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BOARDROOM GUIDE - Business Aviation Leverages Executive Value

Effective Board policies regarding the use of Business Aviation assure that shareholders receive value for salaries and benefits paid to executives. Jack Olcott posits that using time effectively reflects good governance.

Jack Olcott   |   1st November 2010
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Possibly the world’s most recognized advocate, if not expert on the value of Business Aviation,...
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Business Aviation Leverages Executive Value Effective

Board policies regarding the use of Business Aviation assure that shareholders receive value for salaries and benefits paid to executives. Jack Olcott posits that using time effectively reflects good governance.

The CEO of a major company expressed absolutely no reservations about insisting that his secretary drop whatever she was doing in order to run an errand for him- even when the request was as personal as retrieving business papers that he absent-mindedly left in his parked car. “Considering my salary-” he insisted- “it would be unfair to shareholders for me to spend my time doing what she can do.”

While the boss’ argument may reflect a degree of political insensitivity- nobody doubts that corporations pay higher wages to executives than they do to executive assistants. Controversy- however- surrounds measuring what is the true value of executive time to shareholders.

For the company to make a profit- an employee’s worth must exceed by some multiple what he or she is paid. Various formulae exist- and multiples typically range from 1.5 to as high as 6.0. But there is little agreement on what multiple is appropriate.

Furthermore- employees must do more than simply show up for work- regardless of their pay scale. They must produce value for the company.

An employee’s value to shareholders therefore depends primarily on what they do with their time on the job. Time wasted or spent in unproductive activities is time lost- never to be recovered. Making up for lost time is- at best- wishful thinking.

Business Aviation benefits companies by providing timely and productive transportation. Shareholders- politicians and media may argue over executive pay- but they agree that an hour is a universally accepted measurement of time. An hour is an hour is an hour- regardless of time or place.

Thus it is significant that a study of 1-300 business missions conducted by 11 companies over a fourmonth period revealed that travel on the companies’ business aircraft required considerably less time than the same itineraries using scheduled airlines.

The 11 users of business jets each tracked their travel time from the passenger’s initial departure point (e.g.- office or home) to their ultimate destination (client’s office- conference location- etc.)- using an interactive software program called Travel$ense.

Travel$ense- developed by the National Business Aviation Association- links interactively with a computerized airline reservation system to find the most efficient airline connection between the city-pairs served by scheduled service. The program also tracks related ground travel- comparing the overall results with the time required to complete the same trip using the company aircraft.

Since business aircraft have access to about 10 times the airports with scheduled airline service- and about 100 times the city pairs with convenient schedules- business aircraft offer travel efficiency unmatched by the airlines.

Compared with the same business missions had they been flown via scheduled airlines- the 11 companies spent a combined 5-939 less man-hours traveling to accomplish identical visits during the four month study period (or an average 539.9 man-hours saved each). Because many trips could be conducted in fewer total days out of the office- the companies spent 1-530 fewer man-days on the road (average 139.1 man-days each) and over 2-600 fewer mannights away from home (average 236.4 each).

(Note: Three passengers engaged in a trip that saved one day travel time resulted in three man-days saved.)

Hours not spent traveling are hours executives can use in more productive pursuits on behalf of shareholders. Furthermore- when travel is less time-consuming- executives are less likely to avoid visits to outlying markets and plant locations. Efficient travel reflects good policy.

Business Aviation provides shareholders with more value than simply saving time for their passengers. Because business aircraft are in reality offices that move- a company jet enables employees to use their travel time productively. Increasingly passengers on company aircraft have access to email and even broadband connectivity. The environment is private- highly secure and conducive to work. Company confidential conversations can be held without fear that the stranger in the next seat will overhear sensitive information. Thus travel time becomes productive time.

Several studies illustrate that the cabin of a business aircraft enables its occupants to be more productive than they would be on an airline- even in first class. In fact- executives report that they are more productive in a business aircraft than in their office back at headquarters- since no one interrupts you at Flight Level 410.

Economists rarely agree on many subjects - there is one exception though. Uniformly- they recognize increased productivity as the most effective way to advance the value of a company and thus benefit shareholders.

Good governance by Directors demands that companies have enlightened policies toward the evaluation and use of Business Aviation.

Email feedback to editorial@avbuyer.com

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