Wolff and Samson

Key performance indicators, or KPIs, along with a corresponding incentive compensation plan, are an integral part of any travel management services agreement.

Crafting KPIs impels tbe corporation and travel management company (TMC) to identify and focus on the most critical elements of the services being rendered. Exemplary performance should result in a high KPI score and, in turn, additional compensation. Conversely, substandard service should mean a modest KPI score and reduced remuneration.

Crafting benchmarks

Effective KPIs have certain characteristics in common. Each KPI should be equitable, meaning its achievement is within the sole control of the TMC and reflective of performance that exceeds industry standards. Another hallmark of an effective KPI is that it is auditable, so that the integrity of the results can be substantiated. Also, KPIs should be geared toward clearly identified goals of a company's travel program.

The following represents a sampling of KPls often found in travel management agreements, along with tips for structuring those deals.

Telephone service factor. In lieu of the ubiquitous 80-20 standard (80 percent of calls answered within 20 seconds), corporate clients should attempt to negotiate a KPI of 100-20 (100 percent of calls answered within 20 seconds, or 80-20-80 (80 percent of calls answered within 20 seconds, 80 percent of the time).

These alternatives help neutralize the distorting effects of averaging and excluding up to 20 percent of the calls from the KPI calculation, problems inherent in the 80-20 model.

Customer satisfaction survey. To be meaningful, a survey must elicit a statistically significant response. Therefore, surveys should be limited to no more than 15 questions, and the third party conducting the survey should send notification letters to recipients both before and after the survey is circulated. Multiple-choice questions should have either four or five potential responses and the parties should stipulate that positive or negative KPI scores can be garnered only from a specified percentage of responses in the highest and lowest categories, respectively. Survey questions should be geared toward client goals. If cost and time constraints allow, a quarterly survey is preferable to a biannual or annual survey.

Complaint response/resolution time. A phone call or e-mail acknowledging receipt of a complaint should be placed within two business hours after a gripe has been lodged. Complaints involving only the TMC and customer should be resolved within one business day, while those involving third parties should be resolved within five business days.

Accuracy and timeliness of resporting. Ticketed data and other travel-related data for each month should be provided by the 20th day of the following month, which should enable a company to satisfy its reporting obligations under its preferred carrier agreements. Payment to the TMC should be dependent upon the accuracy and timeliness of reports.

Tracking and refunding unused e-tickets. The frequency with which the TMC, or a tool employed by the agency, searches for unused e-Tickets is often dictated by the customer; 30 days after ticket issuance should provide ample time for travelers to seek a refund for or an exchange of unused tickets. While the issuance of the refund is within the domain of the carrier, the TMC can take definite measures to accelerate the process and should be judged accordingly under this KPI.

Providing incentives

Agreements that are most successful at driving excellence are based upon a sliding scale, so that incremental increases or decreases in KPI score translate into incremental increases or reductions in compensation. The results should be analyzed on a regular basis and, if necessary, adjusted.

This article is reprinted with permission from the August, 2006 issue of T&E Magazine. Further duplication without permission is prohibited. All rights reserved.

Laurence M. Smith is a member of the West Orange, NJ-based firm of Wolff & Samson PC. Smith, whose practice consists of a broad spectrum of corporate travel matters, banking and technology, can be reached via e-mail at: lsmith@wolffsamson.com.