Perverse results from rigid travel expense rules

Via Travel Notes, the New York Times carries a story on companies’ increasing use of computer software to flag expense reports that violate corporate travel policies.

Computers, of course, can only compare expenses to policy, rather than making a normative judgment about what expenses make sense. In fact, the piece suggests that when companies adopt this kind of software, they tend to tighten up their travel policies to remove existing areas for judgment from employees’ hands. While that can be a cost-saving measure, it can also lead to some perverse results which dampen employee morale.

    On a business trip to Bismarck, N.D., David Godfrey flew into town two days early to qualify for a cheaper airline ticket. His total savings were $300. He stayed at a friend’s house instead of checking into a hotel, knocking an additional $100 off his expenses. His friend even picked him up at the airport.

    So how did his client thank Mr. Godfrey, a lawyer based in Lexington, Ky., for the help?

    “When I submitted my expenses, they rejected the $4 for parking my friend’s car at the airport garage,” he said. “I was told that if I had taken a taxi to my friend’s house, they would have paid for it.”

    “It’s O.K. to spend $85 on a hotel, $15 for parking and another $15 for breakfast, but if you spend $90 for a hotel where parking and breakfast are included, you’re over budget,” he said. “And it’s O.K. to drive 400 miles in your own car and to get reimbursed at 34 cents per mile, for a total of $136. But get a comfortable rental car and pay $75 and you’re in trouble.”

Like governments, large corporations become bureaucratic. A small organization finds it easier than a large one to hire talented people with strong values and inculcate a shared culture and shared expectations about appropriate expenses. The challenge is much greater as a company grows, and the temptation exists to replace judgment and community norms with rules.

The illusion to government is not accidental in another sense: while I’m insufficiently expert to evaluate the claim myself, the article suggests that one impetus for companies adopting this type of software and tightening policies is compliance with the Sarbanes-Oxley accounting reform legislation.

In fairness, the claim of software companies is that travel expense savings can be as great as 15%. On the other hand, I lay the blame for ex ante high travel costs at the feet of bad incentives and supervisory processes, so it’s unclear that software and rigid rules are the only way to realize travel expense savings.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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