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Dan Ruch

Letter: This Isn't About Corporate Travel, It's Behavioral Economics

Rocketrip CEO & Founder, Dan Ruch is a strong believer in healthy debate, especially when it comes to the value of Incentivized Behavioral Change in building win-win cultures. So naturally when BTN published an op-ed entitled The Case Against Gamification and Price-to-Beat Tools, he felt compelled to respond. Letter: This Isn't About Corporate Travel, It's Behavioral Economics appeared in BTN on Wednesday, June 21, 2017. Here's a bit more from Dan before diving into his response:

"We think it's critical to maintain an open mind about innovation and employee-centricity within our workplaces. I've made it my mission to combat the risk-averse mentality that exists in corporate travel, and I welcome your thoughts -- and participation -- on this journey."

BUSINESS TRAVEL NEWS
Letter: This Isn't About Corporate Travel, It's Behavioral Economics
By Dan Ruch
June 21, 2017

An Open Letter to Alan Tyson:

Dear Alan,

I read your op-ed, The Case Against Gamification & Price-to-Beat Tools, with interest on Friday. Given my role as CEO & founder of Rocketrip, I felt compelled to respond publicly to shed light on the reality of incentivized behavioral change in practice—based on our experience working with many different types of companies, from midmarket businesses to the Fortune 500.

Overall, the views you shared reflect the risk-averse mentality that exists in the corporate travel industry at large and, generally speaking, stifles innovation. By dwelling on the assumed risks, you close your eyes to the larger opportunity. By assuming the worst in our traveling workforce, you miss the point of employer-employee cooperation and the value that can be created through employee-centricity in the workforce. My comments to excerpts from your op-ed are below, and I'd welcome a conversation to discuss further if you're interested. You can reach me at dan@rocketrip.com.

Tyson: "First off, paying employees to save money on business travel can be counterproductive. Unnecessary trips are a substantial source of wasted travel spend. By incentivizing itinerary savings, you incentivize taking trips whether they are needed or not, so long as the employee travels under budget."

From a practical standpoint, products such as Rocketrip include technological solutions and workflow gates that prevent unwise or unwanted behavior. Technology can solve for and prevent virtually any kind of undesirable behavior from happening in the first place. But more important, we need to trust that our employees are thoughtful, hardworking, dedicated individuals who want to do right by the organization and will prioritize accordingly. If an organization does not believe in its people, it's not an appropriate environment for an incentive-based approach to employee-centricity. I'd stipulate that such an organization has much broader issues to contemplate than whether or not incentivized behavioral change makes sense for them.

Tyson: "Also, it promotes spending time on travel research to the detriment of core activities. An employee who is paid $50 per hour shouldn't spend two hours to find an additional $25 airline discount. HR works hard to optimize the motivational environment and understands that incentives often have two edges."

No, it doesn't. And I'm confident in speaking for all others in our category focused on incentivized behavioral change, who believe what we believe: that by rewarding employees for extraordinary behavior, employers realize a far greater outcome (both financially and also culturally) than company policy is capable of on its own. Specifically, Rocketrip's integrations with the leading online booking tools (Concur, et al) mean that the only change in behavior is the recalibration of an employee's decision criteria away from loyalty status and convenience and toward valuing cost as a primary consideration. It's a subtle shift in mind-set with a major payoff. Rocketrip does not promote searching to the ends of the Internet for cheaper options. In fact, we by and large only work with larger enterprises that run mature, well-managed travel programs, and thus our program operates within the confines of the company's existing travel management company and OBT.

Tyson: "While rewards-based programs can undercut their purpose, they also have deeper problems. Essentially, they condition employees to view their obligations transactionally. An employee might think, "If I comply with policy, what do I get for it?" Rewards are specific, material, personal and immediate. Pats on the back just can't compete. The motivational culture of a company—best founded on pride, responsibility, recognition and respect—devolves into a laboratory environment in which rats press buttons to earn food pellets. Is this too harsh a comparison?"

Why do the most successful, progressive, and human-centric organizations still have sales teams that earn commissions? Why do employees earn bonuses? Isn't that also transactional? Why not hire sales reps and give them a strong pat on the back and say, "Go sell, sell, sell!" Financial incentives are likely the most powerful, proven and universally successful motivator of behavior. Financial incentives are not antithetical to a strong corporate culture. They're highly aligned with a corporate model that puts employees first by embracing autonomy, empowerment and choice. It just so happens that corporate travel is a suboptimized equation. Incentives are the optimization.

Additionally, it's important to clear up a misunderstanding regarding the fundamental purpose of incentives for changing behavior. "If I comply with policy, what do I get for it?" You get to keep your job. Policy, along with any set of "rules" (no smoking, no trespassing, etc.), are a set of conditions designed to enforce certain types of behavior, with clear consequences for noncompliance. Incentives are not designed to promote policy compliance. Incentives are designed to promote extraordinary behavior—that neither policies nor occupational obligation are designed to control. One could also argue that poorly defined consequences contribute to the high rates of noncompliance with some corporate travel policies.

Tyson: "If an employee should get something extra for saving money on a trip, what does that say about the organization's underlying expectation? That employees don't need to care about wasting company resources unless there's something in it for them? That employees aren't even capable of pursuing purposes beyond their narrowest personal interests? This kind of cynicism by an organization toward its workforce puts a low ceiling on that organization's potential. People live down—as well as up—to expectations."

I have repurposed your words here with very slight modifications to illustrate a point: If an employee should earn a year-end bonus for doing a great job in their role, what does that say about the organization's underlying expectation? That employees don't need to care about doing a great job in their role unless there's something in it for them? That employees aren't even capable of pursuing purposes beyond their narrowest personal interests?

This isn't about corporate travel. It's about applied behavioral economics and the predisposition of human beings to optimize for their own comfort and convenience, within the limits of a policy or any other construct. If we want to change that equation, we have to be willing to offset the cost of what we're asking an employee to give up. That is where incentives work beautifully. If a policy allows for business class, it's a safe bet most wouldn't volunteer to fly coach. It's not expected human behavior to do so. And a change in behavior cannot be forced without an untenable amount of friction being introduced. But human behavior can be motivated, in a way that all constituents—the company and the employees themselves—have something to gain.

Specifically regarding wasting company resources: If flying business class falls under the definition of wasting company resources, why would a company allow business class as part of policy? An incentive applied on top of a company's policy cannot be used to prevent "wasteful" spending. This is a critical concept in understanding the true power of incentivized behavioral change as it applies to corporate travel. There is nothing "wasteful" or wrong about an employee who operates in compliance with policy. There is simply room for optimization. There is room to empower an employee to thoughtfully consider what matters more. Given the choice, some employees would rather fly coach instead of business class and earn a reward that can be redeemed to feed their family, or be donated to charity, or used to remodel their home...This is what makes incentivized behavioral change special. It engages employees in a personal decision about what matters to them.

Tyson: "It's like what happens when parents pay children for good grades in school. This, intentional or not, sends children the message that you regard curiosity, the desire to learn, and self-respect to be insufficient motivators. Effectively, you are telling the child that the A is all that matters. Mastering course material is just a means to a financial end that the child could perhaps more easily accomplish by mowing the neighbor's lawn."

Many parents provide incentives to their children to drive certain behaviors (dessert if you read a chapter of a book, an extra hour before bedtime if you eat your vegetables ...). Providing a flexible construct that lets a child decide what matters to them is a powerful learning experience. It is similar to empowering employees with the freedom to make choices based on a personal set of priorities that are within certain guidelines and expectations.

Let's look toward the future of our industry with a positive mind-set and be a bit more open minded toward innovative concepts that can change our future, for the better.

All Tags: Dan Ruch, Behavioral Economics

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