I am wandering around the grounds of Cameron House, a luxury hotel on the banks of Loch Lomond. The hotel has one of Scotland’s more impressive collections of exotic trees, but it isn’t the foliage that catches my eye. Just off the path is a set of medieval-style stocks. A damp piece of A4 with the words TEAM D — WARRIORS lies on the muddy ground nearby. You don’t need to be much of a detective to work out that a team building event has passed this way.
It’s a rather forlorn sight. If I’d have been in the mood to Twitter there in the trees, I’d have taken a photograph of those deserted stocks and captioned it: ‘The End of Corporate Team Building’, or even ‘How Business Learned to Stop Having Fun and Stayed at its Desk Instead’. The chances of seeing a live team building event in the grounds of a luxury hotel in 2009 are remote indeed.
But as I wander to the front of the hotel there is a surprise. On the damp flagstones is a shiny new Lotus. Not any new Lotus: this is the not-yet-unveiled Lotus Evora, £50,000-worth of shiny testosterone on wheels. More Evoras creep up the drive. Mechanics, marketing executives and PRs stand guard, holding clipboards, talking intensely into phones. I ask a concierge what’s going on. “Car launch, sir. They’re here,” he says, failing to keep a sparkle out of his eye, “for two weeks”. Time for a new tweet: ‘Luxurious Corporate Events Not Dead After All Shock’.
Later, I catch up with Tamara Kobiolke, Cameron House’s director of sales and marketing. She arrived at the hotel from Sydney in February. Scotland in February is daunting enough for any Australian; but Tamara had more to worry her than the weather and the threat of Seasonal Affective Disorder. The hotel’s owner, De Vere, has spent £40m transforming it from a cutesy, faded castle of the old school to a chic retreat with a championship golf course and luxury spa. The restaurant, the first outside his Edinburgh base, is run by starred chef Martin Wishart. Corporate custom is going to be crucial for Cameron House. But by February, the financial climate was bleaker than the dampest, darkest Scottish winter day: corporate business had come to a more-or-less complete standstill throughout the global hotel industry.
So Kobiolke is pretty chuffed to have Lotus here. Car launches are the last bastion of marketing extravagance: the rule has been, the longer the jaunt, the plusher the hotels, the more correspondents you can fly in Club Class from more corners of the globe, the more confident your brand will appear. But then the automotive sector has been hit harder, if anything, than hotels. This turns out to be a top-of-the-range silver lining for Kobiolke. You can’t test drive a car by video conference. But you can choose where you test drive it. “For the first time in 25 years, they chose the UK,” she says. “And they chose us”. The weather, she notes, was lovely.
Hotel marketing professionals such as Tamara can deal with the financial pressures their corporate clients are under — even if those pressures are unlike anything the corporate hospitality industry, which barely existed in previous recessions and certainly didn’t at the time of the Wall Street Crash, has ever experienced. They shave rates, they trade occupancy for yield — they deal. They can have a dialogue with procurement, present their business case with central purchasing. But there’s one thing they can’t talk to or negotiate with: Symbolism.
Symbolism is strangling corporate hospitality and travel. Companies that can afford to send their executives on away days and training sessions out of the office don’t because of symbolism. MDs and FDs who believe from empirical evidence that face to face contact and bonding with clients and staff is better for business and profits still opt to stay at home — because of symbolism.
Symbolism is a number of things. It’s a picture in a paper of bankers in tuxedos enjoying Champagne and fat cigars at a corporate shindig. It’s a furious editorial in that newspaper asking how these heartless wretches can justify their indulgence when their actions have put millions out of work. It’s a politician standing up at a press conference demanding that the executives on the other end of ‘bail-outs’ produce receipts for every taxi, every lunch, every coffee. (Note: politicians in Britain have been a little more than circumspect in this regard given their own difficulties over expenses). Symbolism is a mood, a zeitgeist, an uneasy feeling that, in these grim times, anything that looks remotely like fun, a perk or what Americans call a ‘boondoggle’ just looks bad. Very bad.
A year ago, we witnessed the symbolic moment that came to define the debate about corporate entertainment. Top performing agents from the insurance giant AIG were reported to be attending a conference at a luxury spa and golf retreat in California.
It was the type of event that thousands of companies have organised thousands of times to bring their employees and associates together to talk, discuss strategy and bond. The difference was that AIG had just negotiated a bail-out from the Federal Reserve that would eventually total over £182bn. The £267,000 reportedly spent on the California event was very small beer in comparison: but this was small beer thrown in the face of the taxpayer.
More stories of corporate lavishness followed. This summer, executives from the Royal Bank of Scotland — now 70 per cent owned by the British taxpayer — were exposed by a Sunday paper for hiring a hospitality tent at Wimbledon.
It didn’t matter how much the companies involved might argue that these were long-standing bookings that would be more expensive to cancel; or that rewarding top performing staff and loyal clients is more important than ever in this climate. It just looked bad. The symbolism was all wrong. And it’s partly because of symbolism that the very existence of some of the world’s best-known airlines and hotels, and the millions of subsidiary companies and jobs that depend on them, is under threat. There was already a threat to business travel, even in the good times: from the environmental lobby, from the increased sophistication of video conferencing, from cost-benefit analysts demanding to know the ROI (return on investment) from that trip, awards do or coaching session. Now that threat is deadly.
The multi-billion dollar industry that depends on businesspeople doing business face to face is fighting back. Before we look at those efforts, however, let’s declare an interest — one that will already be perfectly obvious to most readers. British Airways is one of the companies that most needs to see a change in the language and the symbolism surrounding corporate travel. This magazine was designed for European business travellers, the very people whose travel budgets are now being slashed, who have to justify every trip, every meeting. And although business:life has always been independent in spirit, not a corporate mouthpiece, this article is unashamedly partisan. Because business:life has always been a celebration of business travel, the people,
the places and the culture it represents. It’s right to put the case for the readers, for business and, of course, for BA — especially at a time when so many special interest groups are fighting against it.
So there’s the subjective declaration of interest. What follows are facts — the objective evidence that doing business face to face, whatever that means in terms of the time spent on airplanes and in hotel rooms, repays that investment many times over.
Harvard Business Review Analytic Services has just conducted a global survey of 2,211 businesspeople. Most participants (70 per cent) are executives in companies that operate in multiple countries; more than two-thirds (68 per cent) claimed they make their own decisions to travel.
The purpose was to examine how valuable doing business face to face is compared to the growing array of hi-tech alternatives. They found that 79 per cent view ‘in-person meetings’ as a highly effective way to meet new clients to sell business. Eighty-seven per cent agreed that such face to face meetings are essential for ‘sealing the deal,’ and nearly all (95 per cent) agreed that such meetings are key to success in building long-term relationships.
And they are feeling the pain as corporate travel budgets are savaged. More than two-thirds (69 per cent) reported a reduction in their travel budgets over the last six months. Does that matter? Yes. More than half (52 per cent) said restrictions on the numbers of flights they take for business would hurt their business.
Across the board, face to face meetings were seen as the most effective method for conducting business with key stakeholders, compared with videoconferences, teleconferences, and webinars. There’s a clear pattern. However useful electronic means of contact are, there’s a gap in understanding. That’s especially true about meetings between businesspeople from different nations and cultural backgrounds: 86 per cent agree that in-person meetings are helpful in such situations. But the scores are just as high for face-to-face meetings to negotiate important contracts (82 per cent), interview senior staff for key positions (81 per cent) and understand and listen to important customers (69 per cent).
What of the picture in Europe as well as the US? In an exclusive survey for this magazine, Hilton Hotels Corporation (through International Marketing Research) looked at the impact of reduced business travel by talking to 600 executives from France, Germany, the UK as well as the US.
Again, almost 50 per cent of respondents had seen a change in their companies’ travel policies over the past 12 months. They range from a reduction in the number of business trips (30 per cent of total mentions of those respondents who had witnessed a change), more use of technology as a substitute for travel (30 per cent), fewer external meetings (22 per cent). A further 17 per cent had seen company events cancelled. As for the class of business travel, 23 per cent had seen controls on the class of business travel.
In a time of low business morale, these cuts appear to be making life worse.
Of the Hilton respondents who witnessed a decrease in external meetings, 53 per cent reported a decline in staff morale and 30 per cent believe that business performance has suffered — fewer than the Harvard study, but still a significant figure at a time when business performance is facing so many other external pressures.
Why do fewer opportunities to meet lead to a less effective business performance? The Hilton sample arrived at strikingly similar conclusions to the Harvard study: 81 per cent said that face to face meetings increase business productivity and results, while almost two-thirds felt that overreliance on technology can reduce business efficiency — almost 50 per cent believed that video conferencing and web-based meetings are no substitute for face to face meetings.
The Hilton survey suggests that European businesspeople are even more committed to travel and meetings than their US counterparts. Ninety per cent of those in Germany and France said that crucial business relationships are not possible without meeting in person — compared to 75 per cent in the US (83 per cent in the UK).
We can only speculate what cultural, geographic or social factors lie behind those scores. Or is there another, more topical factor? For in the US, the debate about business travel and rewards has reached a much higher pitch than elsewhere.
In February this year, a remarkable advertisement appeared in The New York Times. In it, John Stumpf, the chairman of Wells Fargo, rounded on those critics in the media who had criticised his bank for planning an annual ‘employee recognition event’ in Las Vegas. The bank was forced to cancel the booking. “Who loses besides our team members?” Stumpf demanded. “The workers who depend on our business. The hospitality industry. Housekeepers. Restaurant servers. The airlines.”
“The problem,” he went on, “is many media stories on this subject have been deliberately misleading. These one-sided stories lead you to believe every employee recognition event is a junket, a boondoggle, a waste, or that it’s for highly-paid executives. Nonsense!
“For many [of his employees] it’s the only time in their lives that they’re publicly recognised and thanked for a job well done. This recognition energises them. It inspires them.”
Taking his lead, US travel and hotel bosses mounted a campaign, centred on the website Meetings Mean Business, to change the ‘mood music’ coming from Washington and the media. President Obama met hotel leaders and pledged government money to help the industry. The rhetorical ground shifted: but no one is kidding themselves that the all-clear has been sounded and companies can return to the boondoggle days.
The travel and hospitality industry leaders I spoke to in Europe were wary about running a similar campaign. “It could be counterproductive. We don’t want to be accused of special pleading,” said one. “Or as if we’re looking for our own bail-outs.”
Instead, companies are looking for innovative means of getting business flying
and using hotels again. British Airways took perhaps the most high-profile step in this direction with its offer to smaller companies (SMEs) to apply for free business class flights, a move the Daily Mail heralded as “flying the flag
to help the British economy”. “British Airways is offering free flights to business travellers,” ran the headline on its comment page. “Congratulations to BA on an imaginative initiative to help pull companies through the recession.”
This month, BA is offering a similar deal to transatlantic business flyers.
Meanwhile, the hearts and minds campaign gathers pace. In researching this article, I heard plenty of anecdotal evidence that doing business face to face
is vital; and that business relationships will continue to suffer if clients and customer meetings don’t go ahead. Now, with the publication of these surveys, the debate moves into the academic and empirical sphere. To that end, the Hilton commissioned a report from Dr Richard Arvey PhD, head of the department of management and organisation at National University of Singapore called 'Why Face-to-Face Business Meetings Matter'.
Arvey is firmly in the coexistence school of thought that argues for a combination of electronic means of communication and face to face contact. The two, he argues, have distinct functions: conference calls or emails are a good option when companies want to convey information, but when a decision or response isn’t demanded: “under conditions of low time pressure or urgency, when decisions are relatively less important, when consensus is not necessary a requirement, and when the communication is mainly about providing information, computer mediated modalities represents a more appropriate communication choice.”
Face to face meetings are more effective when “wide consensus and persuasion
is required”, or when there is “a range of complex tasks or decisions on the agenda”.
“It is my belief,” he concludes, “that eliminating face-to-face meetings would be a mistake for businesses because of the variety of positive psychological as well as general business outcomes that meetings can offer corporations.”
Back on Loch Lomond, Tamara Kobiolke believes that businesses are looking for “more cerebral, less social” events rather than riotous times with paintball guns. She isn’t expecting the medieval stocks to be put to much use in the months to come — though you can’t help thinking that if any passing Scottish bankers volunteered for the rotten fruit treatment they would draw a good crowd.
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