Changing demographics and globalization force employers to face a new set of challenges in their efforts to grow into new markets.
U.S.-based global employers know that relocating employees abroad can be a costly and complicated chore, especially when the destination is Europe, where currency discrepancies will give any American expat sticker shock these days. Furthermore, the European relocation market is about to reach a tipping point. Industry observers note that the structure of the European Union market is changing rapidly as in-house relocation groups are finding it increasingly difficult to meet the new challenges they face, all as a result of seven key market trends:
• Relocation services are shifting from in-house to outsourced solution. The first trend that most industry observers talk about in Europe is the growing demand for the outsourcing of relocation services. As HR managers grow accustomed to the use of HRO, they are looking for other areas of the back office that can benefit from outsourcing. Of particular interest is relocation. While the number of relocating employees in an organization may only represent a small segment of the organization, the time and cost invested into it can eat up big resources. As a result, European HR managers are rethinking relocation outsourcing.
• Globalization is driving demand. A big agent of change in European relocation has been the rise of globalization. With the expansion of the EU and the breakdown of the barriers between major markets in Europe, companies are able to enter new markets more easily than before. As they expand the sale of their products and services to other countries, they are challenged to staff their new foreign operations. Globalization has been a huge driver of relocation services across the world as companies enter new markets and need to place qualified personnel into control positions.
• As the expatriate pool expands, the demographics are shifting. According to a trends survey published by GMAC Global Relocation Services, the use of
relocation is increasing across the board. This reflects the issues and trends recognized by 180 relocation organizations of all sizes, managing a combined total worldwide employee population of more than 8.4 million. Of the respondents, 49 percent were companies headquartered within the EMEA, the first time in the 12-year history of the survey that the U.S. has been outnumbered, further reflecting the new global face of relocation. Making relocation assignments more attractive and possibly contributing to the shift in demographics could be the use of advanced technology, which has made it much easier for workers to be distant from families while on assignment.
• The war for talent Is directly impacting relocation policy. As companies expand their operations into other countries, they must contend with a new talent pool. This presents an obvious problem as they may not be familiar with the new country or may be faced with a talent gap in the availability of necessary skills. Labor shortages exist in some locations as older, more experienced employees retire. To address these issues, the company can turn to relocation of its own employees or it can begin to search for new hires—which puts it in the midst of the war for talent.
• Relocation services are becoming a buyer’s market. With globalization and the need for more specialized expertise increasing, demand for relocation services has substantially grown, as well. The European Relocation Association estimated that there are now 600 suppliers of relocation services in Europe, making it a buyer’s market. This represents both large and niche firms. While there may be about 10 very large global
leaders, other firms are rising and increasing their capabilities.
• The buying decision is shifting: Procurement is involved in more transactions. With the changing global economy, the relocation process has become more involved and complicated. Constant pressure to reduce costs and increase efficiency has required buyers to involve more stakeholders in the vendor selection process. As a result, the procurement department is being asked more frequently to participate in the process from the very beginning. Observers noted that five years ago, procurement was rarely involved in the selection process; today, it is hands-on throughout most of the process.
• Companies are offering creative alternatives to long-term assignments. As the number of relocation assignments increases, the pressure to reduce costs will continue to rise, as well. Companies will have to be creative in order to satisfy their budget concerns, as well as remain attractive to prospective candidates. According to the GMAC survey, 55 percent of respondents were seeking alternatives to long-term assignments.
As employer preferences shift toward outsourcing relocation, they can look to a cornucopia of services offered by a growing base of providers throughout Europe. And in these times of HR doing more with less, outsourcing may be their best salvation.