Comment by tomatocracy

Even if it's set up with the "right" incentives, internal cost allocation can cause bad unintended side effects at the firm level. I worked at at large bank during the financial crisis. Individual teams got charged an implied rent for the space they occupied to their P&L - sensible because it means you can get a better idea of how profitable they really are. However, they went further and the rent was also higher for "nicer" parts of the building (which the firm owned and did not sublet to anyone). So when lots of space became available as large numbers of people were let go, teams moved themselves to empty space which was "less desirable" so had a lower internal rent. The space they left was left unoccupied, so this didn't save the firm any money. Worse, an external contractor was used to move the stuff between desks so it actually cost the firm money while "saving" the team money.