11 August 2008

Compliance in an age of austerity - Big Brother would like you to save money

Perhaps I should have titled this piece - "Love in the time of Cholera"

At the recent NBTA conference in Los Angeles there was a lot of talk about how the airlines new “ancillary revenue” programs are upsetting the apple cart of corporate travel management. It has become a hot button because there are now a slew of charges flying around that don’t necessarily fit under the control of the travel management programs that corporations and their respective independent travel agencies (Called TMCs or Travel Management Companies) such as American Express, Carlson Wagon Lit, BCD and the new comers such as Orbitz for Business and Expedia Group’s newly renamed Egencia.

This got me thinking about the whole process of travel in corporations and the impact in an age of austerity and sky high prices for travel services.

The information problem manifests itself in a simple way. You book your ticket. You pay the required upfront fees but when you get to the airport you have to pay extra. Worse the charge that you pay for that first or second bag appears on your credit card bill as “Miscellaneous Charge”. So the trackers back at the HQ office have no idea what the charge was for. Upgrade, meal, bags, change of flights etc etc. The information chain is broken at several points. Firstly there is no consolidated data source that can compare the total cost of the service provided by the airline in a package that can be compared in a matrix. Apple to Apple. Corporate travel policies can be pretty complex, but even a simple one like you get a meal paid for during your trip away from home becomes a nightmare to track and therefore police. Does the airline give you a meal (hell no!) but Continental does. Therefore if you fly CO during a meal flight then you can eliminate a meal from the expense thus saving approx $25 per meal time.

There is a good article on some options covered by such expense management players and trackers as Concur and TRX. Go here to read Scott McCarthy’s Middle Seat article this week. http://online.wsj.com/article/SB121848940345831141.html?mod=djemseat.

But all of these tools are a bit draconian in nature and don’t solve the problem of saving money. The best decision is actually to not fly then you can save the most money. Perhaps the better solution is to create a budget and provide guidelines for how its spent. IE this is your travel budget, it should result in X deliverables (like sales). It should also be trackable accordingly. Many moons ago I led a team who created a solution that basically created a cost benefit analysis for each trip. The government wonks loved it but the corporations hated it because if actually required some one to commit to creating a value for each trip. Something that no one ever wants to have to do.

At the end of the day the company must justify its travel budget and make it perform just like any other asset. Perhaps now is a good time to see such a system in place rather than asking for a huge number of hoops to be jumped. The solution to the problem for many companies is to just cut the trips or issue blanket policies like “No non-essential out of state travel” (This is Washington State’s new travel policy) or “Each trip must have at least 2 layers of management approve it”. That’s an effective thing for a division head to be doing.

I love to tell the story of one of our client’s who was at a cocktail party one day in the early days of the dot com boom. He had a fellow entrepreneur come up to him and said “I love your company. Your website is now our corporate travel management system.” Our client looked incredulous at this statement since they were a pure leisure site. But the entrepreneur was quite effusive. “Our new travel policy saves us money, time and hassle. Already this quarter we have saved over 40% of the previous out of pocket costs, we fired our travel agency and have a much faster turn around on our expense reports.” Our client (and me listening beside him) asked “That’s great Richard, but how do we help you?” To which Richard replied” Our new policy is chose the flight from the top options off the first of your results page. If not then they have to write to me a 4 page memo as to why they have an exception or didn’t choose it. So far I have not received one memo!”

We actually sat down with him and found that his numbers were right. It was quite interesting.

Bottom line – this is a battle for everyone to fight. Responsible parties in companies need to do a better job of managing the budget. A Big Brother policy is not going to help if it causes extra work for the people it is designed to serve. Similarly if you have widespread abuse of a policy – then either the policy is wrong or your people do not have the right attitude.



1 comment:

John S said...

Your blog helps to reinforce my bias against Corporate Travel departments as being unwieldy and cumbersome excuses for expense control that can be achieved in other ways.

The notion of ascribing a value to every trip is an excellent but sometimes unrealistic expectation. Sometimes travel outcomes cannot be quantified. Notwithstanding, more layers of approval and per diem reimbursements can help to encourage smarter travel spending.

The trend to unbundle fees and the rush to ancillary revenues is one of the outcomes of a broken business model. Airlines are unwilling or unable to charge their real costs and no longer have the capital to absorb the peaks and valleys of a multitude of expenses outside their traditional control.

While there is some sense of
'equity' or 'fairness' inserted into the unbundling argument, ultimately, the customer pays and services deteriorate to abysmal levels.

All travellers - corporate and leisure alike - are looking for a more sensible if not rational approach to air travel. In my view, corporate travel departments seldom help the situation.