Strategy

Straighten Up and Fly Right

Senior financial executives are going to the bully pulpit for travel-and-entertainment initiatives.
Craig SchneiderSeptember 1, 2001

“I’m not putting that on my expense report,” quips Jack Sommer, referring to the Molson he’s just ordered while aboard a plane sitting on the tarmac.

As corporate controller of Boston-based Student Advantage Inc., he knows that the cost of one beer on his delayed night flight isn’t a threat to the start-up’s bottom line. But when it comes to controlling travel and entertainment expenses at the company, which provides information to college students, Sommer chooses to lead by example. That means not sticking the company for every last penny during its push toward profitability.

He’s also shopping for the best airfare online. In this particular case, that means traveling into and out of alternative airports. Often employees and executives are encouraged to then ask the company’s Boston-based travel agent to match the price with a better itinerary.

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Now, thinks Sommer, the agent is “quoting us differently because they know we’re going to challenge every ticket.”

During a cell-phone interview with CFO.com, he boasts that he’s saved the company at least $300 on a single round-trip ticket by flying out of Providence instead of Boston and into Baltimore Washington International instead of Reagan Washington National.

He bought two round-trip tickets — for himself and a co-worker — on Travelocity’s Web site for $300, plus a $50 car-rental fee. Had he not used the new itinerary, air travel for Sommer alone would have cost $450. Sommer did his comparison shopping on the Orbitz and Expedia Web sites.

What’s more, like the rest of the company’s business travelers, Sommer operates under mandated restrictions on ground transportation and meals. Among the limitations are no limousines or hired cars. “It may be the employee drives or takes a taxi or shuttle service,” says CFO Kenneth Goldman. “We have set an absolute dollar amount [$40] above which we will not reimburse for breakfast, lunch, or dinner.”

For his part, Sommer drove to the airport, taking a shuttle from the $6-per-day lot off airport property rather than parking in the $15-per-day lot inside. In the last eight months the company’s T&E initiative has saved it close to $500,000, says Sommer. Goldman adds that the plan is to cut between $1 million and $2 million in costs this year.

To meet that goal, the cost-conscious duo keeps the 500 employees at the company on a strict T&E diet. Sommer and Goldman go beyond the traditional approach of having the human resources department communicate policies and procedures.

Instead, they’re taking matters into their own hands. Violators of the guidelines and mandates set forth at Student Advantage can face an enforcing E-mail or even a phone call from the CFO or controller.

“We don’t want to be the big bad wolves,” says Sommer. But when an employee spends money in an “egregious” way, Sommer might ask, gently: “Why do you have to spend all this? Look at what the rest of the company is saving.”

Like many companies these days, Student Advantage is evaluating customized Web-based booking software, which warns users when violations of corporate travel policy occur and details the lowest fares available. But such automation can be costly and time-consuming to implement, says Sommer, noting that Student Advantage prefers the Internet.

“Why can’t we use the tool that’s out there that everyone understands already?” he says. “I think we’re getting a pretty good canvassing of what’s out there [online]. It’s already free, and it’s effective.”

For now the company’s managers have chosen to focus on executive persuasion. In one recent case Sommer challenged a senior executive regarding an $1,800 ticket, booked through the company’s travel agent, for a round trip between San Diego and Boston. Sommer told the executive that a division controller had been able to book the same round-trip flight, plus two hotel nights, for $650 online.

The price difference got the executive’s attention. “He didn’t do it again,” says Sommer. And the example seems to be catching on: About 85 percent of tickets for Student Advantage employees are booked online.

It doesn’t take too much encouragement anymore to get employees to seek the lowest possible fares. “Instead of complaining, they look at it as a challenge,” says Goldman. “Whether shareholders or not, they are stakeholders in the business,” notes Sommer. “They want it to do well.” Adds Goldman, “I feel sort of cheap saying all of this, but as a CFO of a company heading to profitability in the fourth quarter, [getting employees to cut their travel costs is] the prudent and responsible thing to do.”

To be sure, some CFOs may not have the time for such personal intervention. Richard Wallman, Honeywell International’s CFO, must monitor 25,000 traveling employees, review more than 100,000 of their transactions annually, and oversee the ongoing implementation of booking software.

He certainly isn’t keeping track employee by employee. Instead, Wallman has been “the visible champion,” says James Lee, director of Honeywell’s global travel services: “He did a videotape at the onset of the [online booking] project, where he espoused the benefits of what we were doing.” The Wallman video is shown during training sessions and used for testimonial in communications.

Even large companies, however, are instituting some tough love. “A big dynamic this year is that corporations are getting more forceful” and mandating earlier in the implementation process, says Jeff Palmer, COO of GetThere, a Sabre Holdings company and Honeywell’s booking-software vendor.

Goldman and Sommer have thought about hiring a full-time person to handle the T&E initiative. But in that case, says Sommer, they’d be paying an employee $40,000 to save money that they’re already doing a good job of saving on their own.

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