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Do You Need a Business Travel & Expense Policy? 3 Key Indicators

By Kellie Rondon on Jan 15 , 2024 5 min read 0 comment(s)

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There’s no doubt about it—the business world is back on the move! Your small business may now need a travel and expense policy to keep up with all the new activity. 

The use of video conferencing technologies has made remote work simpler and has reduced the need for face-to-face meetings and in-person events. Despite this, data shows the travel demand has picked back up. Global consultancy firm Deloitte reports that while business travel is already creeping up as 2023 draws to a close, a “full recovery to 2019 [business travel] spend volume,” adjusted for inflation, “appears likely by late 2024 or early 2025.” 

You may be noticing this uptick within your own business. If so, you’re likely wondering whether now is the time to implement a comprehensive travel and expense policy.

In this post, I’ll walk you through how to determine if a travel and expense policy is necessary. If you do choose to implement one, I’ll fill you in on the travel and expense policy best practices to keep in mind. 

RELATED:   5 Steps to a Comprehensive & Clear Business Travel Policy >>  

Travel and Expense Policy: A Requirement for Businesses?

The first thing to know is that businesses are not required by law to maintain or post a written travel and expense policy—this is true under federal law and, as of the time of writing, in all fifty states. However, when it comes to enforcing your policy, best practices dictate that you memorialize your rules within a written policy that employees and managers can refer to at any time. 

Identifying the Need for a Travel Expense Policy

Is it time to get the ball rolling on creating a formal travel expense policy for your small business? Here are the tell-tale signs that you shouldn’t wait any longer: 

Your business is expanding

Are you welcoming new members to your team? Are you expanding to new markets (or trying to get there)? Are you sending sales employees out on in-person calls or entertaining prospective clients? If so, your employees need to know the rules they’re expected to play by. Business expansion is a top reason to create written travel and expense policies. 

While new experiences are going to reveal questions as they unfold, you can anticipate a certain measure of risk and mitigate potential misunderstandings by creating a comprehensive policy beforehand. 

Your employees are asking for clarity

Are you constantly fielding questions about whether an expense will be reimbursed, whether an employee can attend an in-person conference, or whether a manager can fly business class? If so, you need a travel and expense policy. Everyone is happiest when boundaries are set, and a written policy does just that. 

Your travel and expense policy can be as detailed as you like and can lay out in no uncertain terms when in-person meetings should be prioritized, whether “luxury” travel will be eligible for reimbursement, and even whether your employees will be permitted to add on additional personal vacation time to their business travel. 

Your travel and expense policy will be unique to your business, and while it doesn’t have to be an immovable document without room for exceptions, it should at least exist if you’re getting questions about it. 

You want to avoid risks associated with employee travel

Travel and expense policies help your business mitigate risk in several ways. First, they help set behavioral expectations before travel takes place, which in turn protects your organization’s reputation. Many small business travel and expense policies incorporate rules about reimbursements for alcohol, permissible and impermissible forms of client entertainment, and more. 

To mitigate financial risk, you can cap per-day spending, set transportation and accommodation cost ceilings, and even require employees to work with a list of preferred vendors. You can (and should) require the submission of receipts and other records where possible. 

Travel and Expense Policy Best Practices

As discussed, the law doesn’t require you to maintain a written travel and expense policy. But whether or not you reduce your procedures to an organized document, you should be familiar with the legal considerations involved in creating and enforcing travel expense rules. Here are some key items to note: 

Failing to reimburse reasonable expenses may be illegal

You should apply travel and expense rules consistently to the extent possible, reimbursed expenses shouldn’t be considered taxable income for your employees .

RELATED:  Impaired Driving Accidents and Business Travel - Who Is Liable? >>

Developing a Bulletproof Small Business Travel Expense Policy: Expert Guidance

Developing a travel expense policy for your small business isn’t a task that your organization has to handle on its own. Axcet HR Solutions is a  certified professional employer organization  that understands safety, risk management, and human resources compliance for small businesses. 

Axcet believes that every company’s employee policies should be unique. Your rules (and how you enforce them) will differ based on your industry, location(s), culture, and other details. We’d love to walk you through your distinct needs together and help you develop a travel and expense policy that fits your business and its employees. 

With Axcet HR Solutions, you’ll find that there’s no end to the benefits a growing company can reap by working with a  PEO . Wondering if  outsourcing human resources  is the right call for you?  Reach out to our consultants today to learn more . 

Written by Kellie Rondon

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Zoom Doesn’t Cut It as Corporate Travelers Seek More Conference Networking

Matthew Parsons , Skift

January 17th, 2023 at 12:10 AM EST

A new report from Deloitte singles out the power of networking as the main reason for a resurgence in travel, but the truth is the pendulum is swinging wildly because companies are rediscovering the merits of travel for a range of purposes — or at least they are until expenses get reined back in.

Matthew Parsons

In-person events and conferences are set to drive corporate travel’s recovery throughout 2023, as employees look for more human connections.

That’s according to Deloitte, which has predicted industry gatherings will play a starring role in corporate travel’s “new normal” after last year’s remote workers took center stage .

Deloitte’s 2023 Travel Outlook, published Tuesday, suggests part of that is due to “inadequate conferencing software,” as businesses also revive travel programs due to Zoom fatigue .

Primary Reason

The report in particular notes that client acquisition and relationship building are not easily executed virtually, which is something Tata Consulting Services has picked up on as it ups spending on travel .

This year, events will have a larger role to play. In 2022, Deloitte’s research showed that just 25 percent of business travelers pointed to conferences, exhibitions and trade shows as their primary reason for travel.

Delta Air Lines noted that 96 percent of its corporate clients plan to spend more on travel this quarter than during the last, it revealed last week .

“Conferencing software has proven an inadequate substitute for the networking that goes on at industry events,” the report said. “Well-executed, marquee events should have a strong year and play a big role in corporate travel going forward. With less time spent in-office, the conference’s role in connecting people and creating face-to-face opportunities will likely become more critical.”

Training and client projects have been “somewhat replaced” by technology, Deloitte adds.

The Permanence of Laptop Lugging

So what of these “laptop luggers” who were picked out by Deloitte as a major theme at the start of 2022?

That trend will also continue into 2023, it seems. “About half of employed Americans can do their jobs remotely and the number of days they prefer to do so is on the rise as well, from 3.2 days per week in November 2021 to 3.9 days in November 2022,” states the report.

Deloitte also expects business travel spend to reach two-thirds of 2019 levels by the end of 2023, after more than doubling over the course of 2022.

But this year won’t be without challenges, with an overall “murky” outlook for leisure travel in 2023, due to consumer financial concerns and a desire to avoid peak travel dates.

Staffing shortages, technology issues and ongoing supply chain challenges will also prove problematic.

Deloitte has cited “expense-related curbing of trips” too as a barrier to recovery, because of those higher airfares. With Goldman Sachs reviewing its travel policy, according to reports , and Google already moving to business-critical only, a chain reaction of similar decisions made by other international organizations could pose the biggest threat yet.

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Tags: business travel , corporate travel , deloitte , delta air lines , goldman sachs , google , remote work , Zoom

Photo credit: Conferencing software has proven an inadequate substitute for the networking that goes on at industry events, argues Deloitte. SNCR GROUP / Pixabay

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Deloitte S&O Travel, Expense, Credit Card Policy

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Can anyone tell me what the travel and expense reimbursement policy looks like at Deloitte S&O?

Specifically - can we use our own credit cards or are we forced to use the company card? Meals - are there specific guidelines as to how much can be spend per meal? a daily rate? 'don't be crazy'? Flights - is there a threshold of flight time to get first/business class?

1) They want you to use their corporate American Express . It makes it easier to input expenses.If you use another credit card you can still expense it; however, you shouldn't make a habit of it. You can get the points off their corporate amex, but not as good as using like a SPG card. 2) "Within reason" - I'd say people average $70-80. 3) International flights. You can get them for domestic flights if its over 6.5 hours, which is rare unless you're going to Alaska or something. They have a bunch of status challenges that quickly get you up to platinum though, so you get upgraded a lot though.

Thanks! This is a bit disappointing.

LOL maybe you should just get a job that's pays you well if you care about points so much.

No way man. After over a decade in the Marine Corps a consultants salary is a welcome change (and slightly absurd). I just enjoy having those points earmarked for vacation where cash can be used for endless reasons. Never felt bad about spending $5-$ 10k worth of points. Where with cash I tend to second guess myself and prioritize other things (renovations, savings, etc.).

Similique blanditiis quis odit vel et repudiandae inventore alias. Quas sit repellendus aut quidem et sed distinctio. Consequatur nesciunt eaque est dolores.

Et accusamus est esse facilis. Eos quaerat consequuntur reprehenderit earum.

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The complete guide to corporate travel policies

Corporate travel policy (+ free template).

Start writing your own corporate travel policy with our comprehensive template

What’s inside our travel policy template.

• Introduction
• Travel booking process
• Expense categories
• Non-reimbursable purchases
• Expense reporting and reimbursement process
• Travel support, safety and duty of care

Section 1: Introduction

Section 2: travel booking process.

• How to book travel – What is your approved process, method and/or platform for booking business travel? If your company use a platform to enable travelers to book within policy , include the name of your approved booking platform. Otherwise, write out the name and contact details of the company or person they’re supposed to contact in order to request a booking.
• Approval process for senior management - the approval process for c suite and senior members of staff will likely differ from that of other employees. Senior management might require approval from an executive, and executives might require sign-off from other c suite members. All of this must be included in your policy.
• Use of loyalty programs – Many companies don’t allow travelers to collect points for their personal loyalty programs. But if you trust your travelers to do the right thing, you can allow this and include a line in your policy like “Employees may not choose more expensive options only to get loyalty points.”
• Leisure extensions – Sometimes business travelers want to extend their trip into the weekend, or use up some of their vacation days. You should include rules around leisure extensions (or “bleisure”), such as what cost difference is allowable for return flights. It's important to outline what expenses you will cover and what you consider "personal expenses" for "personal travel". Make clear that these are additional costs that do not fall within the ambit of business expenses under your travel policy.
• Traveling with non-employees - travel expenses related to travel with spouses, family members, pets or anyone outside of the company are not normally eligible for reimbursement. These situations can be subject to approval if they are accompanying staff members for business reasons such as attending a conference or for a networking event.

Section 3: Expense categories

Here’s the information to include in each expense category:.

• Approved tool or method for booking
• Preferred vendors (if any)
• Rules on whether or not business class is allowed, such as for flights over a certain duration, or flights taken by employees of a certain seniority level. Highlight whether travelers should go in economy class or business.
• How many days in advance international flights must be booked
• How many days in advance domestic travel must be booked

Accommodation

• Maximum nightly rates per city for hotel rooms
• Preferred vendors and negotiated rate details (if any)
• Rules on standard rooms and upgrades, for example standard rooms are required but room upgrades are allowed if offered at no additional charge
• Reimbursable hotel costs, such as parking
• Rules for booking Airbnb or apartment rentals

Rail travel

• Type of train ticket allowed, such as economy

Taxis and ride-sharing

• When taxis and ride-sharing is allowed, for example when public transportation isn’t viable
• Maximum amount per transaction

Rental and personal car

• Type of rental car class allowed, such as compact or mid-size
• The number of employees expected to share a rental car when traveling together
• How much is reimbursed per mile or kilometer

Conferences & events

• Expense reimbursement process for conference or event registration in cases where it was not pre-paid.
• Process for other conference or event related expenses such as business meals or anything not included in the registration cost.

Food, travel and entertainment

• Reimbursable amount, per breakfast
• Reimbursable amount, per lunch
• Reimbursable amount, per dinner
• Alternatively, a daily maximum or per diem
• Personal meal expenses throughout their trip
• Rules for business meals, such as who approves the amount
• Rules for client entertainment expenses, such as what is allowed

Personal telephone usage

• Cell phone bill amount or percentage that is reimbursable during the weeks that the employee travels. Clarify whether calls for personal reasons will be covered by your company.
• Whether or not personal phone damages or theft are reimbursable during business travel, and if so up to what amount?

Section 4: Non-reimbursable purchases

• In-flight purchases, not airfare
• Excess baggage fees
• Childcare, pet care, and pet boarding
• Costs for family members joining travelers on their trip
• Toiletries or clothing
• Airline club memberships
• Minibar purchases or bar bills
• Laundry or dry cleaning
• Parking fines or traffic violations
• Airline ticket change fees
• First-class rail transportation
• Premium, Luxury or Elite car rentals
• Movies, online entertainment or newspapers
• Spa and health club usage
• Flowers, sweets and confectionery
• Room service
• Additional beds or bedding
• Damage to personal vehicles
• Rental car company insurance

Section 5: Expense reporting and reimbursement process

• What tool to use for expensing
• What items do not need to be added in the expense tool, for example if a trip is booked with your approved booking tool
• Who to submit expense reports to
• What to include in reimbursement requests, such as original receipts
• Deadline for submitting reimbursement requests
• Typical processing time for receiving reimbursement

Section 6: Travel support, safety, and duty of care

• Tracking travelers’ whereabouts – Use this opportunity to let travelers’ know that when they book using your approved method or tool, their trip is tracked. In the event of an emergency, steps will be taken to evacuate them. If you don’t know where they are, you can’t help! Include the name of your approved tool, and what they should do to ensure their trip is accurately tracked if they must book outside of it for a valid reason.
• Travel support – In case of trip cancellations, changes, etc., who should your travelers call? Include contact details for your travel support provider, including phone numbers, email addresses and whatever applies. If there are multiple numbers based on region or language, include those as well.
• Support for emergency needs – In this sub-section, include your duty of care vendor (if you have one) and your travel insurance policy details. Also include the employee name or vendor name they should contact in the event of an emergency.

How to implement your travel policy

• Customize – Customize and finalize the travel policy template. Work with stakeholders to make all of the necessary edits and customizations to the policy; collect all details like travel insurance, nightly rates, etc.
• Automate – Update your automated travel policy. Create or update an automated travel policy so travelers and/or admins can book within policy all the time.
• Deploy – Roll out changes to employees. Depending on the size of your company, roll out your new policy document and automated policy to all employees or an initial subset.
• Listen – Collect feedback on the new policy. Get feedback from employees on the clarity of your travel policy, as well as the ease-of-use of your approved tools and automated policy.

How to improve corporate travel policy compliance

How to improve travel policy compliance with travelperk.

• Is your policy outdated? This could be down to changes within your organization or simply that your current policy isn’t being adhered to. Maybe it’s time to revisit and revamp your policy.
• Monitor your compliance issues. Use travel management software that monitors your policy compliance and use that data to help you understand the reasons behind the barriers you’re facing.
• Self-booking improves policy compliance. Your preferred booking tool plays a role here too. Make use of one that allows your team to book the business trip they want within your policy to avoid confusion and breach of policy.
• Choose an easy-to-use booking tool. Your employees aren’t going to want to use software that is difficult to use, offers little to no support, and has limited options.
• Build your travel expense policy into the booking tool. By doing this, you create an automatic system that allows or rejects different types of travel arrangements based on your business needs.

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6 guidelines to help you manage travel expenses on consulting projects.

In this article, and related podcast , we discuss a very important and rarely addressed topic – how to manage travel expenses during a consulting project. This is an important question to ponder over since mismanagement of travel expenses can, and usually will, be detrimental to your reputation within the firm and your consulting career.

Your project leader and other colleagues will contribute in meaningful ways to making decisions on which travel expenses are relevant and appropriate. But in the end it is you who bears full responsibility for the choices related to travel expenses.

Your choices must rest on a foundation of clarity and sensibility. No one should even think about questioning your expenses. Hence, gaining a clear-eyed perspective on how to manage travel expenses on consulting projects will help you prepare to succeed.

The post was inspired by a question from a Firmsconsulting reader, a Deloitte consultant in the United States. This Deloitte consultant wanted to know how to determine if travel expenses (e.g. bills related to a hotel stay, restaurants, taxi, etc.) during a consulting project are reasonable and appropriate. And he has given examples from his recent consulting project.

Example 1: A management consultant chooses a flight or hotel which allows him to collect reward points even though an equivalent alternative is much cheaper.

Example 2: A management consultant visits a luxury spa and charges it to the client. This charge is included in an aggregate bill so the client cannot see the itemized charge for the luxury spa.

Example 3: The engagement team stays at a five-star hotel even though the Deloitte consultant feels he does not need that lifestyle.

Example 4: The engagement team enjoys expensive dinners at a luxury hotel which are not necessary.

The Deloitte consultant expressed the following concern, “ This doesn’t seem to be in the client’s best interest. It appears to be unethical. How do you ensure these practices are curbed? And how does the junior consultant decide what is ethical or not in the above scenario and act accordingly in team settings?” .

That is a great set of questions to begin with. I will give you a framework and guidelines to analyze how you should manage travel expenses during a consulting project.

Managing travel expenses in my own career

Before I get into the framework and guidelines on how to manage travel expenses, I want to talk about two situations from my own career.

Serving a client: The first example is from the days when I was a management consultant. When I just joined the firm, this is a long time ago, we had recently finished a turnaround engagement for a major oil company. That oil company was about to lose its biggest client. And they had hired us to figure out a way to replace this revenue stream.

The project was very successful. The client was incredibly impressed with the work done.

But there was an issue with that project. A presentation was put up by the senior partner which covered feedback from the client. And one of the things the client said is that, while they would not hesitate to recommend us for our analytical skills, what they didn’t like is that they felt we were not cognizant of what they were going through.

The client disliked that the project team ran up expensive tubs at restaurants in the town where the client’s head office was located, knowing full well at the time that people were being retrenched. And this came from the CEO. This is CEO giving feedback to a major firm, us. Telling us he loves the work, but he did not think we handled travel expenses well. And while they are most likely going to use us again, it just leaves him with a bad feeling knowing that the travel expenses were abused.

Being a client: And another example involves Firmsconsulting. We once hired a team to do some significant media work for us. We flew them down and booked them in a hotel covering all their expenses, including setting a nice team dinner at a very prominent restaurant. And when we were doing the travel expenses later, we came across an expense statement for the drinks and charges they occurred going to a night club.

This situation still upsets me because we did not ask them to go to a night club. They chose to do it and they decided to bill us for it. We paid it, but never worked with them again and would never recommend them to anybody.

They lost a major client over a relatively minor expense. It was the principal of the issue. They contact us often for work but can never understand that trust has been broken.

Framework for managing travel expenses

These two incidents serve as a framing point for the structure I am going to give you to analyze this. When determining whether a behavior or travel expenses are appropriate you have to think about it from your perspective, from the firm’s perspective and from the client’s perspective. And you need to consider 3 elements: cost, perception and value.

Imagine a 3 by 3 matrix here. On one side you have got yourself, the firm and the client. On the other side you have got cost, perception and value.

Travel Expenses from Your Perspective

When managing travel expenses seek to consider six essential guiding principles:

• Don’t spend money on things you don’t need to get the job done.
• Don’t spend money on things you would not spend on by yourself.
• Make sure your choices are in sync with the client’s culture and situation.
• Make sure your actions look congruent with your overall profile.
• While it is important to save money for the client, also make sure your needs are met.
• Extravagant travel expenses should translate into at least equal value for the client.

These six guiding principles are not a formula. They do not represent the whole universe of “good management of travel expenses”. However, they will help guide your decision making on how best to manage travel expenses.

Six guiding principles to manage travel expenses

Let’s take a closer look at each guiding principle.

1. Don’t spend money on things you don’t need to get the job done

The most important rule to remember is only do things you need to do to get the job done.

For example, you do need to stay at a hotel. You have to sleep in a comfortable and safe place while you are working on the consulting project. But in most cases you don’t need to go to a luxury spa to be able to do your job.

Also, if you are doing something because it will not show up on an itemized bill, the mere fact that you are doing it because it won’t show up on the bill indicates that you know it is wrong. So don’t do things you know or assume to be wrong. It’s unethical.

So, to come back to this Deloitte consultant who asked a very important question, when deciding if travel expenses are reasonable consider whether you need it to get the job done.

2. Don’t spend money on things you would not spend on by yourself

You also should not do things you would not do if you were paying for it. You cannot do things just because a client is paying for it. That is just wrong.

3. Make sure your choices are in sync with the client’s culture and situation

That is where we come to the concept of perception. Be very circumspect about how you spend client’s money in light of a client’s culture (how the client behaves and thinks) and the client’s particular situation (e.g. turnaround).

Choose a hotel that a reasonable person will consider to be an appropriate selection for a particular client and client’s situation. For example, if a client is going through a turnaround, don’t book a five-star hotel. Also, if you are working for a client that is very reserved, everything you do that interfaces with them should be reserved as well.

Further, while from client’s perspective they always want to cut consulting costs, from the client’s perception level don’t do things that clash with their culture.

If you are doing things that put you out of sync with the client that is a problem. If you are, for example, going to serve a major financial services client who has a certain way of doing things, which happens to be staying in five-star hotels, and you instead stay in a two-star motel you will look out of sync. So you see, this cuts both ways.

However, you can get away with staying at a two-star motel if being frugal is just the way you are. There are stories of Marvin Bower who was very frugal. In fact, he would fly coach when everyone else was flying business class.   But you need to manage it and make the judgement call based on your particular situation.

You can charge a lot for your work, but do not create the impression you are abusing the expenses. In fact, that is my philosophy. Bill very high fees but charge reasonable expenses. Never ever charge low fees to a frugal client. They will not value you and it will hurt your firm in the long-term. Quality costs money.

4. Make sure your actions look congruent with your overall profile 

When it comes to costs, if you are not comfortable to charge the client for the finer things your project team selects, my view is that you are fine to say, “ You know what, I don’t think I want the most expensive thing ”.

It’s okay to do that. You don’t need to do what other people on the team are doing. But don’t make it look like you are better than anyone else. Just say, “ I don’t need this. It’s too much for me. So I will go with a cheaper option ”.

If you are someone who is frugal or just likes simpler things it is okay to go down that path versus doing what everyone else is doing. It is okay to order the cheapest item in a restaurant. Just because you go to an expensive restaurant does not mean you have to order an expensive dinner.

I have been in situations where I ordered the cheapest things because I knew the client was paying for it. And I did not wanted them to waste money.

I also had meetings with clients in Starbucks. I have met CEOs in Starbucks. That is not even a joke. I have always believed overhead is legal theft from shareholders and consulting expenses are one sliver of overhead.

If you have decided, on a personal basis, to not abuse the client’s finances, as long as it is consistent with the way you are, you will most likely not be treated badly by your project team.

However, if you generally like splurging on cupcakes and you drive a fancy German convertible, but when it comes to a client issue you say, “ Oh, this is wrong. I am not going to do it ”, your team may take it the wrong way.

They will notice a disconnect between who you are and what you’re doing. And some members of your project team may think you’re trying to make them look bad. You can be ethical without insulting your colleagues.

5. While it is important to save money for the client, also make sure your needs are met

If you ask a client how much you should spend, they will almost always tell you to spend as little as possible. As a result, if you make decisions based on what the client considers to be right, you will almost always undercut yourself.

So don’t ask a client how much to spend on a hotel or meals because they will likely give you the cheapest option. This is what clients do.

While you should try to save money for the client, you should also ensure you meet your needs. So I would say don’t cut costs to the bone so it is detrimental to you.

Building a great firm is expensive. You have to do things that are sustainable. If putting all consultants in B&Bs to save money forces them to leave, then it is not sustainable.

You have to treat consultants well and that means relatively higher expenses.

6. Extravagant travel expenses should translate into at least equal value for the client

If you are an awful consultant who is adding little value you should feel terrible about racking up extravagant travel expenses knowing full well you are doing a terrible job for the client. If you are a brilliant consultant who is adding enormous value to the client it is okay, in my opinion, to rack up extra travel expenses.

I will share my own experience here. Yes, I always tried to cut travel expenses for clients. But, there are certain things I never compromised on. And one of the things I never compromised on is my clothing.

I always laundered my clothing no matter at which hotel I was staying in and I often used expensive laundry options. And a client could always come back and say, “ Well, why didn’t Michael go with the cheapest laundry option? Isn’t it unethical? “.

It depends on whether the tiny amount of time I was saving was used to create better value for a client. Time is money for me. I will go with the best option because they accommodate my schedule. And I would go with that option even if I was paying for it myself.

What does it mean to add value?

Adding value to a client does not mean, “ I’m a McKinsey consultant. Therefore, I am adding value ”. The fact that you are there does not mean you are adding value. I always say, you know you are adding value when you feel you are doing things that will earn you a bonus. You add value when you do more than what is expected of you.

If you are just doing enough to complete the tasks assigned to you, earn your base salary and get promoted in the normal amount of time, that is really poor value and you should not splurge.

If you’re someone who likes the finer things in life make sure you are adding value to a client. And if you don’t feel you are adding value then keep your travel expenses to a minimum.

Travel expense decisions are often a judgment call

Whether incurring a specific travel expense is right or wrong is often a judgment call. It comes down to this. Do you feel you are adding value to the client or not? And do you feel you require a particular expense so you can add additional value?

And if you honestly believe, “ You know what, I can add this value to a client even if I don’t get these things”, then don’t go for these things. If you feel, however, that you need the finer things, only do it if you believe you are adding an additional value to a client.

And I know many of you will say, “ the l uxury experience during consulting travel  is a major perk of management consulting “. But this perk is a reward for bringing in talented people who will do extraordinary things.

You do something extraordinary and you get a perk. A mere fact you are there does not mean you are doing anything extraordinary. Yet, this is the way many consultants think. They think, “ Well, McKinsey hired me. Therefore, I deserve this perk .” That is wrong.

If you have extravagant taste and you get the job done a client may hate you for spending too much of their money but they will likely tolerate you while you are adding value. Like that example I gave you about the oil company.

Yet remember that the predominant majority of clients like frugal consultants who are good at their job. In fact, I have never seen a client saying, “ Oh, you are a consultant with simpler taste and, therefore, we will not hire you ”. Clients don’t care about your taste.

Some of the most brilliant consultants like George Stalk etc. look like they shopped in a trailer. Yet clients loved them.

If you get the job done and you care about client’s money like it was your own, they would most likely like you a lot more than if you were not frugal but was good at your job. And that is the thing you need to consider.

So the bottom line is if I was you I would try to not spend the client’s money unless it is necessary because ultimately that is all overhead and it increases the amount of value you have to add to a client.

Travel Expenses from the Consulting Firm’s Perspective

Now let’s look at this issue from the consulting firm’s perspective. The consulting firm needs to hire the smartest people. Its going to be very difficult to entice the smartest people to work for the consulting firm if those smart people can work somewhere else and get better perks than what the consulting firm can offer.

So in a truly competitive market where people are joining a consulting firm partially for the perks they are unlikely to join a consulting firm that doesn’t offer these perks.

And the weaker the brand of the consulting firm the more important the perks. When people are picking a consulting firm that has a weak brand and they only picking it because of salaries and perks, such consulting firm has no choice but to offer these perks.

People would say, “ McKinsey also offers these perks ”. Yes, that is true. But a lot of the perks McKinsey offers are not so great. For example, McKinsey salaries are not as inflated as people think. And McKinsey can get away with this because the brand is so strong.

So from a consulting firm’s perspective the position is, “ Even though we are incurring high travel expenses because we are bringing in the best people the value of the work will show through”.   The firm is basically looking at it from a cost / value perspective.

Travel Expenses from the Client’s Perspective

When you apply this competitive market position from recruiting to clients, the same thinking applies. If a consulting firm is offering these perks obviously the cost to the client goes up because all that overhead needs to be eaten up. If the cost to the client goes up, in the short-term the client may accept it. But in the long-term, unless you add enough value to that client, the client is going to say, “ You cost us a lot of money. You don’t add enough value. Therefore, we will not work with you anymore ”.

So now we come back to the value discussion. If the consulting firm is not adding enough value to justify the costs, the client is completely free to walk away. This is what it means to be in a competitive market. The client is not obligated to work with any particular consulting firm.

The client sees the fees. They understand that part of it is baked in travel expenses. If they are satisfied with the value versus cost trade-off, they say, “ This is the value the consultants brought. So we are ok with it. The value of the work is showing through ”.

From a client’s perspective it is also a cost / value trade-off.

Proper management of travel expenses on consulting projects requires good judgement. However, those six guidelines above will help you in determining whether travel expenses are appropriate.

Frugal consultants who add an enormous amount of value are respected. Extravagant consultants who add significant amount of value are usually tolerated, but are likely to be shoved aside at the first sign that value is starting to drop.

So the question is: do you want to be a consultant who is liked or tolerated assuming both add the same amount of value?

If you are spending a lot of money, at the first sign of trouble the client will likely shelve you. So ask yourself, whether the risk is worth it, after everything you have invested in building your career.

QUESTION(S) OF THE DAY:  Which key guiding principle do you find most helpful? Please share in the comments. Cheers, Kris

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