More Incentive Programs are Being Outsourced
New York— Driven by myriad high-profile corporate accounting scandals and the resulting Sarbanes-Oxley (SOX) legislation, the outsourcing of incentive-program management has accelerated. According to a new study by the Incentive Federation, a coalition of industry associations, suppliers, and trade shows, the use of professional incentive companies has nearly doubled in two years.
"There's a need for companies to be able to say: 'This is what we're doing, what we're spending, who was awarded what, and here's how it was handled through payroll,'" said Rosemarie Christofolo, president of Altour Incentive Management, a Mesa, AZ-based provider of online incentive management services that has seen its sales more than triple in the last two years. "We used to have to explain the benefits of outsourcing [to potential clients], but now people have already made the internal decision to outsource and are just selecting a supplier."
The bulk of Christofolo's increased business comes from mid- to large-sized companies that are subject to SOX legislation. (SOX applies only to public companies with market capitalizations of at least $75 million.) But smaller companies, looking to streamline operations, are turning to outsourcing. "Programs sometimes start off small and grow until you have one to three staff members devoting a significant amount of time managing, enforcing, and tracking them," she said. Outsourcing reduces staff workloads while also ensuring better tracking, reporting, accountability, and justification of the programs.
"We outsourced to provide a more professional means of issuing awards," said Sue Vanhoy of Munich, Germany-headquartered tech firm Qimonda AG. Although Vanhoy said the award cards she uses are limited to certain vendors and that the system sometimes falls victim to bugs or other technical problems, the benefits of outsourcing, she cited, "include reporting, budget tracking, and ease of nomination and issuance."
Dedicated incentive management firms have systems and resources that corporations may lack, including the ability to "pull weekly, monthly, quarterly, or annual reports that show how the program is running." Companies use this data to assess a program's return on investment and return on objective, and to justify the program to stakeholders.
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