How to Create an Expense-Account Policy That Won't Be Abused

Believe it or not, it starts with freedom.

Before I describe how this works, I have to explain a few things about our company. Because this is not the kind of thing that succeeds just anywhere.

LRN is trying to become a self-governing company, which means we don't have bosses. Instead, everyone reports to the mission. We embrace two kinds of freedom. The first is freedom from: Our people are free from micromanagement and rules and policies. The problem is that when you give people freedom from something, it leaves a void unless you also give them freedom to. Freedom to means people not only are able to make decisions without constraint or permission but also that they have the information and the habits of thought to make good decisions.

(By the way, freedom from is different from empowerment. Empowerment means I have power, and I'm a nice guy, so I'll let you have some under these conditions. With empowerment, people pay more attention to who has power than to who is right.)

How a company spends money is a good indication of its values. Our people can spend what they see fit; they don't have to follow guidelines or seek approvals. But we want them to make those decisions based on a crystal-clear understanding of LRN's values and what is best for everyone in the company.

Consider expense accounts. For the past few years, all our people have planned things such as what trips they will take, where they will stay, how much they will spend on food, without interference or rebuke. That is freedom from, and we know it works. Over that period, our travel expenses have declined. Now, to help employees with freedom to, we are making everyone's expense reports public to everyone else on our intranet.

There are a few reasons for doing this. The obvious one is that people are less likely to order that bottle of champagne if they know their colleagues will find out about it. But more important, we want to encourage people to think about spending in a collaborative way. We want them to consult one another before they take trips: Was that hotel really worth it, and given how much you spent on gas, should I consider public transportation? We also want them to see--and admire--models of wise spending. Not people who pinch pennies, necessarily, but those who accomplish a great deal (people in companies always know who accomplishes a great deal) without breaking the bank. We expect those who do make poor decisions to compare their numbers with their colleagues and learn from that.

Principles are better controls than rules. Sunlight is the best disinfectant. As we open up data on travel expenses and all other forms of spending to employees, we believe everyone will make better choices for the right reasons.

As told to Inc. editor-at-large Leigh Buchanan.

More from Inc.com:

    Loading...
    See all articles from Inc

    Friend's Activity