Buyers Eye Sr. Mgmt. Relations

By BTN / June 10, 2001

Buyers Eye Sr. Mgmt. Relations

Interaction with senior management was the subject when four travel managers sat down with BTN editors in Tampa, before the Association of Corporate Travel Executives annual conference got underway. The travel managers were Donna Reidy, director of travel services for Ryder Systems in Miami, with U.S. air volume of $23 million; Lois Raffel, manager of travel services at Achieve Global in Tampa, with U.S. air volume of $4.2 million; Sheila Kittle, vice president of corporate travel with Raymond James Financial in Tampa, with U.S. air volume of about $7.5 million; and Connie Freeman, director of procurement and travel services for Pitney Bowes in Stamford, Conn., with U.S. air volume of nearly $20 million.

BTN: Is senior management more involved in travel in 2001?

Donna Reidy: At my previous company, Intermedia Communications, here in Tampa, senior management did not take an active role, did not see the purpose of the travel manager and it was very difficult to reach my goals. It's much different at Ryder, where the support is tremendous. I think one of the differences is that I report to the senior vice president of finance, so I have the ear of upstairs, and they are extremely supportive. It's one of their top priorities right now.

BTN: Because of the economy, are they even more interested or involved?

Reidy: Very much so. We've been going through some restructuring for the past couple of months, and though I've been there just two months, we have been invited to participate on two strategic sourcing committees. It's very interesting working with purchasing, which I've not had the opportunity to do before.

BTN: Connie, is your senior management more involved in 2001?

Connie Freeman: Yes. I don't think it's been so much a concern for the economy, though certainly that's there, but that we took a very aggressive approach in our travel department. Starting in January, we mandated online booking for our top city pairs and on April 1 we said all our domestic single destination trips and our two top international trips will be booked online. We've done very well so far, the percentages are great and that's fit into the company's strategy of moving toward self-service for the employees, automating processes that can be automated to take some costs out and reducing administrative costs where possible.

BTN: Is there a mandated cut at this point?

Reidy: Actually, our cut was put in place back in early November. We have seen almost a 41 percent drop in our T&E, and we basically put out the message that all travel is to be curtailed or eliminated unless it's absolutely critical. And that mandate will be in place until the end of the second quarter. It's a big initiative and for me a very important one.

Lois Raffel: Senior management involvement with the travel program kind of comes and goes. They're only allowing travel that contributes to the bottom line, such as sales and training, right now.

BTN: So, are you talking more often to senior management than in the past?

Raffel: They're paying more attention to what I do, so I'm glad I have a travel program in place. It's under closer scrutiny. We also have a new parent company, so we've been going through some changes. Typically, we have had travel freezes or travel cutbacks that we didn't feel in our travel department. Our buying didn't dip, and we didn't see any less bookings coming through.

Sheila Kittle: We've always had a close relationship with senior management. I report directly to the senior vice president of human resources, which takes on a different outlook than perhaps finance. As far as any cost-cutting measures, our CEO doesn't believe in taking a knee-jerk reaction to the market.

However, a few weeks ago, all vice presidents of all the major departments were asked to prepare a cost-cutting initiative memo to our CEO to say what's wrong in their areas. Two weeks ago, we put a practice in place that if someone is not taking a lowest fare or if an agent sees that someone is being exorbitant, we become involved. Before, anyone who didn't take the lowest airfare, who insisted on staying in a hotel that is above per diem, if they said they're traveling with clients or going to see a client, we just turned our head. Now, I immediately get involved. I no longer go to their direct supervisor, I go to the department head of that business unit. We have been very effective over the past couple of weeks. It just means that we have to be more actively involved on the front end before it becomes a problem.

Freeman: Senior management looks at travel carefully. We have not put in any blanket announcements or directives that have told people to curtail travel. It's basically done on an individual basis, so individual groups and organizations have looked at their budgets and may have curtailed certain activities, but there hasn't been anything across the board. I have seen some of our activities down, however, our company is involved in a number of high profile acquisitions that we just announced over the past couple of weeks. So, necessarily travel was associated with that and we anticipate it will increase a little due to that type of activity. It was very conscious on the part of the company to change our strategy and grow by acquisition. I'm taking a wait-and-see attitude on how that is going to affect travel, but we've always had a very strict lowest-fare policy, and we've had very high compliance with regard to it.

BTN: Who is the highest-ranking executive in your company who is involved in controlling travel policy and spending?

Reidy: In our company, everything is coordinated through a steering committee and we get buy-in from all of our departments. There is no one person who drives the issues. At Ryder, we're getting the support or we're getting the strategic sourcing committees that are being put in place coming from our CFO and our CEO, which is wonderful. They're right there along with us as we're working on the process.

BTN: When a team makes a decision, it doesn't go for a sign-off to the CEO?

Reidy: It goes for a sign-off, but basically if we support it and we have a good business case with solid numbers, the decisions are ours and they will sign off on it. As long as we've done our homework, they will sign off on it.

BTN: Who is the person who does the final sign-off?

Reidy: Typically, our CFO, depending on the issue. Usually with travel guidelines, the CFO and the committee of people make the decisions, based on the recommendations made by the departments involved. If it's a more far-reaching decision, it'll go to our CEO.

Kittle: The CEO absolutely has the final say on any of the major issues that come about. I wrote the travel policy initially, and my direct supervisor, who is a senior vice president, is my strongest supporter. If there is ever an issue with a policy, whether it's working or not working, we have the hotline to the CEO. He likes to be involved if he's seeing something that is completely out of whack. He absolutely wants to be involved in anything on a major level.

BTN: So does he receive management reports?

Kittle: No, he does not get the management reports, the department heads get the management reports. If there's anything that's truly out of line, that's when I'll get Tom James involved via either my boss, or if it's something with a department head, perhaps I'll go directly to Tom. But he's not looking at the day-to-day stuff. I usually only meet with him when there's a very big problem.

BTN: Connie, what is the approval process for you?

Freeman: It's two-pronged, so to speak. With regard to policy issues, when we've made recommendations to revise or change a travel policy, those come through our travel council, which is a business unit cross-functional team. What we did in that case was we went out and surveyed the senior management committee people to get their input regarding the changes we were proposing and then we actually came to the final draft of the travel policy. We presented it to the CEO and the COO, so it came from them in terms of approval of that. When it comes to selection of suppliers, we basically have implemented strategic sourcing throughout the travel program, starting about three years ago. At that point, it was the people on the team, and we came to a consensus. We did then, of course, tell people whom we worked for this was going to be the decision, but there was no formal presentation any higher than telling our senior executives, this is the decision we made.

BTN: Did strategic sourcing increase senior management buy in?

Freeman: I think it did. Interestingly enough, we're not doing anything different now than we did prior to strategic sourcing. I think strategic sourcing was something that was being adopted by the company as a whole as a means to improve the purchasing process. Travel had not been looked at the same as purchasing previously, so once it went through strategic sourcing, it was looked at in a similar vein in that there had been a discipline brought to the process. I think there was a certain respect for the decisions we made as a result of that process. And, there was less of, "Well you use this agency because you always use them," or "You use this airline because you like them." We actually went through a whole process using a cross-functional team. So, from that point of view, that was very good for us.

BTN: Do you have a frequency of periodic reporting to the CEO or CFO?

Freeman: I do monthly reporting to my boss, who is on the vice president level. And probably on a quarterly basis, she then reports to the senior executive on the senior management committee with regard to travel statistics. Periodically, those senior people report to the CEO. So, maybe it's every six months, but travel is not an agenda item every single time they meet.

Raffel: Typically, I send monthly reports to my vice president. However, a week ago, our new CEO implemented a leadership council that I'll meet with monthly.

Reidy: My internal reports go directly to my boss, who is the senior vice president of finance, and he shares that on a monthly basis with the CFO and the CEO. My meetings are strictly with my boss.

BTN: How many hours a week do you spend meeting with him?

Reidy: We meet approximately one hour every two weeks face to face. However, Chris is very involved with what I do and we basically communicate via e-mail all day long, especially in this cost-cutting mode we're in. If I see something that is sensitive with a department head or a VIP or one of our top brokers, I'll get her involved. She has always been my strongest supporter. That's the beauty of e-mail; I don't have to constantly run over to her office to handle it. So even though I may not have a lot of face time, we're in constant communication.

BTN: Is quantifying cost avoidance a standardized thing you do when you're reporting to a manager?

Kittle: Any of my cost-avoidance reports are on an ad hoc basis. If a particular department wants to know how many exceptions they've had, I can go to that and throw it into a Word document or a spreadsheet. Unfortunately, when you're talking about cost avoidance, that's front end, it doesn't hit the CRS, so there is no way I can capture that in a report.

BTN: In communicating with senior management, do you show what your value is as a percent of sales or shareholder value?

Kittle: No. In the seven years that I have been with Raymond James, I've never really had to justify my position. We are a very visible department. We communicate regularly with the department heads and it's never been an issue. It's only been an issue if the service level drops. We've also had very attractive contracts. We've always, with the contracts we have in place, shown our value.

BTN: So, are there any numbers that you provide to senior management on regular basis?

Kittle: I am responsible for my budget and I have to show the total budget on an annual basis, staffing costs, all of our expenses and so forth. And we do produce a hard dollar savings and a soft dollar savings that I supply to my boss with my budget each year.

Freeman: Basically, we've come up with some key indicators. We report our average ticket cost in comparison to a national index, both domestic and international. I will continue to report that as long as it's much lower. We report on our transaction costs and where that is going. It's continuously been coming down a little each year, so that's been good. We report what we call our contract savings, how much we saved as a result of the fact that someone took a contract and therefore X percent was taken off. That's for cost avoidance. We were tracking our e-ticket usage because we were trying to get people to use it. Now we're way up there, so by next year we won't need our measurement anymore. The final number we were tracking was usage of BTS, our online booking product to see where we were going with that.

Raffel: I have been at the company I work for, for almost eight years. I have reported to nine people in five different departments. Most of my role has been to bring the person I report to up to speed with what the travel department does. So, they don't know what they want and they take cues from previous people that I have reported to and I provide electronic reports via e-mail. I have a snapshot report that I compile each month with what we're doing as a department and some benchmarking information on things like average ticket price and average hotel cost. There's a certain danger with what numbers you provide to people you work for, if they don't know what to do with them. Sometimes they do things like have our agents benchmarked against how close to the average ticket price or under they provide. The market controls that, if we send 80 people to Chicago and it's $1,500 because that is the lowest fare, then they can't control that average ticket price. They don't understand, so I try not to give them too much statistical information, unless it's supporting something specific we're working on.

Kittle: A lot of what department heads and managers are looking at is what appears on their budget statement that they receive every month. Normally, you give that information to someone who doesn't have a true grasp of travel and it just creates more questions. I rather would have dialogue than to give them a chart or graph with numbers they don't understand. When I really ask them what they are looking for, they just want some sense of security that their people are not spending more money than they should be.

Reidy: I developed a metrics reporting system when I was at my previous company that I introduced to Ryder, which I use for relocation, credit card and corporate travel. It talks a lot about our events purchase or average ticket price. There's a section about our preferred carriers and preferred vendors. We show comparison to last month and last year. As I go further into the report, I go into a series of graphs and analysis, so that if there is a trend, I have an analysis of that. I found it to be a very useful tool and management seems to like it.

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