Unintended Consequences

A few weeks ago I was chatting with a business owner about the salary and bonus structure at his company. Like many companies, this owner paid out bonuses at the end of each year. I asked him if he’d considered paying them out twice a year or during the summer months.

The owner said the end-of-year bonus schedule began as a necessity but had become more of a tradition. Wondering out loud, I told him that I assumed he chose the end-of-year because it encourages employees to stay put through year’s end.

bears

And with that, we both came to the same conclusion: Should the bonus schedule reward employees who grind it out through the end of the year, take the bonus and then run? It was an unintended consequence of the schedule he hadn’t considered.

This experience reminded me of another business decision that had unintended consequences.

I worked for a company years ago which allowed employees to spend an average of $75 a day on food. This was not a per diem. If we spent $50 on food, that’s all we could expense. But as long as we kept the average at $75 or less we could eat cheap for a couple of days and then go out for a nice dinner the night before we flew home. This allowed for a level of meal flexibility especially when we stayed in expensive cities with great restaurants like New York or Chicago.

But management didn’t like approving these expensive meals even when we spent far less on some days. So they decided to cap meal reimbursement at $75 a day. No more averaging out to $75. Like before, we could only expense what we spent each day.

Can you predict what happened next?

After the policy change, employees who had casually tracked their meal expenses now went to great lengths to ensure they spent their full $75/day. The new policy made us feel the company no longer trusted us, and many decided to stick it to the man.

During this time, I approved expense reports for about 40 technicians who supported conferences around the world. They often lived out of suitcases, worked long hours and appreciated a nice meal at the completion of an event after living on room service for days.  A few techs complained about the policy, but there was nothing I could do about it.

A few weeks later, expense reports began to trickle in. I was interested to see if the policy would change behavior. Over the first month, the average meal cost per day increased from about $49 a day to nearly $65 or a 30% increase. Subsequent months saw the average inch closer to $68 a day.

I laughed at one expense report that came across my desk. One technician had managed to spend exactly $75 on the day he flew out of Seattle and the day he returned. A closer inspection of his expense report showed that he had purchased $75 (about 5 pounds) worth of cinnamon bears at the airport on his day of departure and another $75 worth the day he returned.

The policy stated that any food was expensable so he was within the rules. I approved his expense report and asked him to bring me a few cinnamon bears.

I can’t imagine this is what management had in mind when they changed the meal policy.

Expense reports with creative meal planning became the norm rather than the exception in years past. I signed expense reports that included pounds of Gobstoppers, Swedish Fish and Whoppers. I also signed reports with $50 worth of food from McDonalds and Taco Bell.

But the only time I recall getting a call from corporate was when one technician tried to expense a couple of bags of Starbucks coffee beans. I considered it food, but someone higher up did not agree.

 

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