A decrease means improvements for this measure 7

PERFORMNCE REPORT 8 Critical: Total Weighted Result, Performance rose 2.5%

Benefit Report: Moving to Financial Data 9

ABSENTEEISM EXAMPLE Current State: Simple ROI 10

Set Goal Set Goal SIMPLE ROI 11 Monetize Benefit Set Budget Set Budget Calculate ROI Calculate ROI

Example Set Goal:  Improve Absenteeism Index by 8% Monetize Benefit (Collaborate!)  10 absences a week lead to $5000 in overtime and wasted management effort  1 % change in index = $10,000 cost savings Establish Program Budget/Cost Calculate Program Benefit and ROI 12

Calculate ROI Benefit = ((New Data - Base Data) * $ Per Unit Improvement) ROI= (Program Benefit - Program Cost)/ (Program Cost) 13

Calculate ROI Benefit = (98-90) * $10,000) = $80,000 ROI= (80, ,000)/50,000 = 60% 14

More than Just Tasks: Disney Recognizes 4 Attributes Safety Courtesy Show Effectiveness 15

ROI for Recognition 16

IRF MMM TOOL Immediate Future 17

Missing Elements of MMM 18 1.Adverse Impact 2.Causality 3.Confidence

19

20 Real Time Walk Through of Phase I IRF tool.

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35 Step Two: Isolate Effects of the Program and Estimate Confidence Level Attribution: How much of the improvement (sales increase, reduction in accidents, lower attrition, etc.) can be attributed to the rewards/incentives program? This percentage will always be an estimate and will vary depending on the length of the program and other initiatives currently underway. For example, if sales increased 25% over the course of a year while the program was in effect, were there other factors such as an improved economy, fewer competitors, significantly more advertising, additional training, etc., that may have contributed to the increase? If so, you may assign an attribution of 80%. This means the program was only responsible for 80% of the improvement that occurred in this metric over the time period. (You may need the help of experts, managers, practitioners, and even customers to do this well.) Confidence Level: Assign a confidence level to each of the measures. For example, if you’ve estimated that 65% of the sales increase can be attributed to the programs, how confident are you (or your leadership) in that estimate? If you were 90% confident, for example, you would assign a confidence level of 90%. Confidence Levels help you adjust to fit the risk profile of executive leadership.

36

37

38

39

40

41

42

43

LINKAGE AND TARGETING Near/Distant Future 44

Additional Considerations 45 1.Linkage 2.Targeting

Lessons From HR & Human Capital Management 46 Linkage & Predictive Analysis

Lessons From HR & Human Capital Management 47 1% Recogni tion 5% Emp Sat 1.3% Cust. Sat.5% Rev

Lessons From HR & Human Capital Management Measuring and Predicting the Impact of Human Capital Investments 48

Stages of Measurement 49

10 Measurement Principles 1. Number and “ease” of measures: 2 to 5, not complex 2. Baseline data 3. Involvement 4. Targeting 5. Linkage 6. Causality 7. Predictive analysis 8. Unintended Consequences 9. Conservative financial assumptions 10. Demonstrating ROI 50

FUTURE? 51

52 Give us “The One Big Thing”