Evolving technology, maverick spend, visibility challenges—getting a handle on travel spend is no easy task.
Travel Management Canada: Premier Issue – November/December 2011
Procurement and travel management professionals face myriad challenges not only in performing their jobs, but also in keeping costs under control while doing so. In October, Travel Management Canada convened a panel of experts for a roundtable on cost containment in this fluid and sometimes personal area of spend. The editorial event was sponsored by Global Business Travel Association Canada and BMO Financial Group.
At the table were: Tanya Racz, president, Global Business Travel Association Canada; Kevin Tait, senior manager, payment strategy and emerging products, BMO Spend & Payment Solutions at BMO Financial Group; Michael Kell, regional vice-president, enterprise sales Canada, StarCite Incorporated; James Moore, procurement manager at Rogers Communications Inc; and Sherry Marshall, senior manager, travel and corporate card at PwC.
Listing the major pressures affecting travel and meeting procurement, GBTA’s Tanya Racz noted the organization is gathering data and forecasting information for 2012. Among other areas, reining in costs ranks high on the list. “We found that, in fact, for 2012 a lot of the priority for travel purchasing professionals (is) cost control,” she said.
Jim Moore of Rogers Communications agreed, noting other factors affecting the field tied into cost control directly. “Whether travel reports, procurement, finance or whatever part of the company, our job is to maximize the value of company dollars,” he said.
Companies are now trying to manage the ROI of business travel, said BMO Financial Group’s Kevin Tait. While that’s a challenge, travel spend done right can yield positive gains. With pressures like sustainability, new functionality, video conferencing and others, organizations are striving for value, he said. “Travel is typically the second largest controllable spend for an organization. That amount of money is something that’s sometimes difficult to measure the ROI of.”
Although the pressure is on to measure and control travel spend, it can be tough to identify where money is going, said StarCite’s Michael Kell. Organizations struggle to identify who’s booking travel, who’s making hotel reservations, who’s traveling and who’s approving that travel.
“Understanding what those processes are in companies that are sometimes very centralized and controlled by policies (is challenging),” he said. “Sometimes, it’s very decentralized and out of control, which eventually would lead to maverick spending.”
The cost of meetings
The group listed meetings as the second-largest cost pressure. According to GBTA research, contractual agreements related to meetings are expected to get stricter in 2012, said Racz. Going forward, buyers and vendors had to “meet in the middle” on certain issues, such as how far in advance conferences can be booked. Not doing so will mean a faster shift to using laptops and smart phones. “There’s got to be a little bit of flexibility,” she said. “Otherwise…it will shift it to this technology that’s there a little bit faster than maybe it would have five years ago, or two years ago even.”
Often, control of meetings isn’t centralized, said PwC’s Sherry Marshall—making it difficult to know how much is spent and who’s spending. “In a lot of places—especially smaller offices—it could be an admin person who may not even know they’re signing a contract they shouldn’t. Those are the things we’re trying to get hold of.”
Using technology that records expenses in a central location—along with using meeting cards—helps capture and control those costs, Marshall noted.
Because they’re decentralized and often planned by administrative assistants or regional offices, controlling smaller meeting costs offers challenges, Kell said. Companies can have scant visibility without technology to source and track meetings. “Organizations should gain control of those meetings of under 10 people—maybe under $5,000—having as part of the technology loop internal approvals so that appropriate people are approving meetings; or looking at alternatives that could include tele-presence and video conferencing and asking, ‘is this actually the best, or should it be a hybrid of the two?’”
Kell agreed a standard terms and conditions document helps track meetings, as does insisting employees register those meetings. “By going through those processes, you really are minimizing the risk for the company on a number of levels,” he said.
The earlier an organization engages and communicates with stakeholders the better, he said, and partners like hotels therefore know whether organizations have standard terms and conditions. Those partners need to know they’re accountable to the organization as part of such agreements, Kell said. “You’re making a commitment to them to extend a significant amount of your business, but they have accountability on their side to help you ensure your policies are followed and that data is being captured,” he said.
Since meetings are often decentralized, using meeting cards to book facilities, entertainment and other costs helps track how much money is going where, said Tait. Often, employees use personal or corporate cards to get to meetings, meaning organizations can miss a chunk of the costs.
“More and more, we’re seeing organizations booking travel on behalf of individual travelers, whether customers or internal employees, on that central bill account,” Tait said. “What they’re really trying to do is consolidate as much of that meeting spend into one spot as possible—it’s just easier to measure, easier to analyze.”
Clearing the view
Also important is gaining visibility into spend, our panel agreed. What took place within each transaction, who spent money, how much and when are all important. “It’s visibility into the transaction,” said Tait. “When money is spent, is there enough data around that spend to give management some insight into what it was for and was it within policy, was it not in policy?”
Having that information in a centralized, accessible place is a major step towards visibility, as is having the tools to analyze that data, the group agreed. For Kell, visibility extends beyond financial intelligence to knowing what is happening from a security perspective. “Where are my people? Where are my travelers? If something has happened halfway around the world, do you have a central place where you can very quickly extract if you have any travelers in that location that need to be contacted and moved? You not only lose track of the financial spend, you literally lose track of the individuals and how to contact them in an emergency situation.”
Demand has grown for more detailed data, said Tait, and even small expenses such as water from a hotel mini-bars add up. He cited one client that was spending tens of thousands of dollars each year on bottled water. The organization negotiated with their hotels to have a free bottle of water per night for employees. “Even little things can make a meaningful difference,” he said. “It isn’t just a matter of negotiating a hotel rate any more; you can actually negotiate on individual terms-something as simple as a bottle of water, for instance.”
Kell noted technology can take travel data from several sources and produce reports showing where money is spent. But having travelers comply with regulations and procedures is key to getting meaningful information. Moore noted his organization uses technology to take data from invoices and cards and combine it for the total spend within a facility. “(Visibility) is very dynamic,” Moore said. “I think we’re a lot further ahead than we were two years ago.”
Marshall said PwC has good compliance largely because the company makes processes easy for employees. “There’s less work for employees to process an expense report,” she said. “We have an online booking tool that’s been successful and we make it easy to use. I think when you make it easy for the employees you get good compliance.”
Still, some areas offer challenges in terms of maintaining visibility, said Tait. Airline ancillary fees, for example, are difficult to track and sometimes charges appear on invoices that employees had to identify in expense reports. This could lead to mislabeling charges. “As the industry evolves and ancillary fees are introduced, there’s still a long way to go for proper identification of what fees are for,” he said. “If it’s put on a corporate card that information will come through on a corporate card as long as the vendor is providing that information up front.”
Educating employees is important in dealing with ancillary fees, Moore noted. “If they don’t realize how critical it is for the data to be clean, crisp, clear, they may not be as specific as they should be in breaking that information out.”
Another critical policy area discussed was maverick spend. At Rogers, maverick spend—buying goods or services outside the preferred process or system—gets reviewed each month, said Moore. Employees remain aware the company is monitoring spending and are more likely to monitor themselves. Educating employees is key when reining in maverick spend. “We have a much more savvy traveler than we did five years ago,” he said. “They’re more aware of questions to ask about fares, about conditions, cancellation, changes, that type of thing, and about other ways of doing meetings. I think that’s going to help us a lot in doing our jobs, and the traveler is better prepared.”
Airlines, hotels and others often have “merchant category codes”, said Tait, so travelers are blocked from spending at certain airlines or hotels. But policies must be balanced with flexibility so employees won’t find themselves without options. Tait also stressed the importance of communicating policy to employees when trying to curb maverick spend.
“Educate, educate, communicate, communicate,” he said. “It’s not something that’s going to happen overnight. I think the vast majority of employees want to do the right thing and be within policy. If they spend out of policy, it’s (management’s) job to inform the employee that they’re out of policy. Here’s what they should have done, and chances are it’s not going to happen again.”
Along with using technology, GBTA’s Tanya Racz stressed the need for executive support. “Unless they buy into it, so often you won’t see it actually trickle down and you won’t see compliance to policy actually come into place,” she said.
Personal versus corporate
Travel may be personal, but organizations don’t allow travelers unlimited leeway, said Racz. Some organizations allow travelers, for example, to fly economy class rather than business, and use the remaining credit for themselves or their spouse. “I don’t really know that companies are doing that (kind of thing) anymore,” Racz noted. “I think now it’s a function of your responsibility as an employee and that’s what you’re signing on in your contract, and you’re expected to travel and this is just what you’re going to do as part of your employment.”
Marshall agreed companies compromise to ease travel’s burden on employees, but travel was usually seen foremost as part of an employee’s job. “I always say that policies are guidelines and you can look at everything as a one-off view of things, and there are always exceptions to policy,” she said.
Moore divides travelers into two camps: the travel-hardened “road warriors” and “one-offs” who traveled infrequently. “It’s not written into policy, but companies might be a little more understanding” that they can’t expect an infrequent traveler to wait for a 9pm flight home to save $100 because they’ve got family responsibilities, Moore said. “Companies and managers who have been in those situations are a little more flexible.”
While some business meetings must always be face-to-face, our experts agreed conference calls, virtual meetings and other alternatives are finding a place. For Marshall, meeting virtually complemented traditional meetings. As with online booking tools, technology saves time in virtual meetings. “And, I found it a very good way to be in touch with my global colleagues,” she said. “We’re thinking more globally now, so for one- or two-hour meetings nobody is going to fly around the world.”
Racz said the GBTA held several webinars, and has seen increased attendance through the ease of participation. “We do have face-to-face meetings throughout the year, but they’ve certainly been scaled back both in that they used to be full-day meetings, now they’re scaled back to over the lunch hour,” Racz said. “If we do virtual meetings we have participation up because people can do it from their desks.”
Companies should begin looking at forming policies around meetings, said Kell. For example, ensuring meetings are registered, deciding whether IT, travel or both are responsible for virtual meetings, among other areas. “In most organizations there are individual silos with regards to virtual meetings and travel.” The challenge is how to bring those two teams together to ensure virtual meetings are part of the travel program, and that IT understand the needs of people and how they would use virtual meetings, he said.
Technology surrounding virtual meetings has improved significantly, noted Moore. Previously, signing on during a virtual meeting could disrupt an event. Now, signing on can be muted. Participants can also ask questions anonymously. “As the technology evolves it becomes streamlined,” he said. “It will become much more popular and become part of policy. It’s just that it’s so new it’s not there yet.”
Also more prominent are tele-presence seminars, in which participants in different locations can view life-size versions of each other on monitors. But participants must be hyper-aware of their actions because they’re on camera constantly during such meetings, said Moore. “You’re virtually there,” he said. “It’s like you’re in the room as if the table is divided in half and you were in Calgary and (other participants) are in Toronto.”
While risk management for travelers can exert cost pressure, Racz noted employees remain an organization’s most valuable resource. Companies owe a “duty of care” to employees to ensure they’re as safe as possible. “That’s just part of the cost of doing business—it’s just part of your security platform,” she said.
It also depends where employees are traveling, Racz said. Those visiting “high-risk” destinations require more security, and organizations can act to protect employees in high-risk places, for example by providing them with pre-paid cards. That way, infrequent travelers could avoid visiting ATM machines or cashing traveler’s cheques in dangerous locations.
Mobile technology like smart phones helps organizations know where employees are, Racz said, and helps notify employees of overseas unrest so they can make alternate travel plans if necessary. “Mobile is going to be a very quickly emerging tool to extend the duty of care and provide some added comfort and security,” she said.
Risk management can also involve cost avoidance or recovery, noted Kell. Consider payment fraud: the more internal controls an organization has in place the less risk of fraud or contractual woes. That’s especially true for the meeting world, where employees sometimes sign contracts they shouldn’t. “Those people may not realize that if they cancel their meeting they’re still going to have a 50-percent payment for that space,” he said. “Managing contractual risks by incorporating that into your meetings policy and having standard terms and conditions…help eliminate costs, not create costs.”
While faced with new IT, evolving policies and other challenges, opportunities to track and reduce spend in the travel and meetings arena do exist. Technology can help monitor where money is spent, while virtual meetings and online booking tools can add efficiency to the process.
Going forward, travel and procurement professionals are in an excellent position to benefit from these tools. TMC