Mandated travel policies: Wave of the future? In today's uncertain business environment, more and more companies are establishing strict travel policies to manage costs and enhance employee safety. (Business Travel).

Just utter the words "mandated travel policy" and chances are you'll send shudders down the spines of many Canadian travel managers.

"It's so hard line," says one travel manager, who explains that his company does not want to be viewed as Draconian.

While few travel managers admit it, mandated travel policies are increasing in Canada and experts suggest that in today's ailing economy, they'll become even stricter in the future.

"More and more Canadian companies are embracing the concept of mandated travel policies," says Samir Andraos, president of AIM International Management Ltd., an independent travel and expense management consulting firm based in Toronto. "Companies are finally understanding the importance of mandating policies because of the benefits they can reap."

Indeed, the benefits can be substantial and include significant cost savings that Andraos estimates are, on average, about 10 per cent of a firm's total travel and expense (T&E) budget, provided the policy covers best practices in all aspects of the T&E process.

"If you can consistently over time deliver on your commitments to your vendors (hotels, airlines, car rental firms, etc.) and continue to increase what you're able to deliver the vendors in terms of greater market share, you're in a better position to negotiate with them in the future," says Frank Schnur, director of Markham, Ont.-based American Express Consulting, a division of Amex Canada Inc.

Schnur also believes that mandating sends a message to the traveller that top-level management is very serious about how people travel and when they travel.

As well, mandated policies eliminate questions about what's right and what's not. Says Paul Winter, chief financial officer for SKU Canada Ltd., a Toronto-based company that adopted a mandated policy almost three years ago: "They know exactly where they stand. They travel, they know what's acceptable to the company so they behave that way as long as a company is reasonable. If you make it so tight or so unpleasant to travel, it won't work."

Denise Harper, account manager for Carlson Wagonlit Travel in Toronto, believes, too, that in the aftermath of the September 11 terrorist attacks in the U.S., companies are focusing more on the safety and security of their employees.

Harper says companies need to know where their travellers are at all times, what their travel plans entail, etc. As a result, adherence to the use of a company's preferred suppliers is quickly becoming mandated policy with many of Carlson Wagonlit's corporate clients.

Certainly, mandating a travel policy is not new. Most experts say some companies have being doing it for the past four to five years in Canada.

Although there are no Canadian statistics available to accurately measure the number of companies embracing a mandated approach, Amex's Schnur says the company's most recent U.S. Business Travel Survey conducted in 2000 suggested that 70 per cent of U.S. firms had some form of mandated policy.

While Canada generally lags behind the U.S., Schnur and others speculate that the trend is gaining momentum in Canada due, in part, to the fact that top level management has recognized its importance.

During previous economic downturns, many businesses took a "slash and bum" approach to travel by eliminating it or freezing budgets. But Schnur says many Canadian firms have recently realized they can achieve substantial savings by travelling smarter. "If you stop travel entirely, it impacts your sales and revenue lines. Part of travelling smarter is mandating parts of your travel policy."

In the early days, mandating travel policy was done mainly by large companies with hefty travel and entertainment expenditures. But the concept has trickled down to small- and medium-sized firms. Carlson Wagonlit's Harper says she's seeing the trend from companies of all sizes and every segment of the market.

That said, Andraos notes that publicly traded companies who must consider their shareholders' concerns about excessive spending tend to jump on the mandating bandwagon faster than some private firms.

Although the extent of mandated rules within a policy varies from one company to another, a growing number of firms are requiring that their travellers use the company's designated travel agency, its designated corporate card, and the main preferred suppliers -- airlines, hotels and car rental firms.

As well, Schnur says a growing number of businesses ask employees to obtain pre-trip approval from a senior manager. By requiring senior management's permission, the traveller is unlikely to submit trip requests that could be avoided, he says.

Still, nothing is carved in stone. David Lawrance, an associate with management consultant William M. Mercer Limited based in Toronto and responsible for the company's national administration that includes travel, says the firm mandates its preferred air carrier, but "where it's inconvenient or impossible to travel on our preferred carrier, then we use whoever we have to."

Similarly, Garry Milks, director of sourcing and contracts management for Manulife Financial Corp. based in Toronto, says there are some circumstances that must be overlooked. "If I have a $65/day meal allowance and file expenses for $100, there may be just cause. If I'm in Japan, $100 may not buy me a lot. It's fine to have limits...but you have to be flexible."

Although companies are reluctant to penalize offenders, some take action depending on the offence and the number of times it's been committed. Andraos says some companies will not reimburse a traveller if they don't use the company's corporate card.

In other instances, they won't pay for items outside the policy. In the case of SKU, for example, Winter says mini-bar or in-room movies are not covered.

Moving from a loosely structured travel policy with little teeth to a stricter mandated policy can be a challenge. Lawrance advises travel managers to write the new policy, put it aside for a week or two, and then tear it apart. He says implementing a requirement for expense reduction purposes alone doesn't work, so managers must ensure the rules are reasonable. As well, they should get others in the organization outside the travel arena to evaluate the policy and, most importantly, they must make sure they have senior management buy-in because "otherwise, you're just wasting your breath."

Once the new policy is in place, experts say it is essential to effectively communicate the new rules to employees. Sylvia Gray, a travel consultant with Calgary-based Western Management Consultants, recommends that managers explain what advantages the new policy has to the traveller. If a new rule is established solely to save the company money, many travellers don't care. But if they learn that they might get a welcome gift or an automatic upgrade if they stay at the company's designated hotel, they're more likely to adhere to the rules.

Communicating the new policy can be done in a variety of ways. Some companies rely on their intranet, although many experts believe that method may not be effective because it requires the traveller to be proactive. Therefore, a printed newsletter outlining the rules, with regular follow-up newsletters or face-to-face meetings, may help bring the traveller on board.

Clearly, mandated travel policies are here to stay. Says Amex's Schnur: "More and more companies recognize that travel management is a key issue, and have made a permanent shift toward focusing on managing their expenses. Most companies realize that travel is a very large part of their controllable expenses and will continue to aggressively manage those expenses. That means we'll see more and more mandating of policy over time."

Carolyn Green is a Napanee, Ontario-based business writer who specializes in business travel.