It’s like taking a long walk in the desert with a crappy map. You wouldn’t do it by choice.
I get why suppliers, lobbyists and trade associations want to link spending with a positive economic return, especially in these harsh financial times. I get why buyers would like some way to measure the ROI of their travel budgets. And I like numbers and metrics and quantifying stuff more than most people…so why don’t I like this quest to measure travel ROI?
With a couple of exceptions, I don’t see any practical way to produce reliable and meaningful measures of return on T&M spend. Yes, that’s a pretty short-sighted reason, especially from a guy who admires innovation. But I’m stumped. What are the measurable inputs (travel costs for sure; maybe productivity costs..what about opportunity costs?) and outputs?
As soon as you start thinking about measurable outputs of a trip or meeting, you see the problem – there aren’t any good ones. By good, I mean robust enough to apply to most trips or meetings, and sturdy enough to be measured repeatably and accurately. Not to mention the problem of defining the payback period…should it be a month, a quarter or a year?
There aren’t many good answers to these tough questions, especially at the level of measuring a trip or a meeting’s ROI. An exception is a macro-economic study, such as the one done by Oxford Economics. (And after trading e-mails with the author about that study’s methods, I remain skeptical of its findings).
What can be measured, or at least estimated, is the degree to which a trip’s goal was met. Did you improve the relationship? Did you sign the deal? Did you pass the exam at the end of the training session?
Measuring the outcomes of a trip or meeting, rather than outputs, makes some sense…up to the limits of the next point:
There’s a “Good Enough” Solution
It’s called management. It requires subjective decision-making using the facts at hand. Is this meeting worth the $75,000 cost? Is that trip worth $1,200? What if we do a Webex or a Halo meeting instead? That’s how T&M budgets get authorized, and that’s how T&M spend gets evaluated.
It’s a remarkably efficient method – no paperwork, no number-crunching. Precise? No. Effective? Usually yes, or you eventually get new management of the T&M budgets.
What’s the Best Practice?
Think about some other big spend categories and the extent to which anybody is measuring their ROI.
Take telecom. Telecom is like travel, in that both typically involve communicating with another person for any of a bazillion reasons.
Can you imagine having to calculate the ROI of your last phone call? Too granular, you say? How about measuring the ROI of your annual BlackBerry/iPhone subscription plan? How is travel so different?
Or take something less interpersonal, but even more prevalent – the desktop computer category. Does any buyer or manager try to calculate the ROI of purchasing a computer for a new employee? Not that I know of.
Instead, a manager makes a judgment call that the employee (or traveler) should or should not have a computer (go on a trip), given the expected cost of a computer (trip). Once that decision is made, then the procurement process takes over to ensure that the company gets the best value it can.
Which brings us to the topic of savings and how you’re measuring that all-too-critical metric. For my recent thoughts on that, see this post.
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