Experienced cost-cutters know that the best way to reduce expenses is to never incur them in the first place. Preemptive cost-cutting has become more visible in other functional areas — cutting head count, for instance, in anticipation of the tough year ahead, or canceling a capital expenditure to accommodate a forthcoming budget shortfall.
But chipping away at smaller travel expenses requires a sharper cost-cutting tool. You can’t simply announce to employees that they are all grounded until further notice. There is still revenue to be captured — maybe more than in better times, if your competitors are suffering — and clients who expect personal attention. It’s a balancing act. In a recent survey of 400 members of the U.S. Travel Association, while 50% of travel managers said that they had to cut costs, 80% agreed that travel played an important role in their company’s success.
These dual priorities give rise to any number of judgment calls: Do you cancel travel to all meetings, or just to those that don’t pay off by stuffing the pipeline with orders? Do you cut back on all entertainment expenses, or make allowances for longtime clients who have habitually responded quite well to being wined and dined inside the luxury box at a ballpark?
What’s needed is a set of policies that is consistent, clear, and easy to communicate. At Starwood Hotels & Resorts, for instance, employees know the kinds of trips they should rule out. “We’ve asked employees to think twice about going to meet with co-workers,” says CFO Vasant Prabhu. The guidelines aren’t quite as clear regarding meal expenses — which can consume 9% of a company’s total T&E costs, according to travel industry analyst PhoCusWright Research. Prabhu says the 1,000-property chain is “encouraging all employees to be more mindful of their food and beverage costs.”
Sometimes it takes more than encouragement. At Volt, for instance, employees not only have to learn about strict travel-expense rules — no reimbursement for alcohol or for in-room movies — but will find it difficult to break them. The company’s proprietary travel portal, which it installed nearly three years ago, enforces most of its policies. So even if an employee attempts to upgrade the size of his rental car, he “won’t get very far before we start getting reports on him,” says CFO Egan.
Third-party technology is also available to police the behaviors of business travelers, and can be tailored to suit a company’s zeal for enforcement. Rearden Commerce, for example, makes a Web-based tool for travel planning that gives misguided employees the benefit of the doubt. At first, a helpful warning appears (“You are out of policy.”). Then an edgy threat warns that the boss will be notified. Finally the system can block an action altogether. “We give employees critical data at a critical point so they can manage their expenses down,” says Tony D’Astolfo, Rearden’s vice president of worldwide sales.