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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 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 significantly 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 management consulting 2

 Travel Expenses from Your Perspective

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

  1. Don’t spend money on things you don’t need to get the job done.
  2. Don’t spend money on things you would not spend on by yourself.
  3. Make sure your choices are in sync with the client’s culture and situation.
  4. Make sure your actions look congruent with your overall profile.
  5. While it is important to save money for the client, also make sure your needs are met.
  6. 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.

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.

Yet, and this is very important, if you are 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 expensive nail polish, 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.

travel expenses consulting

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 judgement 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 luxury 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, “This is the cost of doing, plus quite high travel expenses to bring in the best people. 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.

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Comments

8 responses to Managing travel expenses on consulting projects

  1. Hi Jojo,

    Noted. if you disagree with your peers on ethics, you really only have a few choices:

    1 – Stay at the firm – accept things
    2 – Stay at the firm – change things
    2 – Leave the firm

    There is nothing else you can do. Staying and accepting things is called an ethical breach of need. Maybe due to financial reasons you cannot change careers and need the job, so you elect to accept things.

    Michael

  2. Thanks for your response Michael. I absolutely agree with you. Yet, I currently live in an environment where ethics debates (billing ethics, specifically) are consistently and vehemently challenged by my peers. You have been my go to authority on ethics for some time now so I tend to pose the toughest questions I come across/expect to come across, to you. Thanks again for doing this.

  3. Hi Jojo,

    Your final question is answered in full detail here: https://www.firmsconsulting.com/quarterly/ethics-shaped-by-social-network/

    For the others, clearly some travel is booked by consultants as they change diaries, miss flights etc. Not everything is a group booking.

    Yes, billing a spa session to a client is fine provided you took the client along. That should be the only time to do it, because image matters more than reality.

    Yes, you could make that argument, but can you? Because that is really hard to prove. And you had better add a LOT of value and prepare to be hated when the client finds out. Worse, imagine if the media found out? Is the added value you brought more important than the risk of damaging the firm’s name?

    Michael

  4. Amazing analogy Femi. I could not have said it better and you raise some even better points. Especially the point about a higher calling.

    Michael

  5. Interesting read Michael. For some reason, I assumed that travel tickets/hotel bookings etc were handled by a travel department separate from the core consulting practice. In terms of other expenses (food, spa’s etc), is it done at a group level or an individual level? As in, let’s say the consultants decided to splurge on something as a group; do individual consultants have room to choose if they’d like to bill it to the client?

    Additionally, building off Femi’s point, are there any circumstances (personal beliefs aside) where billing a spa session to a client is ethical? If yes, would the client’s reaction to it change the ethics of the issue? For example, if the client thought it was ok, would that influence whether my actions were ethical? Also, just like you said that doing laundry at expensive places saves you time which you can then use to add value, could someone not make the argument that going to a spa gets them relaxed faster and then they use the time saved to add commensurate value to the client?

    What I am trying to get at is this. If billing something to a client is entirely subjective according to an individual’s beliefs, how then do we determine if something being done in a group setting is ethical?

    Full Disclosure: I’ve never been to a spa so can’t speak to the level of “recharging your batteries” it provides Vis a Vis time.

  6. Hi Michael,

    Thanks for such beautiful piece. This might appear a minor issue but it actually sits at the root of the consulting profession. Of course, I am speaking as an outsider to the profession and I am borrowing from my own background. I am also borrowing from what I have read of Marvin Bower and what I have heard and read from you.

    Professionals should not have any problems being professional (i.e. abiding by set rules and pre-determined modes of practice) in everything that they do. I like the first question Hannah asked and I like the answer you gave as well. Apparently, these issues are communicated during training but they are short-lived in practice. Are firms aware that the trainings on ethics and values have a short half-life? If they do, could it be that even the firms do not really care about ethical conduct beyond paying lip service to the subject? If so, could it be that something is wrong with even the gate-keeping practices in consulting – a gate-keeping practice that invests heavily in determining a candidate’s ability to solve cases and not a candidate’s willingness to stick to laid down standards of practice? I ask these questions because I once read an account where Marvin Bower suggested that consultants and the firms they serve must hold themselves to the same high standards that physicians hold themselves. Of course, Marvin referred to the traditional mode of medical practice.

    In addition, I like the second component of the framework i.e. Don’t spend money on things you would not spend on by yourself. However, I believe consultants should rise to a higher calling. Even if you owned a chain of 5-star hotels and you have slept in one every day of your life, the situation is different here. In this case, you have a professional relationship with a client, a client who is in trouble. Just as doctors are expected to empathize with patients, consultants must hold themselves to such standards. While in medical school, a professor once failed a medical student because she dressed “flamboyantly.” She came to the clinical exam decked in lip sticks, heavy make-up, beautiful attires fit for an expensive ball, jewelry etc. The professor’s argument was that physicians “ought to be seen” as empathizing with their patients. Before you is a patient in “trouble,” and the least you can do is to adorn a toga of sobriety. Hence, if you had a wardrobe full of expensive jewelry and colorful make-ups, the clinic was not where those should be expressed.

    In like manner, a consultant with a high taste must realize that before them is a client in trouble, a client in dire straits. Else, why would the CEO be spending so much money and sacrificing precious time to listen to presentations and to read reports of analyses. Even though he is a rich “patient” and can probably afford the high fees, empathy and trust are core pillars of any profession and those attributes must be preserved at all times. A true professional will do the right thing both when it is convenient and when it is not convenient. Anyone who struggles to realize this or to agree with this, should probably be in another profession.

    Femi

  7. Thanks Hannah.

    Thoughtful comments as usual.

    1 – Firms have very detailed guidelines. I think the Deloitte S&O consultant is asking what to do to remember them better and internalize them. Most consultants forget the guidelines very quickly.

    2 – Agreed, frugality is great but only when it does not obstruct the ability to do one’s job.

    3 – I agree with this. Expense what you are paid to do. That is good advice and simple to follow.

    4 – I agree with this as well. Though, depending on the EM, he/she may not react as well. But you should still do it.

    Michael

  8. Hi Michael,

    Very interesting articles:
    1. It’s quite surprising to know that firms don’t have rules for these expenses. It’s such an important part of their culture and image, shouldn’t it be included in the training?

    2. It’s also important to know that while being frugal is great, one should not put oneself in situations where he/she can not best serve the client. I’m very frugal even when there’s money available (for example, with reagents in the lab) so I should learn not to make myself suffer.

    3. About the questions about what to do, your article broke it down into simple questions to ask oneself. If I did not read the article, I would have asked myself: “is this what the client is paying me for?” The client pays you to get to their site (travel fee), to stay (hotel fee) and to eat (restaurant fee). Others are perks (clubs, spas etc.) that they should not be billed. And if you are not sure then most likely it should not be billed.

    4. What do you do if you see that your team lead by the engagement manager (EM) engages in extravagant activities that could compromise the firm’s image? You could keep silent but it’s in the client’s and the firm’s interests plus it’s plain unethical. I would bring it up nicely and indirectly with the EM, what do you think?

    Great article as always, thanks Michael.

    Best,

    Hannah

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