Nickel-and-diming your employees

Lucy works as a salesperson for a machine-parts company in the Pacific Northwest. She has to travel a lot to make sales calls; often out of state. Because she's on the road so much, she has to eat out all the time. She's not crazy about this, because she finds it difficult to eat healthily at fast-food and quick-service restaurants.

Her company appears to understand that she and her fellow salespeople have no choice but to eat out frequently. So it allows them to expense their meals on the road. But like too many companies, this one doesn't trust Lucy or her coworkers. It's apparently concerned that they will run up obscene meal expenses at luxury restaurants (at airports and rest areas — right!). So it came up with a policy.

Under this company's meal policy, Lucy and her colleagues can expense meals under the following restrictions:

1. they have to be traveling for work
2. they have to be 75 miles from home, and
3. they can't spend more than $17.50 per meal.

OK, now the first restriction makes sense: this is supposed to ameliorate the hassles of eating while traveling on company business.

The second restriction also seems to make sense; the company's not interested in feeding its people while they're at home. But there's an unforeseen consequence here. Much of Lucy's travel is by airplane, and she often has to leave her home early in the morning to catch her flight, making it difficult to make breakfast at home before she leaves. Ideally, she would check in at the terminal and go through airport security, and then grab some breakfast before her flight takes off. But the airport is just 22 miles from her house, so the meal policy doesn't cover her breakfast. If she wants coffee and a muffin at the airport, it's on her nickel.

The last restriction also seems to make sense, setting a spending limit to avoid excessive meal expenses. And $17.50 is probably enough to get breakfast or lunch at most quick-service places, and dinner at a fast-food joint. But the problems arise with how the policy is enforced.

To get her lunch paid for, Lucy has to charge the meal on her company-issued credit card, and then fax or scan her itemized receipt to an accounting gnome at the home office. More than once, she has received admonishing emails or phone calls from these gnomes about nonconforming meals expenses. These, not surprisingly, displease her.

Another unintended consequence: Lucy and her fellow salespeople are self-interested, like most human beings, and they are smart. They quickly learn how to game the system, and find ways to charge meals under "The Price is Right" rules: they come as close as possible to $17.50 without going over. So the company often ends up paying more for meals than it would have if it hadn't set the $17.50 limit.

But the biggest and most damaging unintended consequence is that Lucy and her colleagues resent the meal restrictions. It is an irritant to them, especially when they are waking up at five in the morning to board a crowded commuter flight to go and sell the company's machine parts. While it's impossible to measure, I'd bet you breakfast at an airport terminal that the amount they lose in forgone sales stemming from employee malaise dramatically outweighs any money the company saves on meal expenses.

Employers: resist the urge to have policies like these. Treat your employees like adults. If they spend unreasonable amounts on meals or other expenses, talk to them about it. If it's a persistent problem with a particular employee who's taking advantage of the company, fire that employee. But don't assume that all your employees are trying to bilk the company for an extra airport donut.

Notes: As you might imagine, I don't want Lucy to get fired, so I have changed some of the identifying information. But the story is true … Also, I'm no fan of nickel-and-diming, whether it's employers doing it to their employees, or lawyers doing it to their clients.

Comments

[Frank Roche]

I couldn't agree more. I think it's demeaning to create that kind of policy -- it's saying, "We trust you to do a ton of business for the company, but we don't trust you to make good decisions about how much to spend to eat." Those kinds of policies are implemented by little accountants and HR hall monitors who never travel. Treat people like adults, as you say. That's the winning formula.

[Stefanie Devery]

I absolutely agree. What I dont understand is: if you cannot trust your employees to make rational and appropriate decisions about corporate expenses, how do you trust them to sell your products appropriately?

Happy employees are productive employees. I bet if they ran some numbers of productivity before and after the policy was instituted they would see a change in the amount of sales their employees generated.

[Keri]

I am torn. I absolutely agree that employees should be treated with respect and that managers should address problems as they arise with individual employees rather than set micro-managing, company-wide policies to curb bad behavior among a handful.

That said, I do think setting expectations is an important task of management because "reasonable" doesn't mean the same thing to every person.

My managerial experience extends almost entirely to administrative personnel, so perhaps those managing more experienced staff will disagree. But I have found when you make expectations explicit, it leads to better employee performance and a greater sense of security among employees that their job performance is following the company's standard, rather than a fuzzily shared concept of reasonableness.

In this example, I think Lucy's company would be better to set a policy that "on days you are traveling, you have a per diem of $XX for meals. If your expenses exceed that amount, we will need your supervisor's approval before you submit for reimbursement."

This policy gives the employee latitude in how they spend their money, but also accounts for trips where meal cost may be higher or entertaining clients might be involved.

[Nathan]

Yes, treat employees as adults, but without basic guidelines (and you agreed that the three put in place by Lucy's employer all make sense), an employer must determine case-by-case whether an employees' expenses are reasonable. And when it comes to reviewing meal choices and travel habits, it’s a safer bet to cap expenses than to audit line items, lest the corporate gnomes wander into discrimination territory

The company’s policy protects Lucy, too, because she can exercise discretion with a clear understanding of what’s allowed.

Employers should treat these policies like speed limits. Yes, people are going to bust the limit sometimes, but only the truly serious offenders will get nailed. And when they do, the company’s clearly communicated expense policy will provide firm footing should the employer opt to take disciplinary action.

By the way, has Lucy talked to her boss about getting the 75-mile rule changed to allow breakfast at the airport?

[Wally Bock]

Congratulations! This post was selected as one of the five best independent business blog posts of the week in my Three Star Leadership Midweek Review of the Business Blogs.

Wally Bock

[Jay Shepherd]

I'm honored, Wally. And we're in good company!

— Jay

[Jennifer Hofmann]

If restricting overall meal expense is a necessity to the employer, it might make more sense to give employees a meal budget (by the month or year) and let them decide how to use it.

I agree that "nickle-and-diming" is an affront to the competent employee.

[christian chereji]

I'm a mediator in Romania, Europe, and I have to deal all the time with business people from my city being in conflict with their employees — and I see these nickel-and-dime strategies going on one after another. What's more interesting is that employers to whom I've talked to, showing them with numbers how much they lose on specific cases of nickel-and-dime strategies they adopt, don't even bother to notice the facts. I think this is related to various theories of decision-making, saying that people are more in favor of decisions that have a known-in-advance result (i.e., I won't pay more than $17.50/meal/employee, which is already included in the company's budget) that of decisions that have an unknown, even if supposedly better result. Avoiding the unknown it seems to be a regular policy of companies throughout the world, even if it leads to mediocre results.

[Tom "Bald Dog" Varjan]

Great post.

I also believe that dishonest leaders create dishonest organisational cultures, attracting dishonest people.

And at one point leaders shout out: "Our dishonesty is expensive enough for the company, so let's crack down on other people's (employees') dishonesty."

Of course, through their eyes, even common sense actions are dishonest. They don't see the world as it is. They see it as they are, hence they see cheaters and liars in everyone.

As the saying goes, fish rots from the head.

[Earl Owen]

We have similar, although not quite as draconian as those cited, policies. I find them easier to live with than the over explanation we used to have to provide for each and every meal. For everything you gain there is something lost.

[j drager]

I have traveled for business in the past being paid for meals the same way. From my point of view, I was going to eat anyway, so I have to pay more for my breakfast just because I didn't get up 15 minutes earlier to make my own. I'm still eating the rest of the day on the company's dime. I would have spent my own for lunch, and I didn't have to make my own dinner. Why the complaints?