December 2009 - A bevy of new studies and tools have emerged in recent months that measure the return on investment of business travel and meetings with cold, hard numbers instead of anecdotes. Once viewed as more of an art form, calculating ROI as detailed in the studies and schemas has become more of a science.
After analyzing 13 years' worth of economic data and surveying 300 corporate executives and 500 business travelers, all as part of an emergency study funded by the United States Travel Association and Destination & Travel Foundation, Oxford Economics said every dollar invested in business travel produces $12.50 in revenue and $3.80 in profits.
Eliminating business travel would cut 17 percent of profits within the first year for the average U.S. business, researchers found. "It would take more than three years for profits to recover," the study stated.
The National Business Travel Association, American Express Business Travel and IHS Global Insight analyzed a decade's worth of data to identify travel spending and profit-generation trends. For 2008, business travel as a percentage of material costs and services was 2.3 percent, or 5.18 percent of profits, that study found. Collectively, associations have invested hundreds of thousands of dollars in research to justify travel and meetings as business tools.
To justify the ROI of specific meetings, events, incentives or engagements, organizations have begun to employ new consulting firms or tools.
Adopting methodology developed by the ROI Institute, Catalyst Performance Group president Todd Hanson is calculating the returns of sales meetings, conferences and trade shows.
"ROI has been improperly used to mean everything from the results of smiley-face surveys to anecdotal references about contacts made and more. But today that doesn't fly. ROI is actually a financial term and is calculated by dividing net benefit by total costs times 100," Hanson said at the Motivation Show this fall in Chicago. The problem is, he added, "not everything has an easily measurable ROI."
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"The reason we're talking so much about results measurement is that the lack of ability to show value really caused us to lose the battle over whether travel is a business tool or boondoggle."
— Todd Hanson, Catalyst Performance Group president
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Applying ROI Institute methodology, Hanson helps clients "isolate the effects of a program" using five types of measures. The most basic are measurements of "reaction and perceived value" from participants. Level two measures the learning of knowledge, skills or contacts gained. Level three determines the "use of information, knowledge, skills and contacts," or the application of the learnings. Level four evaluates the impact and consequences or the "changes in business impact variables linked to a meeting." Level five measures the actual return on investment as tools are designed to capture the monetary benefits of the meeting and compare them to the fully loaded costs. Typically, the returns are calculated over several months, and Hanson guides participants on how to isolate all the costs, as well as all the benefits from the application of skills learned. Only the most expensive, elaborate or strategic meetings should be measured to level five, he noted, but all should be evaluated to level three.
Hanson helped Clark National Inc. quantify the financial returns of its annual distributor sales representative meeting last year. The economic downturn prompted Clark's CEO to suggest that the frequency of the three-day event for 60 distributors be reduced to once every 18 months or 24 months. Instead, Clark sales and marketing vice president Mike Sengstock enlisted Hanson to complete a level-five ROI impact study of the 2008 "Clark University" event. Using online and smartphone-enabled surveys, Hanson asked sales reps about the knowledge gained from the event and asked them to tabulate sales to new and existing accounts as a result of that knowledge. Hanson then calculated that the training resulted in increased profits with new and existing accounts of more than $1 million a year and delivered ROI of more than 337 percent on the "fully loaded meeting cost of $242,488." Among the intangible benefits of the ROI study, Hanson said, 70 percent of the content for the 2009 meeting was identified in survey results.
"Education and training is often the first thing cut in tough economic times. This study helped us to quantify the value of education and training in our business environment so we can justify the investment and reap long-term benefits for our company," Sengstock stated in a case study.
"The reason we're talking so much about results measurement," Hanson said, "is that the lack of ability to show value in many regards really caused us to lose the battle over whether travel is a business tool or boondoggle. In many cases, people are spending too little time on results measurement."
Recent focus on "accountability and transparency" demand that meeting owners "bulletproof their meetings and events," Hanson said.
