Corp. Buyers Deduce Motivations For This Year's Bonus Blitz

By Megan Hjermstad / July 29, 2001

Corp. Buyers Deduce Motivations For This Year's Bonus Blitz

By Megan Hjermstad

The number of corporate travel managers receiving bonuses is higher this year than last year, although those interviewed by Business Travel News were unable to agree on an exact reason for this phenomenon.

Some suggested that the increase in bonuses is reflecting the banner year of 2000, when companies in multiple sectors, and technology companies in particular, were flying high. Or perhaps companies--fighting to stay aloft in the current economic climate--are providing more incentive for travel managers to deliver significant cost savings when they are most needed. Yet another possible cause--proffered by industry recruiters--is not that travel managers are receiving greater respect for the value they deliver, but that they are moving into more recognized areas, such as purchasing, and taking on additional responsibilities to which bonuses can be attached.

Forty-seven percent of travel managers said they are eligible to receive a bonus, an increase from 31 percent last year (see chart below).

Of all travel buyers, 41 percent this year reported being able to earn bonuses, up from 29 percent last year. Broken down by type, 39 percent of travel managers said they are rewarded with bonuses, 8 percent said they receive incentives and 12 percent said they earn stock options.

Denis Day, senior partner at Downers Grove, Ill.-based executive recruiting firm The Day Partnership, which specializes in the travel industry, said, "Typically when we get involved in hiring, we are focused on the base salary. Bonuses are discussed but they are usually negotiable."

According to Day, the opportunity to negotiate bonuses depends on the prominence of the position and the travel budget. "Especially if it is a vice president, it is easier to negotiate at that level. Those positions are typically compensated higher," Day said. "People interviewing at that level also have more experience with other companies and a better understanding of different bonus structures."

Indeed, BTN found that bonuses are most common among travel managers with the highest salaries. Of travel managers with salaries above $90,000, 68 percent reported receiving bonuses, higher than in any other salary bracket. Among travel managers earning more than $90,000, the highest proportion--28 percent--of them earned a bonus of 6 percent to 10 percent of their salary.

Of all the eligible travel managers, 29 percent received bonuses accounting for 1 percent to 5 percent of their salaries (see chart, page 34). Additionally, 19 percent of travel managers reported receiving bonuses worth 6 percent to 10 percent of their salaries, and 12 percent said they received bonuses worth more than 10 percent.

"Corporate travel managers are accepting additional responsibility and getting incentives for that," said Jason King, president and CEO of New York-based Yours In Travel Personnel Agency Inc. And some of those added duties have no relation to travel, such as managing an employee cafeteria, fleet services and temporary staffing.

Day agreed: "We are seeing travel managers aggressively looking for broader responsibilities and more compensation."

King said that as travel managers take on other responsibilities, particularly in such areas as purchasing, they are more likely to garner incentives because the practice is better understood and performance is more easily evaluated than in travel management.

Purchasing Magazine, in its 2000 salary survey of 3,372 purchasing professionals, reported that just over half receive bonuses as part of their annual compensation. The average bonus among those purchasing managers was 11 percent of base pay. Compare that with the average bonus and incentive pay for travel managers--8 percent of total compensation, up from an average 5.6 percent bonus as a percentage of salary last year.

"Corporations find it difficult to understand a corporate travel manager's function, so they don't know how to incentivize a travel manager. Because other segments they are entering have always had bonuses and incentives, travel managers now are getting incentives as well," said recruiter King.

Michael Mandock, senior consultant of global travel services for PolyOne Corp. in Avon Lake, Ohio, who also is responsible for fleet services, said his incentive is based on the overall performance of the company and the performance of the purchasing department to which he reports. However, Mandock said it is a companywide policy to offer bonuses and incentives above a certain management level and it is not particular to travel or purchasing. "If our savings goals are exceeded by 10 percent, then we receive a tiered bonus," he said.

Dawn Penfold, president of The Meeting Candidate Network in New York, which deals primarily with the recruiting and hiring of meeting planners, said that bonuses in general are based on a company's blanket policy on providing executive bonuses in salary packages. "It is based on company values," she said. "Some say, 'Your job is to save us this much money and if you save more than that, we'll pay you a bonus based on that.' "

Penfold said bonuses still are uncommon because some companies simply don't believe in offering them--and with good reason. "If part of the job of a travel manager or a meeting planner is negotiating strategy and saving the company money, then they are just doing their jobs. Why should you get a bonus for doing your job? A lot of companies feel that way," she said.

According to Penfold, it has become customary in financial companies and technology companies to give very strong bonuses, but that may change as those companies in particular are showing weaker margins this year. "It depends on the economy," said Penfold. "In the past four to five years, in such fields as finance, banking and pharmaceuticals, bonuses have been given based on company performance and personal performance. This economy will tell a different story."

King agreed: "In every large corporation that has a bonus plan, it is discretionary based on the profitability of the corporation and the department. When times are tight is when bonuses are hurt."

Colleen Guhin, global travel manager for On Semiconductor in Phoenix, Ariz., said bonuses this year might be light at her company as a result of its overall performance. "My bonus is based on my performance and having the funds available, which is based on the economy," said Guhin.

Not surprising, then, given the weak economy, is that those who can earn bonuses cited cost savings/avoidance as the main determinant, with 61 percent of all buyers reporting that to be the top criterion, up slightly from 59 percent last year (see chart, page 34).

Among travel managers, cost savings/avoidance ranked slightly higher in importance at 64 percent, versus 58 percent last year. Buyers also cited year-over-year program improvement statistics and the travel department's contribution to the company's value as key factors for bonuses, at 37.7 percent and 36.4 percent, respectively.

At On Semiconductor, Guhin said, each individual has a development plan that establishes annual goals that bonuses are tied to. "Savings is always a big one," she said. "This year we are rolling out a program by a certain deadline and my bonus is tied to meeting that deadline."

Corinne Green, corporate travel manager for Modem Media in Norwalk, Conn., said her company's practice is to offer yearly management bonuses based on year-over-year program improvement. "I came here as a manager of the travel agency with a $2 million budget, and told them I could get that down by 25 percent. Once I reached that goal, what bonus I received was reflected in what I saved them," said Green.

While initiatives somehow related to cost savings and cost avoidance were most heavily indicated as determinants for earning a bonus, 34 percent of travel managers reported traveler satisfaction as a factor in earning a bonus, up significantly from 24 percent last year. Meanwhile, 30.5 percent of all buyers reported traveler satisfaction is a criterion, up 1.5 points from last year. Of all buyers, 13 percent reported technology implementation was a criterion, down from 16 percent last year.

Terry Chapman, travel manager at Vancouver-based BC Hydro, has an incentive contract that is established at the beginning of the year based on fulfilling specific projects. This year, he is on the hook to deliver an online booking system.

However, Chapman said the biggest driver to his bonus is a customer satisfaction survey--done by telephone on an annual basis--of the top 100 travelers. "My bonus is based on incremental customer satisfaction year over year. A big thing for us is providing service," he said.

Chapman stressed that his bonus is not based on cost savings. "We are looking to increase value," he said. "We don't want to provide travelers with the lowest cost, we want to provide them with the best value at a reasonable cost."

<li><A NAME="2">Bonuses Make A Comeback

Though the majority of corporate travel buyers still are unable to earn bonuses, it appears that performance-based rewards are making a comeback. While fewer than one-third of buyers were eligible last year, that percentage jumped 12 points this year, to 41 percent.

The number of eligible travel managers also grew, jumping 16 points from last year to 47 percent.

Cost savings/avoidance for the fourth consecutive year was the best way to earn a bonus. However, the travel department's contribution to the company's value dropped to third place this year from second in 2000. It was overtaken this year by year-over-year program improvement statistics.

Of the 240 travel buyers that are able to supplement their salaries based on their performance, more than one-third (34.2 percent) said they received their reward in the form of a bonus, rather than stock options or incentives, which were cited by 9.1 percent and 7 percent of buyers, respectively.

Sixty-seven of the 173 travel managers (38.9 percent) answering the same question also said they are offered bonuses more often than stocks (12 percent) or incentives (8.4 percent).

<li><A NAME="3">Bonuses Average 8 Percent Of Annual Compensation

The 47 percent of travel managers and 41 percent of travel buyers that earn bonuses said their bonuses/incentives are about 8 percent of their salaries. In other words, of the $68,500 the average travel manager makes this year, approximately $5,480 is bonus pay. Travel buyers, who are earning an average of $62,600 this year, will get bonuses of $5,008. About 39 percent of buyers, however, said bonuses are not part of their salaries, indicating that bonuses are not tied to their yearly salary.

<li><A NAME="4">Compensation Change Stabilizes

Fewer travel managers this year than last reported not receiving a raise, with only 11 percent getting zilch for their efforts, compared with last year's 21 percent.

The typical raise falls between the 3 percent and 4.9 percent range, with the average for a travel manager coming to 5.7 percent; the average raise for a travel buyer rose to 5.2 percent this year, from 4.7 percent last year--a drop from 1999's 5.5 percent.

<li><A NAME="5">Majority Of Buyers Pleased With Their Paychecks

Travel buyers with headquarters based in the South were the most contented with their compensation, with nearly 61 percent of them reporting their satisfaction.

Buyers based in the West fell next in line, at 60 percent, followed by those in the Midwest and, lastly, those in the Northeast, at 55 percent.

Ironically, buyers in the Northeast tend to earn more money than their counterparts elsewhere in the country.

This is a shift from last year's numbers, when buyers based in the West felt most contented, followed by those in the East.

Breaking this information down even further, 46 percent of female travel buyers and 32 percent of male buyers this year reported not being happy with their compensation, compared with 51 percent of female and 40 percent of male travel buyers last year.

<li><A NAME="6">Buyers Receiving Sufficient Praise

Aside from cold hard cash as a way to show appreciation, the majority of travel buyers this year, as with last year, said they receive the appropriate amount of recognition for their efforts.

Buyers based in the East had the highest percentage--49 percent--of those answering that they did not feel duly recognized, while southerners felt most appreciated, at 58 percent. Most midwesterners and westerners, at 57.6 percent and 56.3 percent, respectively, receive adequate recognition.

Similar to last year, more females than males said they're not getting enough pats on their backs.

The higher up the salary chain, of course, the more pleased the buyer.

<li><A NAME="7">Travel Managers Losing Faith In Salary Hikes

While the same percentage of travel managers in both 2001 and 2000--2 percent--believed salaries in the travel management profession would decrease, the percentage of those who said salaries would increase next year dropped by three points.

For corporate travel buyers, the percentage who maintained that a salary increase is foreseeable remained constant, at 52 percent.

In fact, travel buyers' percentages in 2001 and 2000 were consistent across the board.

<li><A NAME="8">Age Counts More Than Experience

The picture of the typical travel manager has not altered much from last year's account, with the average age of the 2001 travel manager being 45.4, compared to 45.7 in 2000.

Travel managers this year have about 11.4 years of travel management experience, of which 6.4 years have been spent with their current employer. This compares with 10.6 years of travel management experience and 5.9 years at their then-current employer in 2000.

Travel buyers this year have 10.8 years of travel management experience, with 6.6 years at their current employer. The Y2K travel buyer had 10.4 years of experience under her belt, with 6.6 years spent at her then-current employer.

While the average number of years of experience fell between 10 and 11, 52.8 percent of travel buyers had more than 10 years; 57 percent of travel managers also fell into that category.

<li><A NAME="9">Executives Paying More Attention To Travel Mgmt.

Senior execs are paying more attention to travel management this year and recognizing travel buyers more for their labor pains.

The percentage of buyers that said they are being recognized more rose nine points, compared with a three-point increase this year from last year among travel managers.

Among the latter group, slightly more feel their departments are less recognized than last year, at 7 percent in 2001 versus 6 percent last year. The percentage of corporate travel buyers with that view did not change.

Many more Y2K travel buyers felt that travel management recognition remained the same, at 41 percent last year versus 33 percent in 2001.

<li><A NAME="10">Easterners Earn More

Last year's survey, as well as 1999's, saw travel managers based on the West Coast among the highest paid in the industry. This year, however, the tide has turned. Travel managers in the Northeast earn, on average, 18.6 percent--$13,900--more than their midwestern counterparts, $11,500 more than their southern colleagues and $500 more than their western associates.

<li><A NAME="11">Education Not A Key Pay Indicator

Higher education is not necessarily indicative of a higher salary, according to this year's survey. For instance, while the largest percentage--40.2 percent--of all travel managers have at least a four-year college degree, of these 150 people, 57 percent earned less than $70,000, while only 43 percent earned above that.

Professional certification also does not appear to play a prominent part in calculating salaries, but continuing education does. Of the 23 travel managers who hold a professional certification, seven earn more than $70,000, of which three earn above $90,000. Yet, the majority earn between $40-$70,000. Conversely, of the 21 travel managers with an MBA, 62 percent, or 13, earn more than $90,000.

<li><A NAME="12">Agencies Take On Larger Tech Role

Perhaps attributable to the growing number of responsibilities placed upon them, fewer travel managers and travel buyers this year are taking tech on themselves--that is, without the support of other personnel. Most buyers--40.7 percent--are relying on their agencies for support; an almost equal amount of travel managers--39.2 percent--are doing so as well. About 34 percent of both travel managers and buyers this year are doing it themselves, a decline from 2000, when 35 percent and 38.5 percent, respectively, did so. While 36 percent of travel managers last year--the largest group--worked with their IT departments for tech support, this year the largest group--39.2 percent--said they rely on their travel agencies.

Of the 195 travel buyers who handle tech themselves, 35.5 percent earn under $40,000, 28.2 percent earn $40-$49,900, 40.9 percent earn $50-$69,900, 27.4 percent earn $70-$89,900 and 31 percent earn $90,000+. Of the 125 travel managers who do it themselves, 41.3 percent earn under $40,000, 29 percent earn $40-$49,900, 39.1 percent earn $50-$69,900, 26.6 percent earn $70-$89,900 and 32.3 percent earn $90,000+.

<li><A NAME="13">Buyers Cite Reasons For Increases, Decreases In Opportunity Levels

Of the 392 travel buyers who said their level of opportunity has increased, 77 percent cited more attention to travel management by senior corporate management as the top reason. Advancing travel technology that requires specific expertise captured 64.3 percent of the buyers, while 59.2 percent cited the increasing sophistication of negotiating, which requires specific industry and negotiating expertise.

Greater demands on travel managers due to fee-based agency pricing and direct connections was cited by 50 percent of travel buyers, while more travel departments reporting to finance/purchasing was listed by 45.2 percent. This was followed by greater expenditure on travel, 44.9 percent, globalization, 38.3 percent, and a tighter labor market, 16.6 percent.

For the 52 buyers who saw a decrease in the level of opportunity available to them, 51.9 percent cited the trend toward outsourcing (reduced head count), followed by headquarters consolidation of travel, which diminished responsibilities, 23.1 percent. An equal amount said that their travel programs are mature, so there are no significant unidentified cost-savings strategies, while 13.5 percent cited advancing travel technology that requires greater expertise. Increased sophistication of negotiating, which requires greater purchasing/negotiating expertise, was cited by 9.6 percent, while 15.4 percent cited "other."

Of the 12 travel buyers who indicated that their "travel program became mature, so there are no significant unidentified cost-savings strategies," half earn under $40,000, five earn $50-$69,900 and one earns $70-$89,900.

<li><A NAME="14">Buyers' Duties Are Evolving

Nearly every area of travel management this year--with the exception of meeting and incentive planning--increased in the number of buyers accepting responsibility, further validating the fact that travel buyers, indeed, are taking on more.

Technology is playing a huge role in buyers' added responsibilities. The percentage of travel buyers that this year have their hands in the online booking pie, compared with 2000, is 14 points higher, suggesting that the effectiveness of these electronic tools in reducing travel costs has been realized. Meanwhile, the percentage handling GDS selection this year is six points higher than last, reflecting corporations' continuing move to bring primary relationships in-house, and away from their agencies.

The percentage of buyers taking control of their corporate travel intranet site this year is 12 points higher than last. Of the travel buyers who responded to this year's survey, 59 percent said they have a corporate intranet travel page and 81 percent of them currently are adding significant enhancements. Of the 244 travel buyers who said they do not have a corporate intranet travel page, 34 percent are planning on building one.

Meanwhile, the "other" category in what travel buyers are managing this year decreased by a whopping 46 points. Some of the respondents said the other managerial aspects of their jobs include: corporate aircraft servicing and scheduling, back-end airline discounts, charity golf tournaments, corporate administrative services, administration for the transportation manager, and food and catering services.

<li><A NAME="15">Travel Managers Are Checking In With The Finance Boss

Both this year and last, travel managers reporting to finance have made up the largest group of survey respondents, followed by those reporting to administration. However, the percentage of travel managers reporting to finance this year dropped nine points from last year.

<li><A NAME="16">What Buyers Expect In Two Years

Overall, 497 of 591 buyers--84.9 percent--are content with their current employers, with only 10.8 percent expecting to change companies in the next two years; 19.5 percent plan to leave travel management within two years, with 25--4.3 percent--of those buyers expecting to be retired or unemployed.

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