Service level agreements (SLA) are common practice within the category of corporate travel management, but I genuinely question their current relevance, usage and effectiveness.
Having been involved in many travel management company and online booking tool RFP processes, I am continually disappointed by the bland content offered within the suppliers' proposed SLAs. They are mostly generic, subjective, frequently non-measurable and, unsurprisingly, easy to achieve. In fact, I would even go so far as to say that they are generally not worth the paper on which they are written.
My strong advice to clients regarding this important topic of service standards and measurement is always to have their own smart, measurable and challenging, but achievable, service level agreement. It must be relevant to your own travel programme objectives and included as a minimum requirement within the RFP process. Then the agreed SLA should always be included in the contract and you should look to review this every quarter within the contractually agreed format.
Service delivery expectations should be high - 100% in many cases - when setting targets for each key performance indicator (KPI). Who expects to pay for less than perfect service? It is important to measure only the point of sale service, but also the back-office deliverables, such as the accuracy of reporting etc.
Why would you not expect service to run like clockwork 100% of the time? ©iStock.com/peshkov
It is only right that the supplier receives a fair price for delivering the service levels required. The trend has been for corporates to drive down the TMCs' fees in the procurement process. This has necessitated them stripping out costs and/or investment in their own business, which will ultimately affect services on offer and their delivery.
A certain number of account management days are included as standard within TMC financial agreements with their clients. An additional daily rate is chargeable for extra time spent working on a client's programme for those contracts that fall below the threshold requirement for dedicated full-time account management.
There has always been an underlying question regarding the tangible value of TMC account management and whether it is there for the benefit of the client or merely an opportunity for the TMC to drive the client into a profit earning situation following an aggressive sales process. Account management will only truly be valued when the time allocated to each client is spent purely on pro-active programme enhancements and not historical problem-solving, or review meetings. A meaningful SLA should also include clear expectations of deliverables for the account manager.
Would it not be more judicious to allow for a more accommodating financial arrangement to guarantee service levels? After all as we all know, TMC fees represent a very small percentage of the total travel costs, so the overall impact of paying a slightly higher fee could still be financially advantageous.
If a TMC is paid a fair price for its services then it is reasonable for both sides that penalties are applied for instances of under performance.
There has to be concrete consequences for the persistent non-achievement of KPI targets, because without them what is the point of having an SLA in the first place? Yes, you can make SLA under-performance a breach of contract, but contract termination for a multi-national travel programme can be a pretty empty threat due to the time, effort and resource involved with an RFP process and subsequent implementation.
Therefore, SLA performance should be directly related to the fees charged by the TMC to the client. Full fees can be charged for the achievement of SLA target levels and fee reductions directly proportionate to the measured reduction in service levels.
A most important point to note, therefore, is that it must not be left to the TMC to monitor their own performance.
In summary
- Write the SLA as part of the RFP process
- Make it contractually binding
- Build in financial penalties for under performance
- Exclude clearly any third party issues such as those with airlines or hotels
- Regularly measure the KPIs. This should be done by both the corporate and the TMC
- Review the contractually agreed format quarterly
- Ensure that KPI targets are high - it is not unreasonable to expect 100% delivery
In my experience, when selecting a new TMC partner through an RFP process, the evaluation criteria weighting is rarely based purely upon price. So how refreshingly attractive would it be for a TMC to be so confident in its service that it offers this type of SLA - one where they are compensated in direct proportion to the quality of services delivered - up-front.