AMERICAN PERISCOPE. Incentivising trust

It was not so long ago when ambitious young executives stayed late in office, or at least till the boss was around. And bosses too thought highly of their juniors who stayed late, taking it as commitment to the organisation. And then came the whole phase of working from home, when bosses were hard put to quantify work output, so they could evaluate their juniors who were perhaps finishing their work early while at home and spending the rest of their time shopping online! And recently IBM, which pioneered the whole work-from-home movement, started having second thoughts and wanted its executives back in the office.

HR managers are in a tough spot for they have to come up with common policies that motivate varied kinds of people to give their best to the organisation. So we have policies across organisations that span a wide range. While some firms will not allow you to carry forward your unused annual leave to the next year, there are others that do not specify a limit and allow you to take as much vacation time as you want. What polices a company chooses to follow depends largely on company culture, which can be broadly classified as the Type X (the company knows what is right) and Type Y (the company trusts you to do what is right).

Managing employee travel can be the trickiest HR policy to formulate. Type X companies would have their own travel department, or contract with one outside agency who will book on approved airlines and approved hotels in accordance with what is allowed for different employee categories. This often puts the employee in difficult situations of staying at inconvenient hotels and travelling at unsuitable times that can even affect work.

On the other hand, a Type Y company worries if people are taking advantage of lax rules. After all, we all know at least one individual who takes his friends to the most expensive restaurant to eat because he is on ‘actuals.’

For the Type Y company, the question is how do you ensure the employee is deserving of the trust placed in her. One way is to let her do as she wants to, and expect the boss who reviews her expenses to do a careful job of the review. Another way is to build into the rules incentives to guide appropriate behaviour. This led to some companies fixing a per diem rate as an alternative to the approved hotel categories. If the employee had a friend or relative where he could stay, he could claim the per diem rate which is usually lower than the expenses that would otherwise be incurred. He saves, and so does the company.

The working assumption is that employees have no desire to be frugal on company travel unless they have a personal incentive to do so. So a few travel companies have now have taken on the role of assisting employee travel by first agreeing with the company an approved budget for different destinations. Then they work directly with the employee and to the extent that they can work out a lower cost on hotels and travel, they devise an itinerary whereby the employee shares with his employer the amount saved.

These new methods and services begs the real issue, which is trust. If the company truly believes that the employee does what is best for the company, and will not unnecessarily incur an expense that does not bring a benefit, will it have to incentivise the employee to save on travel?

The writer is a professor at Suffolk University, Boston

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