Metric Type Level
SAVINGS: Yes MASTER
SERVICE: No ADVANCED
SAFETY: No BASIC
SUSTAINABILITY: No
Description
So you're a travel manager. Are you worth it? What is your ROI?
What I mean is that do you, and your corporate travel management program, create more value for your company than your cost?
If your company takes a strictly spend-and-savings approach to corporate travel management, then the numbers better add up in your favor.
According to Business Travel News, the average travel manager made about $98,000 in total compensation in 2012. That means at the most basic level, in order to have a positive ROI, that travel manager should have created at least $98,001 in savings for the company. (Coming up short? Read the other entries in this blog to find additional ways of capturing savings that you may not be recognizing).
But wait...to get the true picture of whether your program is worth its cost, you need to add in the total cost of program management. Here's your list:
Formula
Program Savings / (Internal Cost + TMC Cost + Other Cost) = Program Management ROI
Let's do an example with the following data points:
$500,000 / ($126,500+$220,000+$35,000) = $1.31
This means in this example, for every $1 spent on travel management, the company saves $1.31.
Usage
Okay...now you have a number...what do you do with it?
First, if the number is less than $1.00, that means that your cost is higher than the savings you are generating/capturing for the company. You need to read this blog to find other ways of capturing savings that your program may be generating. Some of these metrics are a bit challenging to calculate, but let's face it, you need all the help you can get.
Next, if your program seems to be saving less than it costs to administer, start benchmarking with peers to see where and why your program is falling short. Maybe your airline discount levels are too low compared to what your volume can typically justify. Maybe you need to expand your hotel program. Maybe you need to look into promoting travel alternatives like videoconferencing.
Let's say your figure is over $1.00. That means you're saving more than you cost. Congratulations. Your next step is to benchmark this result with other peer companies to see how you stack up. This is a safe metric to compare because it doesn't reveal your actual total spend, costs, or savings. It's just a benchmark number that can be easily compared with other companies' benchmarks.
If your number is higher than others, then you can point that out internally. Maybe use it to show that you are under-staffed compared to others and that your savings supports hiring more help.
If your number is lower than others, then see the first couple paragraphs of this section.
Caveat
Relying strictly on spend-and-savings metrics can be a dangerous game. A well-managed corporate travel program creates value that can't be easily distilled into dollars.
A strong safety program with processes and protocols helps the travelers and the company by minimizing risk. The value is real, but difficult to quantify.
Ensuring that the level of customer service delivered by the TMC and suppliers saves travelers time and grief. I suppose you could quantify some time-savings created by eliminating the traveler need to search for the lowest fares from multiple sources, or to measure the impact on employee morale of having a TMC available to help when events necessitate a change in plans, but those are hard to calculate and some people seem them as dubious measurements.
Tracking and mitigating environmental impact supports many companies' green initiatives, but quantifying the dollar value that a supportive travel program creates is challenging as well.
So...it's good to have a positive ROI. It's also good to make sure that everyone at your company recognizes the other values your program creates. Be proactive in managing this, or someone else might do it for you.
SAVINGS: Yes MASTER
SERVICE: No ADVANCED
SAFETY: No BASIC
SUSTAINABILITY: No
Description
So you're a travel manager. Are you worth it? What is your ROI?
What I mean is that do you, and your corporate travel management program, create more value for your company than your cost?
If your company takes a strictly spend-and-savings approach to corporate travel management, then the numbers better add up in your favor.
According to Business Travel News, the average travel manager made about $98,000 in total compensation in 2012. That means at the most basic level, in order to have a positive ROI, that travel manager should have created at least $98,001 in savings for the company. (Coming up short? Read the other entries in this blog to find additional ways of capturing savings that you may not be recognizing).
But wait...to get the true picture of whether your program is worth its cost, you need to add in the total cost of program management. Here's your list:
- Internal Cost: This includes not only your salary, but the other costs to the company related to you and any other employees supporting the corporate travel program. This means your T&E costs, equipment, phone charges, space allocation, training, etc. It may be hard to get the exact cost of these items, so I would suggest asking Finance for a suitable percentage based on the total employment and total costs to the company for supporting employees ("overhead costs"). Let's just say here that this figure is 10%, meaning you must add another $9,800 to the average salary to come up with the loaded costs. Do the same for each FTE that supports the program...so if there is another person who splits his/her time between travel management and facilities for example, add half of that person's costs to your program management costs.
- TMC Cost: This should be simple to calculate. Just get a statement from the travel agency(ies) that support your program that shows how much your company paid them for services in a given time period. This typically includes transactions fees, account management fees, maybe licensing or reporting fees, services fees for RFPs or benchmarking. Just the total amount paid to them.
- Other Cost: If you engaged a third-party to help support your program--like consultants (a wise investment), safety/security services, audit firms, RFP assistance, data aggregators, benchmarkers, etc.--then total up how much you spent on these services.
Now you have all the components of your program management costs. I assume you also have your spending and savings totals for the same period. That's all you need.
Formula
Program Savings / (Internal Cost + TMC Cost + Other Cost) = Program Management ROI
Let's do an example with the following data points:
- Internal Cost = 1.5 employees with a total compensation of $115,000 plus a 10% overhead cost for a total Internal Cost of $126,500
- TMC Cost = 10,000 transactions at an average of $20 per transaction, plus $10,000 in account management, plus $10,000 in hotel RFP fees. Total TMC Cost = $220,000
- Other Cost = $10,000 for safety/security program, $25,000 for airline RFP help. Total TMC Cost = $35,000
- Savings = total for airline, hotel, car rental, TMC, and behavioral savings = $500,000
$500,000 / ($126,500+$220,000+$35,000) = $1.31
This means in this example, for every $1 spent on travel management, the company saves $1.31.
Usage
Okay...now you have a number...what do you do with it?
First, if the number is less than $1.00, that means that your cost is higher than the savings you are generating/capturing for the company. You need to read this blog to find other ways of capturing savings that your program may be generating. Some of these metrics are a bit challenging to calculate, but let's face it, you need all the help you can get.
Next, if your program seems to be saving less than it costs to administer, start benchmarking with peers to see where and why your program is falling short. Maybe your airline discount levels are too low compared to what your volume can typically justify. Maybe you need to expand your hotel program. Maybe you need to look into promoting travel alternatives like videoconferencing.
Let's say your figure is over $1.00. That means you're saving more than you cost. Congratulations. Your next step is to benchmark this result with other peer companies to see how you stack up. This is a safe metric to compare because it doesn't reveal your actual total spend, costs, or savings. It's just a benchmark number that can be easily compared with other companies' benchmarks.
If your number is higher than others, then you can point that out internally. Maybe use it to show that you are under-staffed compared to others and that your savings supports hiring more help.
If your number is lower than others, then see the first couple paragraphs of this section.
Caveat
Relying strictly on spend-and-savings metrics can be a dangerous game. A well-managed corporate travel program creates value that can't be easily distilled into dollars.
A strong safety program with processes and protocols helps the travelers and the company by minimizing risk. The value is real, but difficult to quantify.
Ensuring that the level of customer service delivered by the TMC and suppliers saves travelers time and grief. I suppose you could quantify some time-savings created by eliminating the traveler need to search for the lowest fares from multiple sources, or to measure the impact on employee morale of having a TMC available to help when events necessitate a change in plans, but those are hard to calculate and some people seem them as dubious measurements.
Tracking and mitigating environmental impact supports many companies' green initiatives, but quantifying the dollar value that a supportive travel program creates is challenging as well.
So...it's good to have a positive ROI. It's also good to make sure that everyone at your company recognizes the other values your program creates. Be proactive in managing this, or someone else might do it for you.
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