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Policies designed to prevent losses can become extremely expensive when they ignore employee behavior.

At this multinational company, employees had to prove they flew business class before their costly tickets could be reimbursed.

That requirement encouraged everyone to book at the last minute, when fares were dramatically higher.

See how a rule meant to prevent waste actually created a much larger bill.

When the big company doesn’t trust employees

I have a different story about economic incentives.

I used to work for a multinational that allowed employees to fly business class for intercontinental client trips.

It must have been some accountant worrying that employees could trade the ticket in, fly coach, and pocket the money because the policy stated that the boarding passes needed to be included in the expense report.

This man and his colleagues decided to buy their flight tickets at the last minute.

People hated to spend 6–10k USD on a ticket and get reimbursed a month later once they could produce boarding passes.

So, they all bought their tickets at the last minute, thus paying $10–15k.

This is the economic lesson: people respond to incentives.

So the company ended up overpaying for plane tickets because it didn’t trust the employees.

The policy eventually changed.

The policy changed when people started using electronic boarding passes and forgot to ask for paper ones.

Genius bean counters must have found significant savings in the average flight costs but probably they were too dumb to figure it out.

It’s ridiculous to expect employees to pay for their flights and get reimbursed later.

Let’s see how others reacted to this story on Reddit.

This person’s company had the same policy.

This person needs some clarification.

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Corporate paranoia is so expensive, says this person.

If you enjoyed this story, check out this post about a lifeguard who saves a child only to be confronted by parents angry about the paperwork.

Finally, here’s a related personal experience.

The company required boarding passes before reimbursing employees, so workers avoided carrying huge balances by purchasing tickets shortly before traveling.

Those last-minute fares cost thousands more until electronic boarding passes finally pushed management to change the policy.

The accountants guarded against imaginary savings and paid a premium for mistrust.

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Author

Chris Allen