As the world continues to grapple with the realities of the global pandemic, which is spiking again, there is a quiet battle brewing in the executive ZOOM meetings of many organizations. The battle is going to be about what to do with Travel budgets that were allocated in 2020 to functional use but were used for other business purposes.
The combatants of this battle will be the Finance department versus functional departments including big spenders of travel including Marketing, Sales, Operations, and Human Resources. The IT departments are somewhere in the middle of that battle and preparing for their own battles related to digital security which might be the topic of a different blog on a different day.
What Happened to the Travel Budgets?
When the pandemic started to disrupt the world as we knew it in April, May and into June, something interesting happened to the travel budgets that had been allocated to various functions. For example, a typical Sales department allocates up to 20% of their budget for travel, lodging, and customer entertainment. But during the pandemic – when there was no travel – Sales leaders reallocated those budgets towards enhanced sales efforts including hiring more salespeople, sales enablement, and investing in other tools such as virtual Sales Training. And an interesting thing has happened on the way to Q3 earnings calls; sales revenues are up, and many companies are performing better now then they ever have before.
The same can be said for many other functions including Human Resources including talent development. For example, many organizations reinvested their travel budgets to scaling great virtual training to more employees who typically wouldn’t have had the opportunity to participate in intensive multi-day training sessions conducted at comfortable training centers. Like other functions, the Talent Development leaders used the travel budgets to invest in more training, which in turn has led to even stronger organizational performance.
The Battle Ahead
For the past 8 months, functional departments have for the most part been using their allocated budgets the way they see fit unencumbered by the hand of Finance. But, as we move forward, the finance departments are starting to question where the travel budgets got to, and are asking aloud, “If we aren’t traveling, and not spending those budgets, then we should be making more money.”
The Business Acumen Best Practices
From a pure business acumen perspective, it is a logical argument in the short run, but one that that loses merit in the long run. Every expense line item on the P&L should be considered an investment. The fact that travel budgets are being reallocated and are being used to disrupt the business model to produce better results is something the Finance teams need to understand, embrace, and trust.
- The ultimate purpose of the Sales team is to produce more revenue.
- The ultimate purpose of the Marketing team is to create awareness and develop leads.
- The ultimate purpose of Customer Service is to provide the best service to customers.
- The ultimate purpose of Human Resources is to acquire, train, and retain talent
If they are doing that by using budgets that were once allocated toward a different means to an end, that is great, and that is their prerogative.
I say everyone should embrace this phenomenon and challenge the status quo. What other “traditional” expenses on the P&L should be reallocated to more productive and efficient parts of the business?
Planning for 2021
As we execute the plan for Q4 2020 and plan for 2021, it is up to department leaders to plan and fight for the budgets they need to be successful. Scaling back or giving up budget simply because people aren’t going to be traveling as much is not going to be good for the business. Rather, every department lead should be asking for larger budgets and investments in the things that are going to drive and accelerate results.