Even as employers face greater globalization of their businesses, the relocation market is meeting their needs with more robust solutions and a greater geographic reach. While cost reduction is a major driving force behind outsourcing, don’t underestimate the importance of service quality.
One of the most costly services HR manages these days is the relocation of employees. On a per-employee basis, relocation can run into tens of thousands of dollars, depending on the assignment. For many organizations, cutting costs has become a mandate when outsourcing relocation services.
As a result, employers and their relocation service providers are turning to some innovative ways to hold costs down, including one-way assignments, telecommuting, and giving employees more input into how relocation dollars are spent, usually in the form of a lump-sum stipend. Providers are helping by coordinating logistics and keeping moves on schedule, which help avoid unnecessary costs. For instance, making sure that household goods arrive at the same time an employee’s new home is ready to be occupied cuts storage and temporary housing costs.
But the value of relocation providers is not just about cost savings. In fact, service delivery ranks high among the criteria buyers consider. Providers are expected to lend support to both HR specialists and employees, who are usually struggling with not only a new location but also a new job as well. And with many relocation specialists now boasting a global reach, they are much better suited to find local housing, orient family members to communities, and offer up native language support. Many organizations simply are unable to offer such a comprehensive range of support internally.
“Companies don’t necessarily have the core competencies in-house so they prefer to focus on core business and keeping up to date on all tools necessary to run a program,” according to Kathleen Morris, VP of Global Solutions Consulting Group, Prudential Relocation,.“It is time consuming, and a lot of clients are not interested in running those services.”
Indeed, a large portion of companies believe outsourcing relocation services—whether end-to-end or a single service—can improve their relocation policies. A recent study conducted by GMAC Global Relocation Services showed that 46 percent of organizations surveyed believe that outsourcing improved policy application. GMAC also reported that 65 percent of respondents were engaged in efforts to reduce costs associated with international assignments, citing policy as a channel for achieving this goal.
The company’s most recent report also cited providers’ specialized expertise as the top reason for outsourcing, followed by better tracking of relocation costs and adherence to company policy.
At the same time, the relocation market has helped make the decision to outsource easier for employers. One reason is that vendor consolidation in recent years has built up the capabilities of many existing vendors, and they are able to offer a more robust offering than ever before. In addition to finding housing, obtaining mortgages, and other traditional services, some of them now go well beyond the pale. On a global basis, some companies are gaining footholds in developing markets in Asia and Eastern Europe, where an increasing number of international businesses are establishing a presence.
These outsourcing providers are also responding more quickly to changing relocation trends and demographics. For instance, the number of long-term relocations is falling, driven by several factors. For one, workers are increasingly resistant to the traditional 3- to 5-year moves, opting instead for commuting from their home to the new office. In an age of growing virtual offices, this is being seen as more acceptable than ever. Long commutes are especially popular in the European labor market, where a number of workers travel, say, from Paris to Brussels or London to Paris instead of relocating to those cities.
Another factor reported by GMAC is growing spousal resistance to being relocated, especially because many women now have their own careers. (The same report found that while more women than ever are expats, they still only account for just 23 percent of the total.) In fact, spousal career was cited as the No. 2 reason why employees turn down assignments, behind family concerns.
Because cost reduction remains one of the top reasons for employers to outsource relocation services, they see providers not only as a vendor who can achieve that but also someone who can better track their workforce abroad.
“Large organizations also have assignees that they don’t know. One of the key challenges is keeping track of how many assignees they have, where they are, and if they are operating in the countries under a compliance basis, from a legal immigration standpoint,” added Stephen Fairn, managing director for Pricoa Relocation EMEA Region, in Europe complications.
Indeed, having one relocation vendor makes it easier for HR managers to track all costs related to a particular move and also to reduce those costs.
But HR faces a difficult task: balancing cost savings with the need to ensure employees’ lives are least disrupted during the move. It’s this balance helping to drive greater outsourcing of relocation services because providers with local presence in the target market can better grasp particular challenges of moving to that area.
A survey of relocation service buyers conducted by HRO Today in May of this year found that customer service for clients and transferees remains the most important quality they look for, followed by industry knowledge and flexibility. Pricing, surprisingly, ranked fourth.
As markets grow increasingly global, employers may be faced with more complex relocation challenges than ever before. With relocation providers stepping up their capabilities and geographic reach, expect them to bring to the table innovative solutions to help buyers tackle many of these complexities.