Travel Costs: Incent to Save?
Saturday, April 17th, 2010 | Compensation Plans, EIM, Goal setting, SPM, bonus
An article in Thursday’s US Today focuses on how companies are determining the necessity of business travel. Corporate travel experienced cuts in recent years in reaction to economic conditions with every expense item receiving more scrutiny than in boom times. On the other hand many will vehemently espouse the idea that downturns are no time to cut sales and marketing budgets. The article sites that business travel in Q1 2010 is up from Q4 2009 and also year over year versus Q1 2009; this is definitely a good economic indicator. With corporate travel as a whole (and sales travel which closely correlates) recovering, what is good policy regarding sales travel? Some companies pay incentives to sales representatives for lowering travel costs; is this a good idea? Maybe a tele or web conference will do. ?
The article provides what I think is some sound advice; main points I gathered:
- Have a policy regarding making a travel or no-travel decision and evaluate the policy frequently. Technology related alternatives to face-to-face meetings are improving and costs are reducing relative to the face to face meeting; yesterday’s policy may not be the best one for today’s environment.
- Frequently sales travel and the face-to-face meeting are critical for establishing new customer relationships; teleconferencing and web conferencing often can help reduce costs after the relationship is founded. Of course this will vary by industry and even from customer to customer.
- Sales personnel should be allowed to play an important role in traveling decisions and in determining policies governing them. If sales reps feel they are losing big deals to save small money based on someone else’s policy, their motivation and performance will suffer.
As for incentives to save, these should very clearly be designed as secondary to primary incentives that drive revenue and profit generation. Making a bonus for keeping costs down contingent on attainment of a certain percentage of quota is better than one without regard for primary performance. This way sales personnel must save without losing focus on primary goals and won’t be sitting home when they should be hitting the road.
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