By Mike Antich
Score one for our side!
Recently, a Fortune 100 company gave (very) serious consideration
to eliminating its company-provided vehicle fleet program and switching to driver
reimbursement. Initially driving this initiative was senior management’s desire
to cut cost by removing the vehicle assets from the books. The option to move
to an operating lease was not viable since it violated the company’s accounting
policies set by finance. Management reasoned that by moving to an allowance,
the company could write off the fleet as an expense and eliminate the financial
liability of an asset. The fleet manager was given the opportunity to justify
the need for a company-provided fleet.
He succeeded. Interestingly, the winning argument was not based on
cost. The nail in the coffin was management’s fear of the loss of control over
what employees would drive and the implications for corporate image and
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Sending the Wrong Message
A company vehicle is part of the corporate image presented to
customers and the community. With driver reimbursement, an employee determines
whether a vehicle is appropriate for the type of image the company wants to
project. When an employee provides the vehicle, the company surrenders this
control. The wrong vehicle can send the wrong message to customers.
If the company doesn’t provide the vehicle, it has no control over
what the employee drives to a customer location. Customer perception is
everything, especially when it involves prospective customers. Employees may be
required to entertain customers, and you don't want them to drive customers in
an unsuitable vehicle. With driver reimbursement, an employee determines whether
a vehicle is appropriate for the type of image the company wants to project. A
reimbursement program creates a problem when someone is hired who already owns
a vehicle. The company will most likely have to accept whatever he or she is
driving. On the other hand, a company-provided program allows you to control
the suitability and appearance of the vehicles used for your business.
Increased Liability Exposure
With an employee-provided vehicle, how do you ensure it is
properly maintained? How do you know the condition of the tires? What about the
brakes? How do you know when an employee postpones a safety-related repair? If
an accident is caused by deferred maintenance, what is your liability exposure
if the accident occurred while the employee is conducting company business? The
reality is that it is difficult, if not impossible, for a company to be aware
of the condition and maintenance of every employee’s vehicle. In fact, a
reimbursement program may actually contribute to poorly maintained
employee-owned vehicles. For instance, if the reimbursement is not sufficient
to cover actual expenses, the employee may defer preventive maintenance. Also,
since maintenance is an out-of-pocket expense, there may even be a temptation
(or financial necessity) to postpone more expensive mechanical repairs. The
bottom line is that a business has little or no control over the condition of
an employee’s personal vehicle.
In the final analysis, loss of control was the fatal flaw to this
driver reimbursement initiative.
Let me know what you think.