Economy Class Effect

Describes the adverse effect of cutting the level of travel or standard of accommodation employees are provided with when on business travel. Companies under strain typically respond by seeking to cut costs and a favorite budget to target is travel; such costs are cut by seeking to reduce the amount of travel and lowering travel’s cost by using cheap and very basic hotels and requiring employees to fly long haul in economy class rather than business class.

The cuts to traveling to meet customers can damage business relationships directly. Anecdotally, the cuts to comfort of travel often also tend to be counterproductive, as they deter key employees, relationship managers, and sales executives from traveling to meet customers, with a consequent adverse impact on business relationships—a consequence sometimes described as the economy class effect. The consequences are typically even worse if the changes do not apply to senior executives including the CEO, since morale is usually lowered and cynicism raised.  See Phyrric Cost Saving