Travel managers are increasingly relying on service-level agreements (SLAs) to monitor and manage relationships with travel management companies, technology providers and other suppliers.
BCD Travel said about half of its clients have implemented service-level agreements over the past three to five years. However, most new bids include a requirement for a SLA, noted Jim Kelleher, vice president of business development in BCD’s Chicago office.
Adopting this business management tool used by information technology departments for more than a decade, travel management professionals are striving to make it relevant. Applying the SLA framework to travel, corporations are defining the performance and service levels that they expect of suppliers, with financial incentives and penalties baked into the agreement.
Typically an addendum to a contract, the SLA would detail the performance metrics that a company expects of the TMC, as well as the financial incentives for exceeding expectations and penalties for falling short.
“A well-written service-level agreement should preclude you from having questions or problems a few years into a contract,” John Smith, president and CEO of Tower Travel Management, told Midwest Business Travel Management Association members at a forum last month in suburban Chicago.
One of the benefits of SLAs, noted Smith, is that they provide a clear understanding of what both parties value. For example, if a client expects their TMC to be measured on how well they implement the company’s preferred supplier agreements, that would be in the SLA.
“People who are coming up with ways to measure performance and improve performance are usually on the cutting edge,” added Kelleher.
Why consider having a service-level agreement? They help set clear expectations on performance levels, provide potential opportunities to ensure and reward performance and offer dashboards of metrics to monitor program performance.
While technology SLAs can run from 20 to more than 100 pages, most travel-related SLAs are just a couple pages, with seven to 10 metrics, Kelleher said. Trans-border relationships could require language addressing service levels by country. Performance metrics are typically delivered monthly or quarterly, he added.
With SLAs, companies typically define how they want to measure traveler service levels. For example, a customer may want to define that 80 percent of calls are answered within 30 seconds and that 90 percent of travelers rank the agency at three or better on a 5-point scale. They also must detail the delivery, format, measurements and payment terms, Kelleher said.
Among the tips that Smith offers for SLA development is to align the value of the SLA with the business goals, consider weighting each metric and ensuring they can be tracked and audited. Like Kelleher, Smith suggested just 7 to 10 metrics to most effectively manage this process.
In a white paper on next-generation service level management, Managed Objects, a provider of technology to manage SLAs, noted that such agreements typically measure four service areas: service availability or uptime of systems; performance or time to respond to a request; support or the time to resolve an issue; and security.
However, even IT-driven SLAs are evolving to rely less on IT-only issues such as uptime and outages and more business relevance such as transaction volume, productivity and key performance indicators that now comprise about 40 percent of the SLA content.
Within IT, a new breed of technology such as Managed Objects has emerged to help companies automatically and more accurately monitor performance to contract elements. Three-quarters of companies surveyed for IT consulting firm Hurwitz & Associates' best practice research report on SLAs ranked the tool as a priority, but just 27 percent of respondents felt that the data they use for SLA management was highly accurate.