CARROTS OR STICKS?

When striving to get employees to comply with corporate travel rules, companies vacillate between offering incentives and cracking the whip. Success with either will depend on an enterprise’s corporate culture.

TW illustration by Jenn Martins

TW illustration by Jenn Martins

From cajoling and recognition to threats and punishment, today’s corporations have a wide variety of tools available to persuade business travelers to comply with their travel policies and make the choices necessary to keep costs down. 

Spurred in part by a desire to retain traveling employees in a tight labor market, added to the rise of associated travel tech companies and perhaps evolving management philosophies, one of the bluntest instruments to persuade travelers in some quarters is gaining currency: paying them to comply.

The idea of directly rewarding employee travelers with tangible returns — think gift cards or actual cash, not just points or badges or medals — is neither a new one nor a universally accepted one. After all, many companies for years have been happy to split the cost difference with travelers who stay with a friend or at a family member’s home on the road instead of at a hotel. 

What’s different today, in a world where business travelers often are very accustomed to sifting through a broad range of travel choices and booking via smartphones, is that technology and corporate cultural shifts have helped to elevate the concept in some decision-makers’ minds.

“What we’re seeing and hearing from our clients is part of a larger trend within the industry,” said George Kalka, vice president of global client solutions at Oshkosh, Wis.-based Fox World Travel. 

“Travel policies are offering more options and flexing in some areas to attract and retain talent. People are physically rewarding travelers for making better cost decisions, yet still offering them the [travel] options in front of them. That’s what we’re hearing is important.”

‘Travel policies are offering more options and are flexing in some areas in order to attract and retain talent.’
— George Kalka

Rewarding business travelers today most frequently manifests in two scenarios. For employees who book a lower class of air service than permitted by policy, the company calculates the difference between the higher fare and booked fare and awards half of the savings to the employee. Or the company will offer compensation for those who stay in lower-tier accommodations or at private residences on the road. 

Those aren’t the only scenarios, though. Corporations — generally larger ones, with managed travel programs, according to experts — are experimenting with awarding gift cards for policy-compliant actions like booking air travel with sufficient lead time or booking through company-preferred channels.

“We have a client who went through an acquisition of a corporation, which meant their travel patterns started to shift. So they [conducted] a large search in the particular market that they were flying to,” Kalka said, noting a conflict between the two companies’ rosters of preferred travel suppliers. To encourage the new employees to use the acquiring company’s suppliers, “they’re looking at Starbucks gift cards for compliance to that, because they’re not in a culture where they’re going to mandate it.”

The concept of rewarding travelers for complying with policy or choosing lower-cost travel options, though, has its detractors. Some objections are philosophical. 

Will Tate, partner at travel management consultancy Goldspring Consulting, said, “I know of some programs that are trying to do a couple of things. The challenge is that the way it comes up is, ‘I’m not going to incent people to do what they’re supposed to do: follow a policy. I don’t incent them to buy the laptop through the company contract we have, or the office furniture, so I’m not going to do that.’”

‘Some employers say: “I’m not going incentivize people for following policy."
— Will Tate

Others say that paying travelers can backfire and undermine the point of the program. Travelers who know they could share in lower-fare savings might be inclined to book a trip that isn’t truly necessary as a way to line their pockets. Plus, while an international trip in coach class with an extra connection might make a traveler wealthier, it could also leave him or her less rested, refreshed and ready to conduct business. 

Yet others hold that there are simply more effective methods of reducing costs and increasing compliance that involve neither direct payments nor harsh punishments.

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Resisting reprimands

Corporate travel policy mandates and consequences for noncompliance still play a part in no small number of travel programs, but many organizations prefer to avoid them. Some companies prefer to enable travelers to make the choices necessary, within reason financially, to help ensure successful trips. 

A number of managers are wary of a persistently low U.S. unemployment rate and the role travel policies and procedures can play in retaining top talent.

Among them is Alan Hess, CEO of Bountiful, Utah-based corporate travel agency Hess Corporate Travel. 

“From experience, it’s harder for companies to impose policy on people they are afraid will leave,” Hess said. 

“A successful sales department is a good example. Management doesn’t want to slam [employees] too hard with policy because they’re afraid they are going to say, ‘Well, OK, we’re going to leave. Don’t hassle me doing my job.’ So I think sales departments are the hardest ones to have follow policy. In a tight labor market, maybe that applies elsewhere, too. They don’t want to be too draconian in trying to have everybody follow policy.”

The need to attract or retain top talent could dissuade even the most cost-conscious company from imposing policy limits on classes of service, for example, but paying those travelers to forego them might enable the company to have its cost-control cake and eat it, too.

Kalka said, “Companies that are looking at this positive reinforcement in an actual incentive around travel [are doing so] because they don’t have the culture to have a hard mandate. So they’re looking for alternate ways to help travelers to exude the behavior they want and make the decision that they want them to make without having the traveler feel they were forced into it.”

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Automating enthusiasm

Threading the needle of rewarding travelers for compliance or lower-cost travel while maintaining higher-cost options has intrigued companies before, but administering such a program can be complex. 

Direct payment to travelers outside of a standard salary and bonus structure can involve human resources and financial departments, perhaps proving too much of a hassle, even to interested travel executives. 

Earlier this decade, several third parties — large travel management companies including American Express and Carlson Wagonlit Travel (CWT) as well as consulting firms and booking tool providers — tried to develop “gamification” platforms that rewarded travelers with nonredeemable points or “badges” for compliant behavior. They fizzled, but closely in their wake came tech company Rocketrip. 

The then-startup approached incentives differently. Travelers input the particulars of an upcoming business trip, and Rocketrip uses an internal algorithm based on market prices and the client’s travel policy parameters, negotiated rate programs and historical spending data to calculate a projected price for the trip. If the traveler books travel at a lower price than that figure — say, by downgrading from business class to coach — he or she keeps half the savings.

Rocketrip founder and CEO Dan Ruch, said, “We took the best components of recognition and incorporated them into our platform. But the biggest change that we made in terms of improving the sort of classical definition of gamification is to insert real meaningful value, not on a subjective basis but on an objective basis.”

‘Companies must be willing to support the cost of meaningful rewards.’
— Dan Ruch

Today, Rocketrip has partnered with nearly two dozen corporate travel agencies, including BCD Travel and CWT, as well as with the Concur and GetThere booking and expense reimbursement platforms. Clients pay an annual licensing fee based on travel volume, and Ruch said clients typically save 10% to 15% off their travel costs after distribution of traveler rewards. 

“By and large — and there are exceptions to this rule — travel managers don’t want to reward employees who are changing their behavior,” Ruch said. 

“They want them to change. But when you ask them what they want to give out as rewards, well, they want to give out badges, and they want to give out thank you notes and anything that doesn’t cost money, because they don’t have budget for these kinds of programs.

“We’ve partnered with travel managers and presented this opportunity to CFOs and heads of HR to say, ‘Look, we can fundamentally change the way your employees think about the decisions they make, and we have enough data over six years of doing this with dozens and dozens of very large enterprises, and we’ve proven that this works. But you have to be willing to support the cost of a reward that is meaningful to the employee.’”

Among the other tech players that have joined the travel-incentive space, is TripActions, a corporate travel management and booking platform provider that includes a rewards program as part of its default offering.

The TripActions platform offers travelers projected itinerary prices as well as policy-compliant and noncompliant booking options, with point rewards listed if the traveler chooses in-policy lodging or flight options. 

Those rewards can be used for flight upgrades to business class or premium economy or returned to the traveler via Amazon gift cards; the latter option is selected by “a vast majority of our travelers,” said Anique Drumright, TripActions head of product.

“As we’ve gained momentum, I think that people will become more and more comfortable with this idea of incentives and that travelers should treat company money like their own,” Drumright said. “I think there’s this idea that corporate travel should be enjoyable and should be fun and should be personal, and [travel managers] just want to take care of [their] travelers on the road.”

TripActions in June announced a $250 million round of funding, setting its valuation at $4 billion, illustrating the investment support for the concept. 

‘In general, the culture around corporate travel is changing.’
— Anique Drumright

“I think in general, the culture around corporate travel is changing,” Drumright said. “Being on the road is hard.”

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Corrupting a concept

Rewarding policy-compliant or lower-cost travel choices isn’t without risk, and some hold that the incentives offered for good choices are easily deployed for bad choices, too. 

Goldspring Consulting’s Tate said of paying travelers who choose lower airfare classes, he ha “I had some customers do that years ago, and they all [said] ‘Wow! We saw an uptick in trips right around the holidays. Right around Thanksgiving, [the employee would say]‘Hey, I’ve got a trip to Europe. Oh, you mean I’m going to pocket $1,500 because I was able to get a trip to Europe? I need two trips.’”

That’s one reason, Tate said, why the concept “is not taking off in any customer that we work with. ”

BCD Travel senior vice president of global client solutions Andrew Menkes said there was “ongoing interest” in the concept but not an “upsurge.” 

He noted that some clients took issue with the implications of rewards for other aspects of the program.

“What I’ve heard is, ‘Why are you rewarding that particular group of people but not the travel arranger who’s doing all the work and research, etc.?’” Menkes said. Travelers, after all, “are already getting frequent-flyer points, frequent hotel stay points, car rental points and, in a lesser number of cases, points for using the T&E card. How many aspects of the trip should the employee get personal compensation for, considering it’s a business expense?”

‘Clients say: “Travelers are already getting frequent flyer points, hotel points, … How many aspects of the trip should they be compensated for?”’
— Andrew Menkes

Hess recalled a client program that offered gift cards or other small financial rewards to travelers who avoided fees by not changing air reservations.

“The problem with incentives is sometimes unintended or perverse results,” he said. “When you end up incentivizing one thing, you get some negative things, like maybe they don’t change their ticket when they should change it [to make] a sale or do the right thing for the company.”

‘Incentives can produce unintended or perverse results: Someone might not change a flight to avoid a fee when maybe they should have.’
— Alan Hess

After all, the primary reason that companies permit travelers to fly in business class or receive policy exemptions is to ensure their comfort and productivity on the road for the sake of the business conducted. 

Kalka asked, “If you’re trading down to that class of service, is it producing the end business result for you? Is it making you effective when you land? Are you having to go in earlier, a day earlier, because you’re not flying in the business class they’ve authorized?”

For Rocketrip’s Ruch, many of these concerns are overblown. A well-run travel program has layers of management, he said, that knows where its travelers are and can prevent unnecessary travel. 

“It’s a leap a little too far to assert that someone is going to go and just travel more frivolously because they’re willing to travel more frugally and earn rewards for it,” he said.

“Whenever you introduce a motivation for an outcome, there’s of course the concern around perverse incentives,” Ruch said. “I fundamentally believe those are concerns born out of fear rather than of opportunity.”

“Instead of worrying about what could go wrong, let’s deploy the program, trust our people. ... Like 95% of the population will want to do the right thing. They just need to be guided in that direction.”

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