Consulting » Decisions – Travel policy – A Long day’s journey

Whether businesses are cost-conscious or comfort-conscious, virtually everyone has a travel policy. And the need for prudence – a classic accounting virtue if ever there were one – means that even companies with exceptionally deep pockets, where the total spend on travel may not be significant by comparison with the size of its p&l, feel obliged to set up and monitor rules about who gets to travel on what class or by which mode of transport.

The problem with doing this is that rules that are either simply unenforceable, or not enforced, aren’t rules at all. So any worthwhile travel policy needs processes in place to monitor compliance, which needs buy-in from the troops. Without this, people will circumvent or ignore the policy.

For most companies, air travel and hotel expenses tend to form the bulk of their travel expenditure, so these two areas are where they concentrate their policymaking. The options are many and varied, but they tend to fall into a spectrum that at one end makes cost the only criteria, and at the other focuses on pleasing the executive traveller with cost no object.

Most corporate policies eschew these two extremes and wind up somewhere in between. So, you will have few companies forcing all their executives to fly budget or economy class with the back-packers and holiday trade. And you’ll find even fewer that consider first class travel as a normal privilege for your average business trip.

Once the policy is formulated, it’s up to procurement or the finance department to try to aggregate the organisation’s likely total spend on all its major routes. This is then used to leverage discounts out of suitable carriers on those routes and out of the hotel chains with appropriate offerings at key destinations. These carriers and suppliers then become the organisation’s preferred choice for those routes. These preferences become part of the organisation’s travel policy and form an important part of the cost-cutting initiative.

Organisations with offices in a number of countries have to decide whether it is possible for them to implement a global travel policy. Some find that the cultural and logistical issues involved in setting such a policy are too big a problem relative to the savings they might generate. Other organisations argue that a global policy is, in fact, perfectly reasonable.

Tosha Henderson, for example, travel manager at Shell International, says Shell has put together a global policy that all executives are expected to adhere to. The only exceptions are board-level officials who generally use Shell’s own corporate jet, though Henderson makes the point that this is done for security purpose, not for the comfort of executives.

“These days,” she points out, “few corporate jets can rival the service that business class travellers enjoy from the world’s major airlines.”

Another reason why Shell maintains its own corporate aircraft or charters flights is that its activities often require flights that are outside the ambit of mainstream carrier schedules.

Moreover, Henderson emphasises that whenever a corporate flight is scheduled, that flight is well advertised internally and all Shell executives who were planning to fly to the destination in question are welcome to book a seat on that flight. “It’s not board-only: everyone can fly if they have a valid reason for wanting to get to that particular destination,” she says.

Shell’s global policy was set after taking into account the views of senior people from across Shell’s worldwide operations, Henderson says. This helps to ensure that the resulting policy is not simply an Anglo-Saxon view of the world, but something everyone can live with. “We take into account fundamental issues such as health and safety, and the need for executives to arrive fit, rested and ready for business. We are also interested in the work-life balance. Cost is not the only consideration,” Henderson says.

One of the ground rules of this policy is that if a flight is short – less than four hours – then economy class is suitable for everyone. Flights longer than four hours can be flown in business class. The exception to the short-haul economy class rule is where multileg journeys involve short-haul routes, but the best pricing is available from a total package booked on business class.

Low-cost, no-frills airlines do not play a big part in Shell’s travel policy at present. “The fact is, a lot of the airports used by no-frills carriers would take our travellers too far out of their way. There are instances, such as South West Airlines in the US, where the airports do suit our people, and then we will use them,” she explains.

Shell does allow senior board members who are using standard, mainstream carriers to fly first class but, again, this tends to be more a matter of security than personal comfort.

Mark Avery, head of business services at PricewaterhouseCoopers, says his firm’s policy is similar to Shell’s on short-haul flights, although PwC sets the barrier at three hours, not four. For all flights of three hours or less, everyone travels economy. “This does not mean we mandate the no-frills airlines. By economy, we mean the lowest logical fare with their preferred carrier,” he says.

For PwC, low cost involves looking at the lowest total cost, which includes factoring in things like the additional travel time involved in journeying to and from secondary airports. It also means taking into account the possible need for flight times to be moved at short notice. “Often, when you take all this into account, the mainstream carriers are no more expensive than the budget airlines,” he comments.

On flights of over three hours, including the genuine long-haul flights to the US and beyond, senior managers can travel business class. Junior managers still fly economy class, unless they have a legitimate business reason for flying first or business class. “We used to accept partners and directors flying business class on short-haul flights. But about three years ago this changed as everyone looked to cut costs. However, if a client wants us to travel business class on short-haul flights when we go to meet with them, then we will,” he says.

PwC takes travel procurement very seriously. “We do all our own bargaining with the major carriers and hotel chains, and we look to refresh these agreements annually,” he says. Although business services executives are keen to strike the best possible deals for the firm, Avery emphasises that line managers and partners have a real say in what goes on. “We always plan to deliver our people in a fit state to do their work, not in a state where they are so wound up from the journey that they fumble the ball. If someone wants an extra day to unwind from a journey, from the perspective of a work-life balance we would not stand in their way,” he says.

Procurement has to take into account the fact that one size does not fit all. A trip that one person might be able to do well in economy might leave another feeling totally wrecked. “If a PwC traveller makes a case to their business leader, they can get an authorised upgrade and the policy stays intact,” he comments.

Graham Hall, procurement manager of corporate services at KPMG, believes the firm only allows first class travel in the US, where first class tends to equate to club class anyway.

Here in Europe, he points out, first class travel has moved on into the millionaire and A-grade celebrity class. “Today, business class offers executives more, it is fair to say, than first class offered five years ago. With flat beds provided by the likes of British Airways and Virgin, executives are well catered for in business class. There really is no justification for paying the very substantial additional premium for first class over business class.”

Hall says that although he would relish the idea of a global policy for KPMG, it is just not possible. “These things are all country-specific. It would be nice to be able to forge even a limited ‘global’ policy, such as a pan-European policy, but it simply would not fly,” he says.

The immovable rock in the path of any pan-European policy is the fondness local people have for their local carriers and their general disdain for rival flags. “Imagine French executives being told they have to fly British Airways rather than Air France, and that this instruction was seen as coming direct from London. It would sit with them about as well as our English partners would relish being told they had to fly only Air France in future,” he says.

That said, a good part of KPMG’s travel policy is based on the sound procurement principle of setting up multisupplier arrangements. Having two or more preferred carriers on a particular route tends to be better than trying to leverage a bigger discount out of a single carrier by combining the spend.

On hotels, KPMG’s policy is to use four star, not five, in London, except in exceptional circumstances. “We have a very good adherence to our policy guidelines from the firm’s travellers. We don’t try to police these things too heavily. You have to factor in the costs of monitoring as well, and there is a balance to be achieved in all this. “But we have a pre-trip report from everyone and can soon pick up if we are incurring a lot of costs from individuals deviating from policy,” he says.