How to Recognize the "AIG Effect" Before It Happens to YOU

It's happened before and it just happened again. The most dramatic scenario involved the Greek subsidiary of a multi-national company requesting proposals for luxury incentive travel a couple of months before thousands of layoffs and the Greek economic crisis were announced. This scenario involves a multi-national company with a North American head office.

Scenario: A company representative requested proposals from event planning firms for a highly customized and very expensive foreign retreat. Unfortunately, due to the degree of customization, it was impossible to just send guideline pricing. Much research was needed to develop a proposal to fit the company's very specific requirements. Then, there was silence. Finally, the response came. Corporate performance was below expectations. The sponsoring executive and other executives with the subsidiary had been shown the door.

Earlier this year, even though company performance was declining, this executive had taken his team to luxury resorts in Asia and the Middle East. (He had rejected a proposal from a luxury hotel in Las Vegas and held a sales conference in the Middle East involving thousands of employees.) This had strained the travel budget to the point that there was little left for sales calls. Yet, the executive was again out shopping for team events at exotic locations. Similar lapses in judgment triggered the first "AIG Effect."

Best Practices for Executives

There is a time and place for luxury. When performance is declining is not the time for luxury corporate events, business meetings and conferences at exotic destinations. Instead, hire a consultant to get to the root of the company's problems and generate solutions. Save luxury for when performance rebounds. Ensure that there is a bonafide need and that funds are earmarked before sending your team to gather proposals.

Best Practices for Event Planners

Especially for highly customized requests:

  • Research the company.
    1. Do media reports offer clues that the company is in trouble?
    2. Is stock performance lack luster?
  • Insist on a brief conversation with the sponsoring executive. If the scope and company performance don't dovetail, confirm that the initiative has been sanctioned with someone more senior.
  • Confirm that a budget has been allocated.
  • Request a deductible retainer.

What best practices do YOU employ to ensure your hard work is rewarded?

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