Baker’s Dozen -Relocation:With conditions in the real estate market declining each day, employers tweak mobility policies to ensure that home sellers aren’t blown away by the challenges they face. Included in that strategy is a concerted effort to involve relocation providers and their expertise.
Few career events are as stressful as relocating to a new assignment, but these days the stress isn’t limited to just the employees. Ask any corporate relocation manager the source of their angst, and they’ll likely give you two words: real estate.
As home sales continue slumping with seemingly no end in sight, relocating employees has become nightmarish for both mobility specialists and employees alike. With each month bringing news of further declines in home sales and home values, it’s no wonder transferees are experiencing reverse sticker shock as they go to sell. Moreover, some homeowners may be stuck because the value in their houses has fallen so far that they have negative equity.
While the market has led to an employees’ higher rejection rate of relocating, a number of companies interviewed by HRO Today say they haven’t seen a significant decline in the number of moves recently. Even as employers increasingly turn to local talent and to alternatives to traditional moves, they still need to move key performers to developing and growing markets here and abroad.
Not surprisingly, a number of companies are turning to their outsourced relocation service providers for answers and support. With some internal mobility professionals in uncharted waters—never having worked in the profession during a real estate slump— they are asking relocation companies for sage advice on practical and policy matters. Outsourcing practitioners are also relying on vendors to work more closely with transferees to reduce sell time and to prevent properties from going into inventory.
“Now, more so than any other time, relocation companies are looked upon as value-added experts,” said Jim Schneider, senior vice president at Weichert Relocation Resources Inc. “Prior to 2007, the wind was at our backs, we had a great real estate market, and it was easy to deliver great results to clients. Today, it’s a vastly different environment, and relocation companies that offer the best strategies to insulate their clients from challenging market conditions can really differentiate themselves in the industry.”
Schneider said the depressed real estate market has sent many employers scrambling for help with their mobility programs. Under pressure to reduce costs, many companies are asking for assistance with policy development and cost-cutting measures. According to Weichert, the search for solutions isn’t limited to changing just a few points here and there; it is weighing alternative and innovative programs, encouraging short-term assignments instead of traditional home-sale moves, and raising thresholds and mandates to minimize issues such as loss on sale.
Industry observers say during the boom times, employers enjoyed a hands-off approach to helping transferees sell their homes. These days, HR is again actively involved with supporting those efforts.
“What’s old is new again. Companies are doing what they used to do prior to what we had in the past seven years, when you could sell your home in a heartbeat,” said Scott Sullivan, senior vice president of sales and marketing at GMAC Relocation Services, which offers end-to-end mobility solutions. “Now we are entering a down cycle, but actually it’s a normalized situation in terms of companies providing additional benefits that they might have 10 to 15 years ago.”
Like many relocation service providers these days, Sullivan said he sees employers in conjunction with their vendors enticing transferees to sell their homes at current market value. That means they are taking steps such as making sure the homeowner is working with a knowledgeable agent who can market the property at the appropriate price, offering seller assistance with prepping the home for sale, and even offering incentives for selling within the first 30 to 60 days. That’s because the reality is that homes are staying on the market for a longer period of time, and many of them are going into inventory. Sullivan noted that 18 months ago, GMAC managed about 25 homes in inventory; today, there are more than 500.
So, how are outsourcing mobility services helping buyers? In addition to their consulting expertise, providers are working more closely with employees to ensure the selling cycle doesn’t drag on. Through buyer value option (BVO) programs, providers are more closely collaborating with transferees and their employers to find buyers. In some cases, the relocation company’s in-depth knowledge of market conditions can save clients months of waiting because of unrealistic expectations. They are also advising homeowners on getting the property’s condition into a marketable condition.
“You know the old adage about location, location, location? Well a corollary to that is condition, condition, condition,” pointed out Joe Benevides, senior vice president of global relocation services at Paragon Relocation, and the president of the Employee Relocation Council, an industry trade group.
Benevides said that providers are working with clients to develop effective policy changes, including offering allowances to transferees to fix up their homes prior to marketing it. Like other industry experts, Benevides said the slumping market doesn’t mean all buyers have gone away; he noted that if a property is priced correctly, it can sell within 60 days.
He lamented that the market has also taken a toll on service providers because it is taking longer for homes to sell. Because relocation vendors generate the bulk of their revenues when sales are completed, their consultants are spending more time on each move, which means cutting back on the number of clients. .
Globalization Ongoing
Even as employers and their workers struggle with the real estate market, they also must balance these challenges with the need for relocating employees to growing and new markets. With the U.S. economy headed toward recession, many companies are seeking shelter overseas, which means the need for talent mobility has not diminished. In fact, the allure of outsourced relocation services is that many providers have a global footprint and can help handle a client’s need anywhere around the world.
In its 2008 Global Relocation Trends Survey of 154 corporate buyers, GMAC found that global HR experience was the most important criteria in selecting a service provider, followed by pricing and service philosophy. In fact, global experience was also the top selection criteria in previous years.
Ursula Cabalzar, a senior global mobility consultant with software giant Oracle in Redwood Shores, CA, said her company is considering expanding its relationship with provider Lexicon to include more overseas markets. Currently, the vendor tends to its domestic and inbound U.S. relocations, but Cabalzar said Oracle may look to include areas such as Latin America. Even though only 20 percent of its moves are foreign, the company nevertheless could benefit from including overseas transferees in the outsourced program, she said.
“For U.S. inbound moves, Lexicon came up with a very specific inbound service,” she said in praising the self-service aspect of the program. “The younger people who grew up with PCs want to be able to look up things on their own.”
Like many corporate buyers of mobility service, Cabalzar said outsourcing frees up her time to work on exceptions, ensures the company is compliant with tax reporting requirements, and offers both online and call-in support for users. Because the majority of Oracle’s employees are young and don’t own homes, the real estate market has had a lesser toll on the company’s mobility program, but she noted that it still relies on Lexicon to efficiently handle its temporary housing and household goods move.
“You hope your relocation provider actually provides you with suggestions to help you become more competitive,” she added.
Getting consultation on developing a more competitive policy is just one reason to outsource relocation services; ensuring the policy is applied uniformly around the world is another. In fact, consistency of policy application is cited as the third most important benefit of outsourcing relocation services, according to GMAC’s study. Carmella Elletson, regional director of global mobility services for the Americas at Crown Relocation, noted that many companies outside the U.S. struggle with inconsistent policies, sometimes even in the same country or region. The result is compliance and administration headaches. Vendors can help mitigate the disparity when possible, she added, but sometimes developing regions many require different considerations.
She explained that while relocation service providers try to usher in greater consistency to their clients’ practices, they also have to be mindful that some markets and industries will require the employer to be more generous than in other verticals or regions, or risk losing talent to competitors.
Clearly, the market forces gripping employers these days are leading many of them to consider outsourcing if they haven’t already. And the trends are pointing toward turnkey service instead of point solutions. As service provider Cartus’ John Arcario pointed out, during the past two years, there has been increasing demand for end-to-end mobility service, especially as companies look to expand their outsourcing engagement to include multiple countries, and as they look to hold down costs.
“We’re seeing a lot more outsourcing. What’s happening is that companies are holding back approving additional headcount,” Arcario pointed out.
“Particularly in the mobility arena, they don’t want to make capital expenditures that would only impact a small percentage of their population. Why build an infrastructure when you can pay variable costs and get the benefit of installed programs and existing investments in people and technology?”
He added that outsourcing provides one more benefit to employers’ cost-cutting effort: clarity of relocation costs. Because third-party providers are usually better at tracking mobility spend, they can offer up-to-date reporting so CFOs and HR managers can better track budgets.
As corporate relocation programs come under increasing stress from today’s economic climate, buyers will need more support than ever before to ride out the turbulent times. Gone are the days when they could simply count on transferees to handle their own home sales. Now is the time when hands-on attention—whether provided by internal relocation specialists or an outsourced vendor—is needed the most. And it’s a truth that’s evident in markets all around the world.
