Gruntled Employees

The dumbest managerial tool: annual performance reviews

A recent article in The Wall Street Journal discusses some of the problems with annual performance reviews and how a few companies are abandoning them. In the article, ("Performance Reviews Lose Steam," Dec. 19, 2011), Rachel Emma Silverman mentions that even HR professionals recognize the flaws in the system:

Performance reviews have long received poor grades, even from those who conduct them. Nearly 60% of human-resources executives graded their own performance-management systems a C or below, according to a 2010 survey by Sibson Consulting Inc. and WorldatWork, a professional association. And one academic review of more than 600 employee-feedback studies found that two-thirds of appraisals had zero or even negative effects on employee performance after the feedback was given.

Silverman writes that about one percent of companies are ending the practice, citing a report of the Corporate Executive Board. Well, it's a start, I guess.

In Chapter 8 of Firing at Will, I discuss annual performance reviews at length, calling them "the dumbest managerial tool." Here's why:

First of all, emphasizing that employees’ performance should be measured on an annual basis suggests that there’s less reason to measure it on a more-frequent basis. That’s insane. First of all, who can possibly remember how a particular employee was performing ten or eleven months ago? So what ends up happening is that the past month or two get undue weight in the “annual” evaluation.

Second, if the purpose is to correct poor performance or behavior, why would you wait till the end of a year to do that? Performance and behavior issues need to be dealt with when they arise, not saved up till the end of an arbitrary twelve-month period. Similarly, if the appraisal is intended to reward good behavior or performance, why in the world would you wait? “Hey, Alice. That thing you did back in March was terrific. Way to go.” Alice: “Huh?”

Third, if the purpose is to tie the evaluation to a decision about a possible pay increase, that’s also foolish. In a well-run and well-managed company, pay decisions should be made on the basis of the employees’ individual contributions on an ongoing basis, not based on the mere fact that they avoided attrition for another calendar year.

My fourth problem with the annual basis is that managers tend to blow it on the timing. I always did. An evaluation that was intended to go out in early January would just as likely get finished in late March. That’s normal, because managers usually have more-important managerial tasks to accomplish, like running the actual business.

The problem is, if you tell your employees that you’re going to do annual performance appraisals in January, they’re going to expect to receive them in January, along with some sort of a pay raise. When January slips into February and then March finally comes around, those employees are going to be unhappy with you, even if they know you’ve been busy doing real work.

Companies end up using performance reviews as a crutch in place of actually managing their employees real-time. In fact, the reviews do more harm than good. Don't be part of the 99%. Get rid of annual performance reviews, and instead teach your managers to manage.

Fist-bump fireworks and other employee metrics

Managers often struggle with how to measure employee performance. It's natural to shy away from purely subjective ways of judging how well your employees are doing. It's much easier to have an objective metric that you can just look at to track your workers' results.

Ironically, employers generally base their hiring and firing decisions on primarily subjective opinions about the employees. But when it comes time to actually manage them, employers long for something they can look at in a spreadsheet. Law firms, accounting firms, and other professional-knowledge firms are the worst offenders, using the timeworn metric of billable hours to substitute for subjective evaluations of performance.

Many employers use annual performance appraisals to rate employees' performance. They figure that it's easier to check off a few boxes and plug in a few pat phrases than to actually (and subjectively) evaluate performance. In Firing at Will, I describe the annual performance appraisal as "The Dumbest Managerial Tool." To find out why, and to learn about better alternatives, check out the book. (It's in Chapter 8.)

Many employers have asked me how to measure performance if they don't use billable hours or annual performance appraisals. The answer I give them is to look around their business, figure out what really matters, and measure that. Professional-services visionary Ron Baker devotes an entire book on the subject called Measure What Matters to Customers: Using Key Predictive Indicators (affiliate link). In it, Ron talks about the sort of KPIs that professional firms could use, such as turnaround time (which is really the opposite of billable hours), innovation sales (selling new services), customer loyalty (retention rates), share of customer wallet, and others. (Ron prefers "key predictive indicators" to the more common "key performance indicators" because the former is forward looking.)

At Shepherd Law Group, we unintentionally developed a way of recognizing whenever one or more of our lawyers had a successful client outcome. It didn't matter what it was: winning a discovery motion, landing a new client, settling a case. We would note the successful event by exchanging "fist-bump fireworks." This was a goofy ritual of exchanging fist bumps followed by a slow descent of wiggling fingers to connote fireworks. This came from a silly but memorable McDonald's commercial. (I've looked all over the web to find it, but was unsuccessful.)

Although we never put this into practice, we could have tracked FBFs — either as a firm or by lawyer — and charted our performance. Naturally, a greater number of FBFs per month or per quarter would be a positive result. This might sounds like a silly performance metric to you. But as the saying goes, "You can manage what you can measure." Measuring FBFs or other key predictive indicators will help you manage toward having more occasions for them.

What KPIs could you institute in your company? Share them in the comments.

500,000 reasons to worry about retaliation claims

Good news, you're thinking. Your company's just been sued for sex discrimination, but your lawyer tells you that her discrimination claim stinks. You're almost certainly going to beat it. W00t! Squee!

Not so fast with your w00ts and your squees. As employment lawyers, we see this scenario play out far too often. Company gets hit with a weak discrimination claim. Turns out something bad happened to the plaintiff after he or she complained about the bogus discrimination. Wa-bamm! Now the company's stuck defending a much stronger retaliatory-discrimination claim.

This happened the other day here in Boston. The state's Probation Department faced a sex-discrimination claim (among other things) from an assistant chief probation officer. The case went all the way to a jury trial, which is unusual (less then one percent of these cases try). The Suffolk County jury found in the Department's favor on the sex-discrimination claims, but ruled for the plaintiff in her retaliation claim. It awarded her $6,000 in compensatory damages, and … wait for it … half a million dollars in punitive damages. Plus, now she's entitled to her attorneys' fees.

Now to be fair, the Probation Department has been having a bad year as the subject of daily newspaper stories about corruption and patronage. (For The Boston Globe's extensive coverage, click here.) But the lesson is still an apt one. In this case, after the employee complained of sex discrimination, she was stripped of supervisory duties and reassigned to cover the front desk. In its defense, the Department said that her performance had declined. Maybe it had. But that's a weak defense in a retaliation claim. (For more coverage of the case, see Marcella Bombadieri's piece in the Globe.)

Employers: When you're facing a potential discrimination lawsuit, you have to be extra careful to avoid doing something that could end up giving the employee a much stronger retaliation claim. It's a delicate situation to be in, but the wrong actions by the employer can be just the thing that the plaintiff needs to end up with a windfall.

For tips on how to treat a complaining employee, tweet or direct-message me at @jayshep, or send me an

Four more years!

Gruntled Employees began four years ago today, on September 28, 2006. To paraphrase Ronald Reagan, from his famous 1980 debate with then-President Jimmy Carter: "Are you more gruntled than you were four years ago?"

I know I am, thanks to you. Four years ago, I took a made-up word and a philosophy about employment and human resources and started this blog. Since that day, there have been 165,892 pageviews, many of them by people not my mother. I'm honored to have had a small slice of your time, and I'm honored by the hundreds of comments and thousands of tweets that have continued the conversation.

The first post was called "Radio Shack Deletes 400 Workers, Common Sense," a story about how the electronics retailer fired 400 employees by email. At the time, Radio Shack defended this Stupid Employer Trick as being necessary "improve its long-term competitive position in the marketplace." Since that infamous email, Radio Shack's annual revenue has dropped about 16 percent (or nearly a billion dollars), and its annual income has dropped about 24 percent. Nice work, guys. I doubt that workers at The Shack are more gruntled than they were four years ago.

Thanks again to all of you who read these posts on the website, by email, and by RSS. Who knows? Maybe four years from now it will be "Morning in America."

Here's that clip from the Reagan–Carter debate:

Rethinking noncompetes

I have to admit it: For the past 16 years, I've been a bit of an "employer snob." Professionally, I've described myself with the cumbersome and inelegant mouthful "management-side employment lawyer." (Seriously: you want to see someone fall asleep standing up at a cocktail party? Tell them you're a management-side employment lawyer. Don't get me wrong: the job's not boring. Just the label.) Labels aside, I've seen my role as someone who helps employers.

But over the years, as my practice has grown, I have developed a specialty in noncompete litigation. (Unintended consequence: some clients have asked me if I knew a good employment lawyer. D'oh.)

Noncompete practice is a little different from the rest of employment litigation because you tend to have management-side employment lawyers (snooze) on both sides of the cases. Which makes sense because you have employers on both sides: the old (enforcing) employer and the new (defending) employer. We do both sides at Shepherd, although if pushed, I'd probably say that I enjoyed defending more.

And here's where my problem comes from. I like to say that I don't represent employees, and that's generally true. If you want to sue your employer for wrongful termination or some sort of USERRA violation, I ain't your guy. But truth be told, when I'm defending a noncompete lawsuit, I am in fact representing (former) employees. To be sure, it is commonly the new employer who's paying my freight. But most of the time, the new employer is not named as a defendant. So, yes, I represent employees in noncompete cases. And quite honestly, we've had some very good success in doing so, against some of the largest law firms and employers in the world.

But I've only just come to realize that I've been looking at this the wrong way. It's not about choosing a "side" — employers on one side and employees on the other side. It's about following a principle.

Most noncompete lawsuits are brought for the wrong reasons: to punish former employees. To thwart competition. To send a message to competitors to stay away from our people. To send a message to our employees that you're not free to leave.

I have a problem with that.

As I've said many times over the past three and a half years on this blog, talent is the most important asset any company has. And it's up to the employers to find, train, manage, and keep this talent. Noncompete agreements, which are almost always forced down a new employee's throat without the possibility of negotiation, are a poor way to retain employees. Fear never inspires loyalty. And disloyal employees will find a way to leave eventually.

No, the better method is to give employees reasons to want to stay. But if they decide eventually that it's time to leave the nest, then they should be free to do so. Even if it means that they're going to compete.

With one exception. They can't take our stuff. And by stuff I mean two things: our secrets and our client relationships. If their old jobs required them to work with our secrets — our legitimate, protectable secrets, not stupid things like prospect lists — then they should not be allowed to take them to their new jobs. And if in their old jobs we paid them to develop and maintain customer relationships to the extent that they became the face of our company, then they should have to stay away from those relationships for a reasonable period of time. A year, say. Enough time to make the customers understand that the company was what made the relationship special, not the departed employee.

And that's it. If a company hires me to enforce a noncompete against an employee who has taken secrets or hijacked our customer relationships, then I'll go after that employee with every club in my bag. But if an employer wants me to help punish or screw over employees who simply wants to do their own thing, that employer's going to have to find a different firm.

The principle I'm interested in is fair competition, because that's what our system's all about.

So from this day forward, when it comes to noncompetes, I'm not about being on the employer's side versus the employee's side. I'm about promoting fair competition. The law is designed to protect against unfair competition, not ordinary competition.

Employees: If you are stuck with a noncompete and you want to go to another company or maybe start your own, we can help you — as long as you're not stealing secrets or unfairly commandeering customer relationships.

New employers: if you're looking to hire new talent but not looking to score your competitor's secrets, we can help you.

And old employers: if someone's looking to unfairly compete, we can help you.

It's not about employers and employees. It's about competition. That's the side we're on.

Why FOX can hire Conan as soon as he leaves NBC

People are still talking about the late-night wars at NBC. One interesting thing I keep hearing is that Conan O'Brien is ... well ... kinda screwed. His statement yesterday rejecting NBC's plan to move him and "The Tonight Show" was brilliant and worthy of respect. (See "How Conan O'Brien powned NBC.") But even if he makes good on his promise to leave NBC rather than move, many have speculated that he will not be able to head on over to FOX (or ABC or cable) because of his noncompete agreement.

As far as I know, no copy of Conan's employment agreement has found its way online. Presumably, when he packed up and moved to California to take over the show, he signed an agreement that spelled out his and NBC's mutual obligations. For example, some have reported that NBC promised that it wouldn't run "The Tonight Show" any later than 12:05 a.m. Eastern. (For those of you who've forgotten, "a.m." is Latin for "no longer tonight.") If this report is true, then presumably NBC is not in breach with its plan to run "The Not-Really-Tonight Show" after the reworked 11:35 version of the Leno debacle. (I don't think that's what they're calling it, but it would be refreshing.)

But commentators have suggested that Conan would be bound by a noncompete that would prevent him from competing with NBC for a year or two. See reports here (ironically from CBS, who must be LTAO) and here. The blog "Concurring Opinions" also has a nice write-up of possible contractual issues in the Conan matter here.

But Conan isn't bound by a noncompete.

Let me point out for a moment that I write this without having seen his NBC agreement, and without any actual knowledge of his negotiations. So how do I know that he's not bound? Well, noncompetes are a specialty of Shepherd, our employment-law firm.

I put a hint in the second paragraph above. Go back and reread it. I'll wait. [... tick ... tick ...] Got it? That's right: "moved to California." Conan shoots "The Tonight Show" in Universal City, California. (I need to get a city named after my company.) And California, as many of you know, prohibits noncompetes. Section 16600 of the California Business and Professions Code makes employment-related noncompetes — like the one Conan reportedly has — void.

Now if NBC was smart — and given how they've handled all of this, there's not much chance of that being the case — they may have tried to do an end run around 16600 by placing a choice-of-law provision in the contract. NBC is headquartered at 30 Rock in Manhattan, so they could have insisted in the agreement that New York law govern it. And if NBC got him to sign it back in 2004 when they promised the show to him, that might have made some sense. But not now.

Because in August 2008, New York decided to protect oppressed millionaire TV broadcasters by enacting the Broadcast Employees Freedom To Work Act, which banned postemployment noncompetes for broadcast-industry employees. Oh ... so sad.

Actually, don't feel bad, NBC. Even if New York hadn't gone and done that, there was no way that a California court was going to honor a choice-of-law clause to enforce a noncompete that restricts a California worker (Conan) from plying his lawful trade. Either way, no noncompete is going to stop Conan from broadcasting on FOX or ABC or Telemundo or YouTube.

To be sure, Conan's agreement might have some penalty if he walks out on NBC (assuming NBC didn't breach the contract themselves by make "The Tonight Show" into "The Not-Really-Tonight Show"). At the very least, he could well be walking away from millions of dollars by not finishing out his term.

But NBC can't stop him from working. And how sure am I about this, especially since I haven't read the contract? This is how sure: If NBC sues Conan for violating a postemployment noncompete agreement, my firm will offer to defend him. For nothing. (Not soliciting work here, of course. But if he calls, we'll do it.)

See you after "24," Conan.

How Conan O'Brien powned NBC

(For the definition of "to pown," check out Urban Dictionary here.) (Noob.)

I've got to be honest with you. I've never been a big Conan O'Brien fan. At least, not until today.

This afternoon, the New York Times reported that Conan had rejected NBC's plan to move his "Tonight Show" from its 11:35 p.m. slot to 12:05 a.m. to accommodate Jay Leno's return to late-night television. This is just the latest step in a drama that has quickly spun out of NBC's control.

Some background, in case you haven't been paying attention:

Conan replaced David Letterman on "Late Night" (at 11:35 p.m. Eastern) in 1993, when Letterman jumped over to CBS after losing out to Leno as Johnny Carson's successor at "The Tonight Show." In 2004, NBC announced that Conan would succeed Leno — five years later, in 2009. (I mean really: who makes hiring decisions years in advance? Oh, right. Big law firms. Brilliant.)

This fall, Conan indeed replaced Leno at the helm of "The Tonight Show." But NBC wanted to keep the great comedic talent that is Jay Leno (OK, that's a little sarcasm; I'm even less of a fan of Jay) (good name, though). So it came up with a "revolutionary" idea to create an ersatz version of "The Tonight Show" featuring Leno that would run weeknights at 10 p.m. Eastern. The rationale was that "The Jay Leno Show" would be much cheaper (even paying crazy money to Leno) than to pay to fill five hours of scripted TV dramas during that slot.

But the gamble failed. The show was panned and the ratings tanked. Despite having earlier said that they would give the show a year, NBC panicked last week and pulled the plug. But apparently, they want to have their cake and eat it during late-night too. Instead of sending Leno to the cruise-ship circuit, NBC has decided to move "Leno" (the show) to "The Tonight Show's" time slot: 11:35. But they would shorten "Leno" (again, the show) to thirty minutes, and start Conan's "Tonight Show" at 12:05 a.m.

(The Times has reported in a different article that Conan's contract did not specify what time slot his show would run in. Some have suggested that this was bad lawyering. On the other hand, AP has reported that the contract does say it can't begin the show later than 12:05.)

Of course, the common-sense question is "How can 'The Tonight Show' begin when it's no longer tonight?"

So today, Conan released a statement rejecting the move to 12:05, instantly garnering massive worldwide support on Twitter and in the blogosphere. Now normally, when you hear that someone "released a statement," you immediately think boring nothingness generated by lawyers. But here's where Conan really shined. First, he almost certainly wrote it himself (probably with help, but that's OK). Second, he completely avoided coming across whiny, pouty, angry, or victim-y. Third, he chose not to trash anyone, not even NBC. He favorably mentioned Carson, Letterman, and his "Late Show" successor Jimmy Fallon (who's really getting screwed by being bumped to 1:05, where he could lose both his viewers). Fourth, he spoke respectfully, with much language about the tradition and importance of "The Tonight Show's" six decades following the late local news.

And fifth, and I think most important, he was funny. I don't mean LOL funny; but with a light-hearted irreverence that humanizes him and his message without making the reader question the seriousness of his feelings.

And that's the real trick. Too many people — employers, employees, and their lawyers — hide behind a thin veneer of pomposity, haughtiness, verbosity, and legalese. That never works — ever. All it does is turn off the reader, and may even turn the reader against the writer. Instead, Conan wrote with charm — a perfect blend of humor and seriousness. Now unless NBC backs down and kicks Leno to cable, it has no chance of winning this contest. Conan powned them.

Read Conan's complete statement in the Times article here.

• • •

For more TV-related goodness, check out how "Lost" beat out the President's State of the Union, at our sister blog, The Client Revolution.

Why I'm glad I'm not Microsoft's employment lawyer

First off, in case anyone missed it, I'm an Apple guy. My firm's all Macs and iPhones, and I know nothing about worms, trojan horses, or blue screens of death. Unsurprisingly, I'm not a fan of Microsoft.

But put my bias aside for a moment. Decide for yourself whether Microsoft passes the smell test here. This is a website image (click to magnify) from a Microsoft website intended for an American business audience:

Now look at the Polish version of the same site with the same photograph (again, click to magnify):

Notice anything different? Yes, the words are all in Polish. Good. What else? Yes, the monitor on the table in front of the woman isn't plugged into anything. Very good. Anything more subtle? Yes, the white laptop looks strikingly like a MacBook minus the Apple logo. Excellent. Is that it?

Oh yeah. The black guy is now a white guy. (Microsoft has since changed the Polish site to revert the new white guy back to the old black guy.)

D'oh.

Actually, that's not entirely true. Only the head and neck were changed. If you look carefully, you'll see that the white dude has the black dude's hand and wrist.

Let me be clear: I'm not saying that Microsoft did this because they're racist. It's far more likely that they did this because they're clueless. Some marketing flunky probably came up with data showing that there weren't a lot of blacks in Poland (or, apparently, monitors with power cords). Maybe they even tested too see if focus groups responded better to a white man than a black man. (Asians and white women are apparently OK.) But the point is, they did it. And they got caught. Looking stupid.

Three lessons for employers here:

1. Don't do something cute like this thinking that no one will find out. People always find out.
2. Ignore what marketers or even customers tell you about race or religion or sex or any other protected class. You can't use that information as an excuse to discriminate. If a plumbing company has a racist customer who says, "Don't send a black plumber to my house," you say, "Too bad." The customer isn't always right. Instead, tell the customer, "You're not our customer anymore."
3. Understand that stupid things like this have a tendency to find their ways into lawsuits. Someone somewhere will someday bring an unrelated race-discrimination claim against Microsoft, valid or not. If his or her lawyer is good enough, this little Photoshop flop will be used as evidence of bias, or at least a lack of sensitivity. It may not be legitimately so, and it may not be persuasive, but it will be something that Microsoft's employment lawyers will have to deal with.

That's why I'm glad I'm not their employment lawyer.

• • •

Hat tip to the excellent blog TechCrunch, which broke this story in a post by Michael Arrington ("Marketing Decapitation In Poland: Asians Ok, Blacks Maybe Not"). Make sure you read the comments there; many are hilarious. The two images came from that story. As I mentioned, the Photoshopped Polish one is no longer on the Microsoft site. But I've seen no statement from Microsoft denying what happened.

Update Microsoft has apologized in a statement, CNET has reported. Also, PhotoshopDisasters has good coverage here, Reddit has some terrific discussion here, and now TechCrunch has started up a contest inspired by this.

Strippers take it off ... off payroll, that is

Everyone knows that strippers are properly considered independent contractors. Right?

Yeah, right.

A Massaschusetts court this week ruled that a strip club had violated state wage laws when it improperly classified its exotic dancers as independent contractors. Instead, they should have been treated as W-2 employees. (Although to be fair, the IRS hates it when you get glitter on your tax returns.)

The Boston Globe reported that Massachusetts superior court Judge Frances McIntyre granted summary judgment on liability in favor of the clothing-challenged professionals (look: how many different ways can you say "stripper"?) working at King Arthur's Lounge in Chelsea, near Boston. The case, which the judge certified as a class action (oh, there's gotta be a pun there somewhere), now proceeds to trial to determine the damages, which could run into the thousands of dollars per ecdysiast (helpful Wikipedia definition included in a somewhat NSFW entry).

The Globe explained how it all worked:

King Arthur’s Lounge, a club that has been the scene of more than one notorious crime, did not pay the strippers any salaries, required each to pony up $35 to perform each night, and kept $10 of every $30 that each made for “private dancing’’ in secluded booths, according to a state judge who granted a stripper’s motion for summary judgment on the issue of liability.

Apparently, the performers were allowed to keep the singles that patrons tucked in their garters, or whatever, while they performed on the open stage. But they had to turn over a third of their "private dancing" (read: lap dance) tips to management.

The club argued that the dancers were independent contractors because of the independent discretion they exercised. Writes the Globe:

In arguing that the strippers were independent contractors, King Arthur’s said that Chaves got to pick her own music, costumes, partners, and routines. The club also said it never gave her written rules to follow or documentation that she was an employee.

Uh ... no written rules means you're not an employee? As if.

This case was a loser from the start. Most of the time, when an employer tries to pass an employee off as an independent contractor, it is violating the law. This is especially so in Massachusetts, where a statute says that an employee whose trade is the same as the business's cannot be an independent contractor. To get around this, the club argued that it was in the alcohol business, and that strippers were just something extra. You know, like darts.

The judge basically called that ridiculous:

A court would need to be blind to human instinct to decide that live nude entertainment was equivalent to the wallpaper of routinely televised matches, games, tournaments, and sports talk in such a place. The dancing is an integral part of King Arthur’s business.

As we've said here before (see "How to lose a wage-and-hour case"), you can't win a wage case if you mess up an employee's pay. There's no defense if you got it wrong. Our advice to employers: make sure you get the pay right. Or be prepared to settle if you don't.

And bring plenty of singles.

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.