Below the Line: The Hidden Cost of Employee Experience

The Knowledge Gap in Cost Allocation

If your company sells a product (e.g., software, food, clothing, etc.), odds are you know the basic pricing strategy and how customers pay. Unfortunately, while many leaders consider their workplace a product, most employees don’t understand how business lines are charged for rent, benefits, or other experience costs.

If you just read that and thought, “Geez, I know this stuff already; I go through this with FP&A every year,” let me ask you this: How many people on your extended team genuinely understand how “workplace product” costs and budgets are allocated to the business? Or, for service providers, do your sellers ask prospects how their costs cascade internally?

I bet not many, and that lack of awareness is a disadvantage when trying to inspire new behaviors, reduce office space, implement new technologies, etc.

Your responsibility is to educate your colleagues. (Hint: You can forward them this article).

So let’s talk about it.

Traditional Example: Real Estate “Below the Line”

In large enterprises, real estate costs (e.g., rent) are usually managed centrally and allocated to business units “below the line” as a ​chargeback​. Costs could be distributed based on revenue share, headcount, occupied desks, etc. There is no standard practice, and it gets more complicated when spaces are unassigned and reserved.

Even if the “who gets charged what” formula is updated annually, companies with good financial processes may have poor real estate data, which has several implications for driving change:

1. Lack of Trust: If a business unit is charged for space it doesn’t use, leadership could resist other changes or lose faith in the workplace team.
2. Financial Incentive: Why should a BU voluntarily downsize “for the company's good” if their P&L doesn’t see an immediate benefit?
3. Slow Pace of Change: Many annual budget cycles prohibit dynamic chargeback and budget changes in response to shifting workplace needs or desk sharing programs.

It’s not just grumpy CEOs that hamper modern working transformations; outdated chargeback mechanisms can also create bad behaviors.

For example, a BU head with employees in a poorly utilized office may impede the real estate team’s efforts to sublease or otherwise exit the space purely because their P&L would not see an immediate(-enough) benefit. Alternatively, they may try to relocate or hire staff into a non-strategic office because they don’t “feel the pain” financially.

Both cases could create internal, political tensions that divert attention from strategic projects.

Modern Example: T&E and Gatherings “Above the Line”

Companies like ​Atlassian​, Zillow, Airbnb, and Dropbox have adopted a “remote first, but not remote only” work model. They have downsized their office portfolios and used the savings to fund more frequent team and company gatherings.

And it’s working.

Atlassian ​reported​ that 1600+ Intentional Team Gatherings (ITGs) with an average of 16 attendees earned 96% satisfaction ratings, and 86% of Dropbox employees ​believe​ that gathering improves team effectiveness. The latter created an Offsite Planning Team (OPT) to enhance the management and execution of these gatherings.

How does this differ from real estate costs? In two key ways:

1. T&E expenses are typically found “above the line,” i.e., controlled directly by business units and not allocated to them like some kind of tax.
2. Companies may employ various gathering types, such as all-hands, local community events, coworking memberships, and structured programs like cohort training and board meetings. The costs for each may be governed differently.

For example, a BU could be directly allocated $X/employee/year for “regular” T&E, with retreat budgets available by application and cohort (e.g., intern, new manager) training budget held centrally.

This creates a new set of challenges:

• Volatile Budgets: Execs seeking cost savings love to cut travel and events, even from travel companies like ​Southwest​ and ​Airbus​. Protecting gathering budgets takes CEO-level cultural beliefs.
• Mixed Management: Unlike real estate, travel budgets may be fragmented, making it hard to implement company-wide policies or ensure team equity.
• High Demand: Gatherings and travel can be fun. Even comprehensive programs are not immune to department demands, especially when reducing office space.

Making the Switch: Fewer Offices, More Offsites

I have seen a version of the following exchange play out with a few clients:‍

• ‍Real Estate: Our lease is expiring, utilization is low, and I’m renewing for less space.‍
• Office Head: What about social events when more people come in?‍
• Real Estate: Sorry, policy says we have to reduce the footprint. What if I used some of the rent savings to increase and protect your T&E budget to host gatherings at other fun places?‍
• Office Head: Ha! That will never happen.

Do not underestimate the financial gymnastics and executive buy-in required to shift from “below-the-line” real estate allocations to “above-the-line” T&E budgets.

Change Management: Making Incentives Work for You

If you are serious about transforming company culture and footprint, educate your teams about chargebacks and align incentives to support behavioral change.

Leading companies also do the following:

1. Propose New Ideas—Have you ever considered swapping rent savings for increased gathering budgets? It won’t be easy, but you miss 100% of the shots you don’t take.
2. Build Trust with BU Leads: Are you apprenticing all members of your team on how to have candid discussions with their clients about budget mechanics? Or proposing ideas directly to them based on the nuances of their current chargebacks?
3. Increase Chargeback Transparency: Do you have a centrally available resource explaining how departments are charged for various experiences and resources?
4. Reimagine Central Services—Could your travel team help plan and execute gatherings? Could real estate manage and allocate costs for coworking memberships?

Employee experience is not just a strategy—it’s a product. Good products need transparent pricing and aligned incentives to make people want to “buy” them.

Change is possible when there is respect for and transparency about current chargeback mechanisms and the courage to propose policy changes.

With the proper knowledge and understanding, you can navigate the complexities of chargebacks and lead your organization (or clients/prospects) toward a more effective and inspiring workplace transformation.

It's all about knowing which side of the line you're on.

Has your company changed how real estate or travel and event costs are managed in the past few years, maybe to incentivize desired behaviors or improve experience?

Did you have to overcome challenges from Finance?

I’d love to hear and share your success stories!

- Phil