Why the C-Suite Should Focus on Incentives
As governments at all levels increase their use of incentives, companies must figure out how to best capitalize on these offerings to increase their competitive advantage.
Rebecca Truelove, Business Incentives Partner, Ernst & Young (Q2 2014)

{{RELATEDLINKS}}An ancient Chinese proverb says “May you live in interesting times.” For those in the credits and incentives (C&I) business, these are indeed interesting times. In July 2013, Ernst & Young LLP (EY) conducted its second biennial survey of primarily tax and finance executives from Fortune 1000 businesses to assess how these businesses identify, evaluate, negotiate, and optimize credits and incentives to enhance their competitive advantages in the global marketplace. The results from nearly 800 respondents to EY’s survey reveal that sophistication among businesses regarding the availability of C&I is growing, and the profile of those who are most active in this regard is becoming clearer. Those companies that most successfully pursue and secure C&I tend to be more thoughtful, disciplined, and collaborative in their approach and methodology. Their C-suite is engaged, their processes are focused, and their people are proactive. Their approach is undoubtedly worth evaluating and, where appropriate, implementing.

Before delving into the survey results, it is worth considering some qualitative insights obtained from discussions with corporate clients, executives, and Frontline EY professionals engaged in C&I services:

What characterizes a “very active” company in the C&I space?
Almost 8 percent of companies responding to the EY survey describe themselves as “very active” in pursuing C&I, and these very active companies behave differently from others. Understanding the differences can help improve your own company’s performance in benefiting from business incentives. How, exactly, are the very active companies successfully pursuing incentives?
To evaluate the opportunity to develop a more focused and coordinated approach to capturing value from credits and incentives in line with the “very active” model outlined above, it is important to first understand the current internal profile of ongoing credits and incentives efforts. This internal assessment could begin with a review of where the company footprint is likely to grow and similarly where it is likely to contract. Then, knowing the landscape for potential incentives triggers, what, if any, are the current capabilities and processes in place for identifying and evaluating credits and incentives opportunities, and are the right departments and stakeholders aware of the value potential and the processes to pursue them? A good indicator of the groundwork for future success in this area could come from the level of confidence as to whether these stakeholders are informed regarding the credits and incentives currently being enjoyed and how well they are actually being utilized.

When reflecting on this assessment, if there is a sense that there are gaps in the ability of the business to implement a credits and incentives approach modeled on the very active companies, businesses may want to give some consideration to prioritizing which resources should be added to support this initiative: ideas could range from modifying job descriptions to include credits and incentives to making proactive investment in tools, technology, and external resources.

Lastly, on a personal level, it would be critical to determine what level of executive sponsorship may be needed from you or your office to successfully create within your organization a more informed, collaborative, and successful credits and incentives approach. Based on feedback from EY executives, clients, and government economic development officials, taking the time for active reflection and implementation in structuring a more focused and coordinated approach to capturing value from credits and incentives will position your organization to achieve much more value in both one-off and recurring savings. This, of course, will translate into overall stronger group performance and greater earnings per share.

In Sum
The competition to attract, retain and grow businesses is on the rise. As local, regional, and national governments the world over do more in the credits and incentives space to become more attractive places to do business, executives should consider how their business organizations can best be structured and positioned to capitalize on the expansion of such government incentives. Based on the 2013 EY biennial tax credits and incentives survey, executives that are interested in obtaining greater value from credits and incentives would do well to lead their businesses to emulate companies who describe themselves as “very active.”

According to the survey results, these companies tend to derive greater benefit across a wide range of both statutory and negotiated or discretionary credits and incentives opportunities. Making the most of opportunities like this requires more than mere awareness, but also a commitment to a systematic and collaborative process equipped with adequate resources. This can drive tremendous value but must be done in the context of an acknowledged quid pro quo: the acceptance of credits and incentives forges a “partnership” between governments and businesses. If a company pursues and accepts an array of tax credits and business incentives, it needs to follow through on its commitment to the local community with investment, jobs, and corporate giving. It is only through such partnership that credits and incentives will be a prosperous cycle in the long run for companies and the communities where they operate. Implemented at the C-suite level for greatest optimization, such a partnership will pay proven dividends for companies that make the differential investment for success.

In short, companies who focus on C&I — and, in particular, those with an engaged C-suite, a disciplined, collaborative process, a global perspective, and a willingness to devote resources and technology to support their corporate goals and objectives — can enjoy a significant competitive advantage that can lead to greater success in the marketplace and set the stage for future growth and success.

Note: The views expressed here are those of the authors and do not necessarily reflect the views of Ernst & Young LLP.