Business class is cheaper than economy: whole-of-journey travel risk management

Just what have you cut?

The majority of travel departments/managers are only empowered, authorized or capable of looking at travel management from a cost perspective exclusively. However, to truly ensure that the process of travel is efficient, profitable and safe; a much wider focus is required-predominantly in the areas of cost, productivity and safety.  When such a wider and more comprehensive perspective is engaged, most organizations will discover that business class flights are in reality much cheaper than economy class for the majority of their executives and traveling talent.

Consider a short-haul flight of under four hours. For an executive this will typically translate to an eight-hour working day. If traveling in economy class they will typically need to be at the airport nearly 2 hours before departure. Even with privileged frequent-flier status they will need to be checked in much earlier than their business class counterparts. Without such privileges, the time required maybe even longer as check-in queues and airline efficiency lengthen and decline respectively. The immigration processing will potentially be lengthened also as many airlines now have preferential immigration processing of business travelers. The traveller in economy will now be left to fend for themselves in the public seating/WiFi/meals environment of economy class travel. Boarding time will be  lengthened and carry-on luggage will be reduced which again will have added to the overall pre-departure time.  Regardless of the physical size of the traveller, their work laptop, the airline or the seating space; very few people get anything close to productive work conducted whilst in economy.  Not to mention, when corners have been cut,  everyone within proximity of a business laptop user can often see the entire content and context of business presentations, e-mails, discussions and intellectual property. The arrival stage will also entail longer immigration processing times, time lost awaiting baggage and jostling within the bulk of the flights travelers. If after all this, on a short-haul flight you expect the traveller to bring their A game or deliver pivotal business results, you should prepare yourself for disappointment now.

Conversely, a journey that has been considered in a whole of risk  manner will play out significantly different. First, the traveller will have the time and flight best suited to the work productivity objectives and reduced commute, check-in and processing times. Utilization of the business lounge will ensure productivity and access to information and systems prior before departure. Overall fatigue and affect on the individual will also be reduced. Whilst not entirely risk free, the threat to personal belongings, company information  or other valuables will also be reduced.  Productivity (best calculated by adding the per hour cost to the company for the executive and the per hour revenue potential of the trip or executive) will also be enhanced by a compact yet usable mobile workspace. Even if the individual is not conducting work on a computer platform, the demands to the individual  are also diminished.  It is also almost ensured that the executive will hit the ground running and clear the aircraft, immigrations and baggage claim much faster, leaving only the commute from the airport to the place of business. This streamlining and efficiency is also replicable for multiple travelers or trips.

When analyzing all of these factors (even in a developed country) the hundreds or even thousands of dollars between economy class and business class travel is often much cheaper than the thousands or tens of thousands of dollars  of business productivity, time and dollars at risk. However, the functional heads responsible for cost, productivity and safety are all typically measured and evaluated on cost containment rather than profitability or maximized earnings of their senior executives. All of these elements are significantly amplified in developed or developing countries. When the entire journey is constructed along whole-of-journey travel risk management lines thousands or even millions of dollars in opportune business can be preserved while appropriate expenditure managed. Reduction or elimination of disruption and wastage can be easily achieved. When it comes to whole-of-journey travel risk management most companies are penny wise and pound foolish. There is nothing more comical and economically tragic than a senior executive or CEO traveling on a budget airline. While sitting in cheap seats being nonproductive and paying five dollars for peanuts or drinks they are losing thousands of dollars or even millions in productivity or earnings for the sake of a few bucks. In the wake of the financial crisis, some very savvy financial institutions openly conveyed that they dare not reduce the privilege, risk or status of their major wealth generation executives for fear of losing them to more competitive or sophisticated banks or financial institutions. Why should this be any different in the face of many other threats to talent and revenue?

The empirical data and evidence of enhanced productivity and efficient travel risk management exists at present in every company. The only limitation is that few are rewarded or supported in harvesting, processing and analysis of such data. If companies and their respective leadership took the time to stop and analyze such processes or even historical culture within the organization, they would find that simple and efficient adaptation of such processes like the use of business class travel versus economy class travel could potentially unlock thousands of hours of productivity and greater business competitiveness. This is certainly the case in developed markets and significantly more acute in developing markets where there is an accumulation of much greater threat, costs, threat disruptions and safety issues.

The question then  is not “Is business class is cheaper than economy?” but more a case of  “Can you accurately prove that it’s not?”

Chicken or the pig, what came first?-The growing menace from Swine flu and other health crisis

The evolving threat from any health crisis should be a major concern to all those charged with ensuring their company’s resilience. When Swine Flu first surfaced, the public interest was akin to the gold medal tally board during the Olympics, if my country isn’t represented in the top five, who really cares? Sadly, with planners and medical advocates focusing on an inconsistent and flawed measurement tools such as the WHO’s running tally, most will not recognize the threat until it is literally upon them and rife within their communities. Much like the stock exchange, if the S&P 500 is surging, it is no guarantee that you are inclusive of the rally, alternately if it is plunging you could very well be unaffected. Why should the WHO’s numbers be any different?

When it is widely acknowledged that most governments, certainly within developing countries, are not the most dynamic of organizations and the list of failings by numerous administrations remains long and varied; why have so many placed such absolute trust in their ability to manage this particular crisis? Are so few people aware of the already over extended healthcare system in even the most developed of countries? When people are already waiting lengthy periods for non-life threatening surgeries and general practitioners are dwindling in number do they really believe that thousands of people even mildly ill simultaneously will be serviced in a timely manner? Not to mention the issues over any drug or vaccination that is rushed to market exclusive of any standardized clinical trials. I agree that the current trial periods may be too long but look at the countries that are mandating or implementing widespread vaccination programs of the first round of vaccinations. Concerning? Volunteers?

Even the most progressive multinationals have turned a blind eye to the inequalities of everything outside their home country when addressing planning and prevention for a major health crisis like swine flu. Their “home ground” view seems to be the same assumptions and standards for addressing the issue abroad. Since when has India had the same labor laws as the US? Since when has Indonesia enjoyed the same level of broadband connectivity to enable for employees to telecommute? And who in their right mind would assume that employees in China will stay at home and monitor their own health to ensure they do not contaminate the rest of the office/factory? Contractors and consultants in the UK recently declared that they were unlikely to stay away from the office if sick as they are on an hourly/daily rate which would be reduced should they not turn up for work. So much for that assumption! How many people do you think fill in the health declaration forms accurately when entering a country with such screening? Even Hong Kong’s current attempts are nothing more than superficial and mere inconvenience rather than anything of substance or consistency.

Malaysia has acknowledged their citizens are oblivious to Swine Flu and its affects. India is in a growing state of fear over the sudden realization they could be affected too, and they are helpless to do very much at all. Many employees in companies within India simply walk off the job to care for family if they think or confirm an ailment. How much of the world’s back office is situated in India? What do you think the impact will be from thousands who don’t turn up for work or significant diminished service capacities within India? South Korea, Taiwan and China all have major problems. They thought it was a European and Americas problem. Their population is ill informed, suspicious of the government, dependent on them to do something, have very underdeveloped risk management strategies and little to no budgets for such countermeasures, not to mention the care of extended family responsibilities well beyond that of the European and American cultures. Forget what the conflicting medical opinion is, do you really believe this will not be a problem?

Swine Flu (I don’t refer to water as H20 either) is not a human health issue. It is not limited to public health and safety. Like never before, company resilience to this issue will be determined by their actions and implementation, not industry standards or piecemeal government efforts. More concerning is that while these companies will be well prepared, their vendors, suppliers, consumers, affiliates, distributors, advocates and just about everyone else will not enjoy the benefits of their planning and be at the mercy of dynamically shifting environmental influences. You don’t need an economist to confirm the impacts of the economic downturn, equally any similar announcements by the medical fraternity will come well after the obvious, and at present, inevitable impact. On the scale of victim to survivor, where do you fall?

Asleep at the wheel-Outdated assumptions and current threats

Is my assessment still relevant?

Despite countless events and incentives to change, a startling number of companies are still behind the business curve with regards to their risk management. In much the same way a train travels on a set track that has been planned, surveyed, laid and maintained for predictable routes between key locations it doesn’t permit for deviation or adaptability. Given a large enough obstacle it can even be derailed, damaging the train, goods, passengers and requiring major repairs before service is returned. Shareholder value may be affected and the reputation of the company called into question. While the business demands swift and timely movement between locations, the business decision making process is likely to be much slower than the business operation.

Enterprise resilience is a relatively new term and still foreign to most. Outdated risk management structures are functional silos of threat identification, budgets, management and risk mitigation with higher than average potential for duplication, wastage and blind spots not covered by the functional departments or managers. The people overseeing the strategy or implementing the objectives may also be inexperienced or lack authority to encompass all the necessary business aspects.

To further frustrate the process is the human trait that ensures the longer one is exposured to a situation, activity or location results in complacency or diminished ability to identify emerging risks. We have seen this in action most recently with companies operating in Thailand. Despite repeated and almost obvious changes in the situation across the country, but more so in the capital Bangkok, thousands of people and hundreds of companies were taken totally unawares when protesters blocked streets, business environment altered, airports closed and open violence on the streets. The situation was largely predictable and measured preparedness and planning would have negated any major disruption or continuity issues. Thanks to the legacy emotion of Thailand being a “great place” companies almost refuse to accept the new status and many have dismissed the past events as “isolated” and still remain vulnerable to what is the new order until resolution is evident. A similar situation is emerging in Malaysia at present. With a large foreign investment, multinational headquarters, expatriate placements and active international travel, the affects of the changing state in Malaysia will have similar impact on companies and personnel. The signs are there; rule of law, emergency services, crime, religious fragmentation, social unrest, health crisis and financial division are not easily remedied and constitute a here-and-now threat that must be mitigated accordingly.

Enterprise resilience begins at the top. If your board, C-suite or executive leadership is not engaged, the process is doomed from the outset. If the identification and preparation for threats are not inclusive of the enterprise and a representative counsel, the results will be similarly weak. Modern management and competitive advantage lays with those that are hard-wired to the assets and issues in parallel. To know what constitutes value, and the priority to the business along with emerging and dynamic incident surveillance rounded out with a replicatable and efficient decision making process will ensure survival of the fittest. This is an even more poignant issue for those with there manufacturing, management, back office processing or supply lines in developing economies where even the most basic of enterprise resilience strategies are specks on the horizon and not perceived to be an economic imperative. The vehicle is in motion, its speed increasing and the business may be depending on you as the designated driver. The question is, are you asleep at the wheel?

Penny wise, pound foolish-human capital risk management

Do you know the actual value?

In spite of the considerable investment and development around the preservation of assets and the mitigation of risks across conventional corporate assets such as facilities, information, equipment and products, the same methodology and motivation remains far less advanced in regards to human capital.

Before any organization even explores risk management strategies for their human capital it is fundamentally important that they first determine the value at risk. Not only is it a case of valuing the contributions of the individual or groups of personnel but differentiating the value in which they contribute to the company, whether it be through the provision of specific skills and services or the commercial value they present the company. These distinctions also need to be made between job functions or management/executive levels. No two individuals are contributing to the company in the same manner, much less two diverse business functions.  How many companies even know this definitive financial value of their people?

Following the basics of valuation, and any other unique considerations that the company may have (mobile work force, fixed laborers, knowledge capital, research and development) a unit cost can then be applied for prioritizing strategies or expenditure. For example, an individual that reflects a unit cost/investment per hour of $1 will be less likely to addressed as a priority when compared to an individually that presents a unit cost/investment per hour of $100. However, if there are significant numbers of the basic unit cost of $1 at risk, that group as a whole may be a greater priority than that of a single or limited $100 per unit cost individual.

Threats and residual risks associated with human capital are many and varied. Over time a detailed and thorough analysis can be conducted to determine the probability, velocity of onset and other governing factors that will provide a single or annual loss expectancy to the company. A single loss expectancy, such as death, may cost the company significantly more than just the forecast value identified in the first stages. Conversely, an annual loss expectancy, especially in light of the fact many companies are unable to even quantify this loss, may equate to millions of dollars in lost productivity, administrative burden or opportune costs.

To truly understand or appreciate the current or potential losses to a company through their human capital it is imperative to model the disruptions and time loss (inclusive of management and departmental support) to a cellular and group level. If someone falls ill, how long are they unproductive? What does it cost the company? Should the become a victim of crime or their business activity disrupted due to a natural disaster, what is the cost to the company? When applied to our entire human capital asset base, what is our single and annual loss expectancy?

“You can’t improve what you can’t measure” If you are making a truly informed decision on where your assets are distributed, you can then make informed decisions around strategies to preserve their value. You also enjoy the benefits of comparative investment/management. Most companies are surprised to discover that despite their commitment to their people, they actually devalue their contribution by not acknowledging them as an asset and preserving it accordingly. Are you one of those companies?

Companies that have undertaken to approach the management of their human capital consistent with other corporate assets have found the process highly rewarding and very confronting. Conversely, those adverse to such strategies or behind the curve continue to loose more money than the cost of such preparation and mitigation. They too find over time that penny wise turned out to be pound foolish.