Rewards: The Dollars and Sense of Travel Policy Compliance
Can you buy your way to corporate travel policy compliance? Should you?
In a previous article, we explored the implications for People Operations when companies resort to rewarding travelers every time they book within policy guidelines. We offered what we think is a much better solution – psychologically as well as financially – rewarding the team, not individuals for a “job well done.”
The truth is, there are serious financial ramifications that should be carefully considered before choosing a system that rewards individual behavior. And there are some serious benefits to choosing a system that emphasizes overall goal achievement instead of offering what amounts to bribes to do the right thing.
Since the primary reason for encouraging travel compliance is to save money, it’s time to delve deeper into this concept and, as they say, do the math.
T&E Predictability Is Essential
Travel is critical to your company’s current and future prosperity, but it’s also expensive. So you created specific travel policies to control spending, especially on the most costly elements such as airfare and accommodations. You may have negotiated discounted rates and/or more favorable amenities packages with suppliers. Obviously, you want employees to use those preferred suppliers whenever possible.
Following booking guidelines also provides a duty of care benefit because it helps assure travelers will stay at safe hotels and in appropriate neighborhoods. This isn’t a nicety, duty of care is a legal obligation and part of overall business risk management, one of your CFO’s most pressing concerns.
You forecast future travel needs and travel spend based on past experience but also on the assumption that the policies you’ve created will dictate traveler behavior. When that doesn’t happen, predictions go out the window and costs go up. No business can thrive on that.
Spending Money to Solve a Financial Problem
Poor travel compliance is a complaint among companies of all sizes, in all industries. Out of desperation, some are now resorting to incentive programs that reward travelers each time they follow the rules – essentially bribing them to do the right thing. Book a cheaper, in-policy hotel? You earn a reward. Book an approved flight? Ditto. The exact rewards vary from one firm to another – gift cards are common, but some offer time off or prizes such as a new tablet.
Nice if you’re a cooperating traveler. Not so nice if you’re the CFO that has to watch helplessly as the cost of your incentive program spirals out of control.
In theory, despite the cost of the rewards, as long as they cost less than the amount saved on bookings, there is a net benefit to the company’s bottom line. The appeal is clear, but the hidden pitfalls? Not so clear, but definitely present. No wonder your CFO is nervous.
Costly, in More Ways than One
Deloitte notes that “incentive compensation can be a powerful tool to properly align employees with the achievement of the company’s objectives.” However, they warn that incentives can sometimes bring unintended consequences. Hidden costs.
Finance/accounting wastes time
Your travel manager may have recommended an individual incentive scheme, but it’s the folks in accounting who will have to help manage it. If your program involves multiple types of rewards and you have many travelers, the complexity grows exponentially. Now you have possibly significant direct costs for labor – skilled employees whose time could be more effectively spent in some other way.
No worries, you think. This concept has become so popular recently, there are third-party apps that can be integrated with your company’s existing travel platform. Just plug and play, saving time as well as money.
Or maybe not. If you’ve checked into these options, you might have noticed they are not necessarily simple to administer. For example, you might receive an after-the-fact invoice for all rewards your employees earned last month. But do you get the detailed data you need, too? After all, you want to know who’s saving money and on what. How else will you know where compliance is still falling through the cracks?
And where in the budget does it show the amount you spent on these rewards, or on executing the rewards program? You can’t control costs unless you have complete financial information, in a timely manner.
In truth, it’s a paperwork pain, whether you set up an internal incentive program or adopt a third-party app. Show of hands, HR and accounting folks and travel managers: who wants to do more travel-related recordkeeping? And who wants to add another page to your corporate travel policy detailing the complexities of your gift card rewards program? Haven’t we all learned that simplicity and brevity re key to improving policy compliance?
Rewards for all send the wrong message
And it might not be so simple after all. Does everyone get the same reward no matter how much they save? What if Joe books a $20 cheaper room and Suzanne books a $100 cheaper room? For that matter, what’s the baseline – cheaper than what? Are you merely rewarding people for booking anything within guidelines, assuming they are saving money by assuming they would automatically make more expensive choices without the promise of a reward?
Travelers should select for best value, not only low cost. Otherwise, some overly frugal employees will still feel obligated to book a place that is not convenient, or in a sketchy area, or without the amenities they really need. They might earn a reward, but it’s based on doing something you want them to NOT do.
The process “demotes” non-travelers
If you don’t travel for work, you will never be eligible to earn a reward. You have effectively punished some employees for something they don’t control by making it impossible for them to earn the benefit. Sending a message that “travelers matter more than you do” is likely to generate unrest and jealousy rather than a sense of teamwork.
Even among your traveling employees, will incentives be tiered, so that those who save the most money get higher-value rewards? How on Earth will you implement that? Will some people book inappropriately cheap flights or hotels simply in order to get more free stuff? If so, you’ve found a new way to put duty of care in jeopardy.
According to the Harvard Business Review, “The surest way to destroy cooperation and, therefore, organizational excellence, is to force people to compete for rewards or recognition or to rank them against each other.”
Our Better Idea Is Better for Everyone
Yes, you have to spend money to make money. You spend on R&D, sales and marketing, and myriad operations necessities, not to mention the most valuable ingredient for your success – people. However, a poorly considered or implemented rewards program can lead to employee dissatisfaction or even loss of company reputation as a traveler-friendly workplace. There’s a cost you don’t want to incur.
On the other hand, a quarterly contest that makes all compliant travelers eligible to win is a winner in every regard. It rewards achieving the real goals – better compliance and lower spending. It allows everyone to bask in the glow of that achievement, knowing they might win the quarterly prize next time. The cost is 100% predictable, 100% accurate for budgeting, and provides a reliable metric for future forecasting.
This aligns perfectly with your overarching goal, a streamlined travel program/process for all involved. Simple. Effective. Cost-effective.