Counting The Costs, and Benefits, for Business Continuity From The Perspective of a Veteran Deployment Housing Warrior

Who knew it could cost $1,000 per person per day just to house critical personnel near their backup site in the event of a category 2 hurricane?  But that’s exactly what happened to one of the largest banks in the U.S. when they had to deploy their Gulf Coast personnel in anticipation of the landfall of Hurricanes Gustav and Ike in 2008 before they became our client. As business continuity professionals the first rule of reality is that at no other time will a company hemorrhage cash more than during a business interruption and/or unscheduled deployment.

per-dayTake, for example, our friends at the bank…

Pre-hurricane facts:

  • Gustav and Ike were large-scale events with significant advance warning.
  • The bank needed 200 rooms.

The bank’s entire deployment housing plan:

  • Their internal travel department would negotiate with each individual hotel at the time of a crisis.

How it actually went down:

  • They were still trying to secure group blocks of rooms when responders were already on the road.
  • They scrambled to collect critical information regarding responders’ detailed needs because they hadn’t gathered it in advance.  And again, responders were already on the road.
  • Since the travel function was outsourced to a travel agency rather than handled by a deployment housing specialist or internal folks at the bank, agents didn’t work the 24/7 schedule that the deployments demanded.
  • They signed contracts on the fly (i.e., at the last minute), which made it impossible to negotiate the most advantageous contractual terms and very difficult to find someone with proper signing authority within the structure of this large company.  Since they couldn’t move fast enough, they lost some of the rooms it had taken them so long to secure.
  • Once onsite, they had myriad issues such as hotel shuttle service (limited availability), catered meals (cost, accuracy, service, quality), pets (responders bringing them but hotels not allowing them) and simple human behavior (people bouncing from hotel to hotel to be with friends, enable carpooling, and – my favorite – “to save the bank money.”)
  • Invoices were a nightmare, as they tried to retrace the steps of 200 people and haggle with hotels to eventually agree upon amounts owed.
  • They had 12 people working full-time for 5 weeks on nothing but these 2 deployments.

The cost:

  • They spent $3 million over the 2 deployments for the combination of lodging, per diem and travel expenses.
  • THAT’S $1,000 PER ROOM PER DAY, and that’s RIDICULOUS!

And it could have been prevented.

There are so many ways the bank could have done better: rates they could have negotiated, concessions they could have requested, credit they could have established, research they could have done, contracts they could have signed…  You get the idea.

And then, in addition to the unanticipated housing costs resulting from a deployment, whether well planned or not, there’s a long list of other costs that can impact a company as the result of a business disruption.  Not all of them need to be incorporated into an organization’s business continuity plan but they should all be considered and discussed.  This list includes but unfortunately is not limited to:

  • Offsite facility costs: rent, maintenance, IT and other infrastructure, security, utilities, insurance.
  • Away team onsite expenses: food, hotels (and hidden hotel fees such as unsecured rates, stringent contract terms and missed opportunities to save), per diem, overtime.
  • Transportation costs: last-minute airfare . . . or gasoline and either mileage reimbursement or vehicle rental.
  • On the back end once your team returns home, they might still not able to get into their homes and while there may be electricity at work there might not be power at many of the employees’ homes which definitely has an impact on performance – and then the entire issue of presenteeism.
  • The soft cost of the impact on employee morale and resiliency issues in general
  • Recovery planning costs: repair, reconstruction, restocking.
  • The cost of the impact on your customers and their future need for your services or products.
  • The cost of the potential impact on your vendors, suppliers, carriers, etc.; will they all be able to continue to perform during and after the impact?
  • Whether you send an away team or not, your ride-out team will cost the company: food, bedding, kitchen/break room and bathroom maintenance (Cleaning crew? What cleaning crew?), bottled water and probably the largest potential cost, generator fuel.

Each possible cost is an opportunity to save.  With hotels, for instance, contingencies can be factored not only for the cost of the employee rooms but also for the cost of rooms for each employee’s family, cleaning deposits for pets, internet costs for working remotely, catered food and beverages for a war room, parking, taxes, various negotiable “freebies,” and especially strong contract terms such as attrition, cancellation, early departure allowances, rolling no-shows, etc.  And the cost of generator fuel can be mitigated or at least more efficiently considered by securing a fixed price contract well in advance of a potential disruption.  The list of known and unknown costs is a long one.  But it can be managed, planned for and, most importantly, reduced.

As in any industry, there’s always a struggle between the academic/philosophical part of the equation and the actual application of processes when it all hits the fan.  What brings reality much more sharply into focus – and what usually amounts to the lighthouse in the distance while you’re setting specific goals – is prioritizing the planning for runaway costs in order to reduce them as much as possible.

[This post was composed for the Business Continuity Awareness Week “Counting the Cost” flashblog.]

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Continuity Housing helps companies enhance their business continuity plans by pre-arranging guaranteed housing and providing logistical support for mission-critical employees during disasters.  Subscribe to the Continuity Housing blog and follow us on Twitter, on YouTube, on LinkedIn and on Facebook.

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