Labor Force Participation: Travel Expense reporting

This post is a followup on yesterday’s post on the declining value of work and its possible impact on motivating people to participate in labor.   The primary motivation for today’s post was the popular urban legend of the expense report with the attached note “find the hat” as described here, although this account is more like what I heard and goes on to touch on the theme I’m exploring.

This story is common in corporate training sessions on expense accounting where the story is told either by the trainer or shared among the attendees as joke.   I don’t recall the first time I heard the story, but it was very early in my career.   It was memorable not just because it was a clever story, but because it touched something more fundamental that I described earlier as the desire for a human-to-human contract when it comes to employment.  

The entire story wouldn’t even be possible if the context was a client-agent relationship.  I’m thinking of the common depiction in 1940s/1950s film noir where a private investigator blurts out the terms of his services as so much per day, plus expenses.  That last statement stands out with an extra punch.  It is meant to be completely open ended.

I know it is a film and that dialog was chosen deliberately to provoke exactly the response I gave it.  Certainly there was some kind of paper contract to sign that spelled out some constraint of what an expense may entail.

But my impression is that compared to today’s accounting standards, that paper contract was as open ended as the dialog implied.  It was an acceptable term for the contract because it was a human contract sealed with a handshake after signing the paper.   The client trusted the judgement of the agent in determining legitimate expenses.

The above “find the hat” story exemplifies a reasonable expense that would have been paid without objection in a human-to-human contract that covered expenses incurred.   The hat was an essential accessory for doing business, it was destroyed or lost in the course of doing business, it had to be replaced, therefore it was a valid expense.

Alternatively the story may have played out completely opposite where the agent doesn’t bill for the replacement hat because of his sense of the relationship with the client.   In such a scenario, the story would have a punch line where the client insists on paying once he found out the details.

Today, travel is a very big part of expenses for doing business.  A result companies have a huge incentive to control travel expense costs.  

Over the past 50 years, travel has become very routine and inexpensive on a per-trip basis.   Businesses leverage this bargain in growing their business.   Large portions of their workforce commit to regular travel ranging from single day trips to multi-week trips and ranging in frequency of a few times per year to a few times per month.   Many job descriptions include the percentage of time for travel, and often it is in the range that qualifies as much of the time.

As a result of the frequency and duration of the travel, the company’s travel budget is huge.  It is very noticeable expense of doing business.  Because of the frequency and duration, little expenses add up.   There are large potentials for cost control by paying attention to little expenses.

Out of this necessity, expense report accounting has become a very elaborate process involving complex forms, multiple levels of checking and approval, and extensive documentations of legitimate expenses.    These rules cut both ways.    Allowable expenses must be documented and reimbursed.   Unallowed expenses must not be reimbursed but sometimes must be documented in any case.   In all cases, the documentation is expected to be complete with original receipts (not copies) and completely accurate at risk of penalties up to criminal fraud.

A job with 75% travel could easily burden the final 25% with the expense report filing.   It is a very tedious process even for a clean trip.   The rules are very precise getting into different scenarios for each type of expense.   Something as simple as a meal expense may have several ways it must be recorded depending on when it occurred, whether it occurred on the same day as air travel, and whether the meal was alone, with coworkers, or with clients.    A particular cost may need to be subdivided into what is reimbursable by the employer and what is billable to the client.

The point of this post is only that the travel expense accounting has become a very impersonal and elaborate accounting exercise.  It has been going on for so long that we take it for granted.   Doing travel is just like working on a factory floor milling some component.  We just do it.

The process is still depersonalizing.   The time spent in preparing the expense report often must be done after the end of the report and yet is expected to take much less time than it actually does.

It is also depersonalizing by regulating behaviors during the part of the day that is not company time.  When on travel, only normal working hours are recorded but the entire day is under control of the company.   The travel expense rules dictate the choice of the hotel, the choice of meals, the options for after-work entertainment, etc.  Sometimes it is subtle.  For example, although a person may be willing to pay out of pocket the additional costs of exceeding his per diem, this option is not available when he is traveling with colleagues who don’t share that willingness and need to have the similar accommodations.

Even more subtle is the elimination of the option of the gregarious of picking up the check for the table.   Even more insulting is to have to endure the social awkwardness of having separate checks delivered and paid separately.

Perhaps a comradery develops over dinner that merits extending the evening with some additional entertainment.  This opportunity is denied because the per-diem limits have been exhausted.   Once the daily expense limits are reached, the social part of the day ends.  Everyone retires to their room to wait for a fresh day to start.

It is easy to envision people spending their personal time quite differently if they weren’t bound by the strict rules of expense accounting.    Even or especially if they are on travel, they are likely to desire to treat themselves to extravagances that take advantage of the local opportunities. 

Personally, I am no fan of company travel but I know many people are quite fond of it.   They find pleasing after-work experiences despite the constraints.  Nor does it seem to be a challenge for companies to fill positions that require significant travel.

All of this is to say that this is not a rant against the current company travel culture.

Instead, I’m looking at the expense accounting in historical terms.   Over the past several decades the expense accounting has changed a lot.   The expenses were always checked closely by accountants but the rules were simpler and more lenient in terms of trusting the judgement of the traveler.   Even the actual filing of the expense report more often involved direct face to face discussion with the people who approve the report.   Such discussions may have exchanged verbal information that later must be documented in paper form.

As an aside, I want to note that nature of jobs requiring travel changed too.   Decades ago, travel was limited to executives and sales people where there is a lot more deference to their judgement.   Today, travel is dominated by regular business often involving people doing jobs that have be done on the client’s site instead of the company’s site.  This change in job diversity of travelers undoubtedly contributed to the growth in travel and the need for stricter accounting of expenses.

My point in this post is a fictionalized concept of what it may have been like when travel expenses were approved more on the basis of trust in the judgement of the traveler.    

That trust was an extension of the broader concept of the employment contract itself.   The employer once hired someone because the employer sees the candidate as a good person, one who will work hard with honesty and loyalty.   More than that, the employer hired someone because he see a valuable personality.   The way a person conducts his life outside of working hours could benefit the company.  

An obvious example is the entertaining capability of someone in sales or marketing.   An entertaining capability that borders on extravagance may be justified by the results delivered.   But today, these people need to restrain their natural abilities to conform to the rules or take risks of being called out for ignoring them.

Perhaps this historical perspective has no real impact.   As I mentioned, people continue to do travel assignments and many look forward to their next assignment.  People learn how to play by the rules and still have a tolerable if not enjoyable experience.    I mention this because I really think the impact of the rules is subtle.

I’m thinking more broadly about the bargain of an employment contract that balances the rewards with the burdens and risks.   I note only that the expense report accounting rules, burdens, off-work behavioral constraints, and potential penalties fall into the burden side of that equation.  

It seems to me that that burden has increased considerably over the past half century and probably following the same curve as the decline in workforce participation.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s