A better strategy for travel procurement
For too long travel procurement pros have been focusing on the wrong thing. New evidence shows
that traditional cost savings is the wrong goal. What’s the better goal? Maximizing the business impact of all those trips.
Over 750 US-based road warriors were surveyed (see box at end) about the impact their business travel and their corporate travel policies had on their personal and professional lives. The responses were split into subsets based on the type of travel policy each road warrior thought best described their employer’s approach to travel management. One group identified their travel policies as cost-focused; the other group identified their policies as traveller-focused.
Travellers managed by cost-focused travel policies reported:
What procurement professional would knowingly buy a basket of business trips that had a 22-percent scrap rate? Or advocate for a procurement strategy that resulted in higher attrition and lower productivity among its most valuable subset of travellers?
Try this perspective on for size:
The average road warrior who travels within North America spends roughly US$35,000 on air and hotel expenses. His salary is roughly $150,000, which means his estimated annual value-add is likely at least $600,000 (at four times salary, per my analysis of public data).
Would you rather focus on saving an additional two percent on a road warrior’s spend, or find a way to increase the road warrior’s value-add by 22 percent? There is a right answer here.
The better goal is clearly the one that delivers the largest business impact. It can’t be about saving a few percentage points on the price of an airline ticket or hotel room. It can’t be about forcing inconvenient, uncomfortable and non-productive travel requirements onto those folks that are on the front lines, travel-wise.
Road warriors who are managed by cost-focused travel policies want very different things from their employers, compared to their peers who are managed in more traveller-friendly environments. The following are at the top of their list:
“Don’t waste my time.” “Don’t make me sit where I can’t open my laptop.” “Please give me half a chance at a decent night’s sleep on an overnight flight.” If you spent over 250 hours a year stuck inside an airplane, and had to cross 135 time zones, as these folks do every year, you’d be begging for more productivity, too.
Travel procurement done right
So what does a much more valuable travel procurement strategy look like? For starters, it uses the same pieces as the classic cost-focused strategy. The big difference is the goal.
The classic procurement effort looks at the travel supply chain with an eye toward reducing cost. I see this in most every negotiation with suppliers, technology providers and travel management companies. The same holds true of procurement’s efforts to shape travel policies. Tough travel policies, such as requiring an extra stop, or an economy seat on a 12-hour flight, result in lower-cost trips.
The better approach is one designed to achieve more value added by the road warrior. Instead of trying to reduce cost throughout the travel supply chain, the challenge is to maximize the chain’s ability to help travellers deliver higher value.
This starts with giving travellers higher-quality trips—no extra connections, roomy seats, high-quality and convenient hotels, access to airport lounges and expedited customs and security lanes…pretty much anything that improves a road warrior’s health, safety, productivity and engagement.
Procurement’s challenge is to curate the travel suppliers that are best able to deliver these productivity improvements, support travel policies that help retain road warriors, and negotiate on price, of course.
Will these higher-quality trips and more traveller-friendly travel policies cost more? Yes, just as a smartphone costs more than an old flip phone. The real question is about payback—can the higher cost be justified?
The framework is simple. Compare what it costs to give a road warrior a year’s worth of better trips, and divide that by his or her estimated annual value-add. If it costs an extra $30,000, and his annual value add is $600,000, then you need a five-percent improvement in his value-add to break even.
Surely a good procurement buyer can find travel suppliers that are capable of supporting that type of modest goal.