The question, “Did you enjoy your trip?” may not be top of mind for chief financial officers (CFOs) and chief procurement officers (CPOs), but it should be. Traveler satisfaction is a bit of a sleeper, but it actually plays a striking, if indirect, role in business outcomes.
Business travel can be stressful and efforts to improve traveler satisfaction can improve morale, decrease staff turnover, and make recruiting smoother. These factors are fundamental to maintaining a strong organization and playing to win. Programs that improve traveler satisfaction save money. Replacing people is a costly process that impedes progress and strategic advancement.
Connecting people to strategy
Does a business strategy execute itself? No. People make it happen. That’s why successful business leaders like Southwest Airlines CEO Herb Kelleher said, “Your employees come first. And if you treat your employees right, guess what? Your customers come back, and that makes your shareholders happy. Start with employees and the rest follows from that.”
Multiple factors contribute to a successful connection between treating employees right and business results. The strategy has to be coherent. The right people need to be on the job. They want a positive work environment, intelligent incentives, and the right productivity tools. Traveler satisfaction is a big driver of productivity. Employees prefer to travel comfortably and safely while they’re on company business.
Decreasing turnover by increasing traveler satisfaction
Traveler satisfaction keeps people on the job. A 2017 research study from the Global Business Travel Association (GBTA) revealed that increased traveler satisfaction can also increase employee retention. Satisfied travelers tend to quit less frequently, which decreases the rate of employee turnover. On board for the long term, these employees are able to follow through and execute strategic business plans.
Why is travel satisfaction so important for worker stability and commitment? One compelling reason is that travel is an emotional experience. A business trip that’s comfortable and rewarding contributes to positive morale and motivation. As an Egencia customer said, “You want to be on your best when you travel, to focus on the work you’re there to do.” Unfortunately, the opposite can also be true. Poor travel experiences affect workplace attitudes as well as an employee’s personal life when families are left to deal with an exhausted, stressed-out employee at home.
Traveler safety is a related and equally important issue. Unfortunately, travel — especially international travel — can occasionally create some risks for travelers. These threats range from unpredictable weather to civil unrest, crime, or worse. While these instances are relatively rare, business travelers may feel vulnerable and anxious if they are uninformed or unable to communicate effectively during a time of perceived risk. We recommend following best practices for Duty of Care to keep track of employees who travel and their safety.
If travel satisfaction and safety concerns contribute to an employee leaving the company, the business costs can be significant. The Center of American Progress reported that the cost of replacing a highly paid employee requiring specialized training can reach 213 percent of the employee’s annual salary. Consider the case of an employee who earns $100,000. Replacing that individual could cost $213,000, excluding lost revenue.
|As Is||With poor traveler satisfaction|
|Number of employees: 5,000|
|Rate of employee turnover||5%||6%|
|Number of positions to fill||250||300|
|Average salary of departing employees||$100,000||$100,000|
|Cost of recruitment, training per employee: 213%||$213,000||$213,000|
|Total cost of recruitment||$53.25 million||$63.9 million|
|Difference between “As Is” and poor traveler satisfaction||$10.65 million|
Table 1: Modeling the cost of employee turnover, assuming a 1 percent change in turnover due to poor traveler satisfaction.
These costs can add up in a large organization. Table 1 offers a simple model of the way poor traveler satisfaction can affect employee turnover costs in a company with 5,000 employees. If the turnover rate goes from 5 percent to 6 percent due to travel satisfaction issues, the company will have to replace 50 more employees. Assuming a replacement cost of $213,000 for each employee, a lack of employee travel satisfaction would cost the company $10.65 million.
Turnover also can cause a loss in strategic momentum, with a financial impact that outstrips the costs of recruitment and training. It’s difficult to model this phenomenon, but Table 2 attempts to with a simple form of decision theory. The table shows the dollar effect of higher-than-expected employee turnover.
Imagine that a strategic plan has the potential to generate $10 million in incremental earnings. If the probability of success is 50 percent, then the plan has a projected value of $5 million (50 percent x $10 million). If turnover decreases the probability of success to 40 percent, the projected value falls by $1 million — that’s the cost, in earnings, of the turnover problem. If the company’s stock is trading at 15 times earnings, the turnover problem would cost shareholders $15 million.
|Potential earnings impact of strategic plan||$10 million|
|Status quo||With higher turnover|
|Probability of success||50%||40%|
|Projected value of strategic plan||$5 million||$4 million|
|Projected value (in earnings)||$1 million|
|Stock trading at (earnings per share)||$15|
|Difference in projected value in entity valuation||$15 million|
Table 2: Modeling the projected value of a strategic plan before and after a change in employee turnover due to poor traveler satisfaction.
Cutting costs while improving recruiting efforts
GBTA data also showed that higher levels of travel satisfaction translated into reductions in overall travel spend. This stems from better travel program compliance as the program works to drive down costs through targeted and strategic negotiations. To be successful, it takes awareness of traveler satisfaction to achieve the desired results. The travel program should provide the necessary tools to monitor and improve on key performance indicators (KPIs) rather than simply report on usage.
Business travel satisfaction is also an issue that resonates with potential recruits as well as existing employees. Companies can bolster their recruitment efforts by improving employee satisfaction with travel arrangements. This typically occurs when a travel management company partnership helps support travel policies that contribute to higher levels of satisfaction.
CFOs and procurement managers should take note. Satisfied corporate travelers tend to stay on the job longer and are more productive than peers who are stressed out and exhausted from business trips. Travel satisfaction allows a company to up its competitive game through the consistent execution of strategic plans. Travel costs also come down because satisfied travelers are generally more compliant with travel program policies. It’s necessary to build travel satisfaction goals with data-driven decisions about travel policies, and the right travel management partner can make a big difference.
To learn more about Egencia and the future of procurement and travel, download our white paper here.