By Andrew K. Reese
Gregg Brandyberry is living proof that Janan Johnson's philosophy on controlling travel and entertainment (T&E) expenses works.
Johnson is director of procurement for corporate services at pharmaceutical giant GlaxoSmithKline, and she believes that by using technology to give her company's business travelers a clear view of their choices for flights, hotels and other T&E expenses, "visual guilt" will drive them to choose lower-cost alternatives that don't compromise quality or impose undo burdens.
And Brandyberry, vice president of procurement, global systems and operations at GlaxoSmithKline — as well as a veteran road warrior who regularly shuttles between the company's U.S. and European operations — seems to be proving Johnson right. "I probably have reduced hotel costs at least 25 percent, and many different times I have moved a flight by a couple hours to get savings of 25 or 30 percent," Brandyberry says.
It appears that in the world of T&E, more really can be less.
A Controllable Expense?
Travel and entertainment has been widely accepted as the second largest controllable expense for companies after labor costs. But T&E also has been widely acknowledged to be very difficult to control. "Travel is a complex spend category with a human element," says Charles Brossman, solution owner for travel and expense solutions at spend management specialist Ariba, based in Sunnyvale, Calif. Brossman has more than 18 years of travel industry expertise, including in corporate-level travel management positions. He says that T&E's complexity makes it problematical for companies to apply uniform business rules to travel in the same way that they have applied rules to other spend categories. In addition, travel has traditionally been managed outside the purchasing function and therefore not necessarily aligned with the same best practices for spend management that procurement has learned to apply to other categories.
And yet the need to address T&E spend is more urgent now than ever. "Right now in the travel industry, it's definitely a supplier's market," says Rex Heineman, policy leader at American Express. Earlier this year, for example, American Express reported in its Business Travel Monitor that U.S. domestic airfares had increased 7.2 percent in 2006, and daily car rental rates were up 4.5 percent. Even budget hotel rates were up significantly, rising 19 percent in the fourth quarter of 2006 compared to the same period in 2005. It's no surprise, then, that Heinemann says, "We seeing companies really focusing on how they can manage these costs."
Except they don't seem to be having much success. A recent survey by American Express Business Travel Advisory Services (BTAS) found that 62 percent of business travelers don't use the preferred vendors specified by their companies. Part of the reason may lie in the types of tools that companies have been offering their travelers, according to Dan Ford, director of product marketing at Rearden Commerce, a Foster City, Calif.-based provider of solutions targeted at employee business services. Ford cites figures from travel industry research firm PhoCusWright indicating that while two-thirds of all consumer travel reservations will be placed online by 2008, fewer than half of corporate travel reservations will be made online in that year. Ford pins the difference on the corporate tools' slow adoption of the types of "user-friendly" features commonly found on consumer travel sites. "The quality and usability of the tools in the corporate online booking market have not advanced significantly," he says, "and so we see a growing number of employees opting out of using these corporate tools." With adoption rates remaining low, compliance with corporate policies also lags, Ford says, complicating efforts to rein in T&E spend.
Tackling T&E at GSK
Driving greater adoption and savings was a prime motivator for GlaxoSmithKline's recent T&E initiatives, according to Janan Johnson. "Our adoption rate on the travel side was flat," says Johnson of the T&E tools that the company was using up until last year. As a result, the company was looking for new tools to help bring its T&E spend under control. GlaxoSmithKline had been in discussions with Rearden Commerce about the solution provider's Web-based applications for managing employee business services, and the pharmaceutical company made the decision to move forward with a pilot in early 2006.
Rearden offers a platform for managing an array of services, ranging from air, hotel and dining to car service, package shipping and teleconferences, among others. GlaxoSmithKline's initial test of the Rearden solution involved a group of 20 U.S.-based "power users" split into two teams. One team used the company's then-current system for travel booking, while the other group used Rearden's travel tool. During the weeks-long pilot, Johnson's team observed the two sets of users to learn how they used the tools and their responses. At the end of the travel pilot, the team interviewed the users and conducted a heuristic study to understand the usability of the two different interfaces. In the end, the results in terms of adoption, compliance and savings tilted sufficiently in favor of the Rearden group that GlaxoSmithKline elected to move ahead with implementing the provider's solution.
However, even as the company began to roll out the travel module, GlaxoSmithKline also decided to initiate a separate pilot for the package shipping, chauffer/car service and dining components as well. For these other categories, Johnson's team set up a separate pilot that involved bringing onboard the staff within facilities management who deal with chauffeur services and the facilities staff that owned pack and ship, too. The package ship component was a little bit challenging for GlaxoSmithKline because the company has certain products that it cannot ship via the regular carriers because of regulatory issues. But Johnson's team was able to segregate out various opportunities — contracts, documentation and other business paper — that allowed them to run a large enough pilot to get a sense of how effective the tool was at gaining compliance and driving cost savings.
The car service group was more conservative, Johnson says, because they manage internal chauffeurs that work for the company, so the group wanted to ensure that internal resources were used first before users went to outside firms. Nevertheless, once the group began using the tool in earnest, within a matter of three weeks more than 900 users were booking their car service through the tool. In fact, once the company went fully live with the Rearden solution last fall, only a couple hundred users remained to be brought onboard in the U.S. side of the business. Johnson attributes this rapid adoption rate to the fact that these users had already begun using Rearden for booking travel, so they were familiar with the interface and open to the idea of using it for other services. Johnson's team also did training for users, including through Web seminars, to familiarize them with the online booking tools. And they ensured that a core group of power users was available to provide assistance for "newbies" throughout the company's locations.
"Visual Guilt" Complex
GlaxoSmithKline followed the U.S. pilot and rollout with a pilot in its U.K. operations. By that time, the company felt comfortable enough with the successes it had seen in the United States to limit the U.K. pilot to just 30 days. Since the rollouts on both sides of the Atlantic, Johnson says that adoption rates have climbed steadily among the combined 15,000 U.S. and U.K. users. In June, for instance, the company saw about 8,000 bookings by its U.S. users, with an adoption rate of 35 percent. That figure might not seem overly high, but GlaxoSmithKline sets a very high bar for transactions that it classifies in the "adoption" bucket — the booking process must be "zero touch," that is, completed entirely online, with no calls to the company's travel agency. At the same time, GlaxoSmithKline has a large number of international travelers who require visa, security, health management or other cross-border support, which frequently requires agency intervention.
More significant, in Johnson's view, is the high completion rate for bookings initiated through the online system. "We started tracking whether people actually submitted reservations for purchasing because we wanted to see whether they were just surfing Rearden and then picking up the phone and calling the agency," Johnson explains. "We found that we have a 99.6 percent submit-for-purchase rate, so people really are transacting the business, not just playing." That's good news, she adds, because it reduces expenses on the agency side, and it also means that more users are subject to the force of "visual guilt" implicit in the solution.
"Visual guilt" maintains that if users are presented with various service options and shown the costs for different levels of service, the users will most likely choose to go with a lower-cost option. Someone shipping a package, for example, might choose delivery by end of the business day rather than delivery by 10:30 a.m. based on the significant difference in the rates. Or, like Gregg Brandyberry, the sponsor of the Rearden project at GlaxoSmithKline, a business traveler might opt to leave a couple hours later or earlier to save a few hundred dollars on an airfare. "If people are presented with a better buying opportunity, they will make better buying decisions," Johnson says.
Those better options add up to cost savings, too. "Our average ticket price and average hotel price are creeping down," Johnson says, while acknowledging that the company will need to drive adoption rates somewhat higher to achieve more significant savings. The company has been helped by the fact that it already had a very high compliance rate for air carriers and hotel. Still, GlaxoSmithKline has estimated that it easily paid for its investment in the Rearden solution early on in its adoption of the tool.
The Convenience Factor
For his part, Brandyberry praises the convenience of an online tool for handling all travel-related tasks. "In the past, if I wanted to travel, I had to call an administrative assistant and we would exchange a couple of phone calls back and forth before the travel was booked," he says. "Now I can do the whole thing myself in five to seven minutes." He also appreciates the updates that the system sends to his mobile devices, reminding him of upcoming travel, as well as the ability to have the system include the travel in his Lotus Notes calendar.
Ariba's Charles Brossman says that convenience and usability are keys to gaining widespread adoption of this type of tool. "You have to win over the end users that it's going to be easy to use and that it's not going to be cumbersome for them," he says. "Usability is the No. 1 concern." Being a spend management suite provider, Ariba has integrated its T&E module to the rest of its offering, providing a way for travel and entertainment spend to be ported into the expense reporting tool, adding a further layer of convenience for the user. That kind of integration, of course, can bring T&E data into a larger e-procurement system, giving procurement executives the opportunity to have greater visibility into, and control over, this category of spend. Exception reporting, for instance, can alert executives to maverick spending and help them understand where business rules need to be strengthened or better enforced. "We're giving travel managers and procurement managers visibility into what's going on, and the exception reports are critical to make sure that maverick spend doesn't get out of hand," Brossman says.
Rex Heineman, with American Express, emphasizes that companies looking to get a handle on their travel and entertainment spend should take a systematic approach to implementing their T&E strategy. "You can spend a lot of time putting a policy together, but that's really just the foundation," Heineman says. "After that, you need to determine what controls and compliance measures you are going to put in place." Those controls depend to a large extent on a particular company's culture, Heineman continues. "I can take a look at a policy and quickly get some general idea of the culture of the company just by the language that's used in the policy — whether it says ‘should" versus ‘required,' or ‘mandated' versus ‘please spend reasonably.' There is not one clear-cut policy that fits all."
Where the new solutions for managing T&E spend can help in this respect, according to Dan Ford of Rearden Commerce, is in providing a channel for companies to propagate policies down to the end user. Ford notes that studies by Aberdeen Research have suggested that only 6 percent of U.S. organizations have the ability to communicate policy to their employees in an automated fashion at the point of purchase for products and services. "The other 94 percent are relying on word of mouth through the company intranet or some dusty old policy guide sitting up on the bookshelf," Ford says. Rearden, for one, tries to remedy this by offering organizations personalized policy messages for their employees within its application.
Back at GlaxoSmithKline, Janan Johnson says that the company has been careful about how it has mandated use of the Rearden system. In certain discrete areas, such as pack and ship for some types of domestic packages, Rearden is the only option. The company currently is getting ready to mandate the system for booking certain travel, such as between its main office locations in the United States and London.
To executives at other companies looking to implement a T&E solution, Johnson recommends initially targeting one subcategory — such as air or car service — where success in terms of adoption rates, compliance and savings is more assured, based on the company's culture and current policies. Then expand the program out to encompass additional categories as opportunities present themselves. The more services that get added to the program, the greater the likely buy-in from the user community. "When you package all these services together in one place, it makes it very convenient for the administrative assistant or the direct user," Johnson says. She concludes, "It gives them a one-stop shop."