When companies wish to squeeze more ROI out of a travel program, they often turn to a program optimization (PO) approach to unearth new cost-savings opportunities and understand where things can be managed more efficiently.
PO, an extension of sourcing and ongoing program management, is the process of scrutinizing program data to identify potential savings opportunities and, once the value of those initiatives are quantified and approved by senior management, going through the steps of implementing those changes, from rewriting policies to educating business travelers about the new guidelines and making sure they are receptive to the shifts.
Now the question is: Can a company really optimize their travel program, a strategy historically used to drive savings, while also balancing the needs of its travelers? With employee recruitment and retention key focuses in today’s competitive job market, it is an important factor to consider when undergoing PO.
On the surface, it may seem that a PO approach is at odds with traveler-centric goals, especially when considering the expectations modern business travelers have.
Because they have grown accustomed to the flexible, customizable experiences that the leisure travel industry offers, these hyper-connected travelers have developed consumer-like desires and demand exceptional user experiences. In turn, there is a growing gap in what the modern business traveler is seeking and what managed travel programs that operate under policy constraints and within an ecosystem of preferred suppliers — each with their own limited technological capabilities — actually can deliver at this point.
Despite this challenge, we firmly believe that through a PO approach, you can strike the right equilibrium between giving travelers a satisfying experience and reducing costs — it’s just a matter of figuring out the right initiatives to implement.
Of course, that can be an overwhelming process — which is why many companies lean on Global Business Consulting (GBC), the advisory arm of American Express Global Business Travel (GBT), to guide them through the journey.
The PO process with GBC
So how exactly does the PO process work? To give you an idea, let’s take a look at how we recently helped a pharmaceutical company based in the U.S. save millions by optimizing its $95 million global air program.
As with any of our PO projects, we first started by conducting a high-level review to pinpoint an area of the travel program that likely will generate significant savings. In this case, we targeted the company’s business class policy. Then using our proprietary evaluation criteria, we performed a more thorough analysis, diving deep into the data to assess its air program and identify current trends and greatest opportunities for savings. We also conducted peer benchmarking to determine best-in-class business class policy rules across the industry.
During this step of the PO process, both qualitative and quantitative methodologies are used to measure and define what actions will maximize savings. Qualitative research involves examining the processes of the program and making sure they are being run efficiently as well as taking a close look at the travel policy to ensure it is driving cost-savings while also meeting the culture of a company. It also can entail benchmarking to understand how the program compares to industry peers as well as looking at how successfully change management is being carried out.
Quantitative research, on the other hand, is driven by the numbers. It involves analyzing sourcing performance, behavioral and savings metrics as well as custom KPIs to understand how the program is performing and where it can do better.
To ensure any recommendations we ultimately suggest are in harmony with the needs of your travelers, we evaluate it through the lens of three criteria: the culture of your company, the objectives of your travel program and methods to engage travelers in order to drive compliance.
When optimizing a program that also meets travelers’ needs, on top of the more traditional KPIs used for cost-savings objectives — such as lowest logical airfare, how many travelers are booking with preferred suppliers as well as the demand for these suppliers — we also look at new-age metrics. These KPIs include ones that measure traveler engagement and satisfaction as well as travel spend per employee, travel spend vs. company revenue, and contract competitiveness and compliance.
Once we have all the data we need to fully assess a travel program’s processes and policies, we provide customized recommendations to boost program effectiveness through tighter controls, efficiency and savings. We then quantify both the value and challenges the shift can bring so that management can make a fully informed decision before the real execution work begins.
Before moving forward with the recommendation GBC had for the pharmaceutical company, we helped create materials to build the business case and also presented our findings to senior management. After multiple rounds of analysis of its air program and 100 percent of senior management buy-in was obtained, the decision was made to adjust the program’s business class policy allowance from flights that are eight hours or longer to flights 10+ hours.
As we do with other PO assignments, we then helped the company rewrite its travel policy so that travelers were fully informed of the new policy rule and there were absolutely no ambiguities.
To ensure a smooth transition, we also work with our clients on the change management process, working to inform travelers of the new policy guidelines, ramping up engagement efforts and helping to streamline communications with an emphasis on gaining traveler buy-in while taking into account regional nuances.
GBC sat down with the pharmaceutical company to develop a global communications plan that included timing, mediums, frequency, messages to specific audiences, etc. We then put the plan in action at the right times. While many companies overlook this step, it is a critical one for spurring compliance.
To lessen the sting of the policy shift and boost morale, the company also implemented a cash incentive program for travelers who were eligible to travel business class per the policy but opted to fly economy instead.
For the last step of the PO process — closing the feedback loop — GBC monitors how different initiatives are performing and reports back to the client to demonstrate that the desired results indeed are being achieved. In the case of the pharmaceutical company, we had great news to deliver: It had saved a total of $6.3 million in the first year alone! And because travelers were well aware of and prepared for the change, there was little “noise” post-implementation.
Back to traveler satisfaction
While we do believe companies can achieve value through PO while still satisfying travelers, it sometimes does require introducing a new traveler-friendly, cost-efficient initiative to help offset any friction resulting from the cost-savings push.
For instance, if a PO shift has more of your travelers flying coach, you may help them recover from long-haul flights with a compensated day off when they return or by encouraging them to extend their stay as part of a “workcation” or “bleisure” trip. Sometimes this also has the added benefit of triggering a less expensive airfare since the traveler may be departing during a nonpeak time or from a second-tier city.
Or you might consider providing your jet-setters with airport lounge access, the costs of which might be offset with the free food and Wi-Fi service that are made available.
Of course, there is no one-size-fits-all solution. As customization is the very nature of the PO process itself, each company must decide if such a strategy is the right choice for its travel program.
The good news is, you need not make such a momentous decision on your own. We are here to help. Through a high-level PO analysis, we can determine if the impact optimization will have on the program is worth the effort. Contact us at [email protected] to learn more about our program optimization services and to schedule a complimentary consultation.