Five tips for com­pa­nies to re­duce re­lo­ca­tion costs

The Progress-Index - At Home - - DEAR MONTY -

Reader ques­tion: I work in fi­nance with a mid-size pub­licly traded com­pany. We out­source our re­lo­ca­tion pol­icy to a third-party re­lo­ca­tion com­pany. Our costs to re­lo­cate con­tinue to rise yet our re­lo­ca­tion com­pany says that short of re­duc­ing benefits; there is not much we can do. What is your an­swer to the ques­tion, “Is there any­thing we can do?” Bill G.

Monty’s an­swer: Not hav­ing re­viewed your com­pany’s re­lo­ca­tion pol­icy and re­lo­ca­tion de­mo­graph­ics, to pro­vide a con­crete re­ply is not pos­si­ble. The goal of a cor­po­rate re­lo­ca­tion is to sat­isfy the com­pany’s busi­ness needs. It is also im­por­tant to pro­vide for the em­ployee, and their fam­ily through­out the re­lo­ca­tion process. Many com­pa­nies could im­prove cost re­sults, but they fo­cus their ef­forts on ser­vice fees in­stead of the pol­icy. The re­lo­ca­tion com­pany reacts by cre­at­ing in­ter­nal pro­ce­dural changes to re­duce their costs which

un­wit­tingly adds a cost to the client.

Five out-of-the-box cor­po­rate cost sav­ing ideas

1. Limit the num­ber of files a re­lo­ca­tion coun­selor can ad­min­is­ter. One ex­am­ple of re­lo­ca­tion com­pa­nies re­duc­ing their costs is to add files to the re­lo­ca­tion coun­selor’s caseload. It is not un­com­mon for a re­lo­ca­tion coun­selor to be re­spon­si­ble for dozens of files. A coun­selor feel­ing over­whelmed is far less apt to ne­go­ti­ate a counter-of­fer or take the time nec­es­sary to eval­u­ate lo­cal mar­ket dy­nam­ics to know whether a counter is a good idea. If your ven­dor can­not in­cor­po­rate this con­cept, con­sider al­ter­na­tive ven­dors.

2. Fire your pur­chas­ing depart­ment when hir­ing a re­lo­ca­tion com­pany. There is no ques­tion the pur­chas­ing depart­ment is the ex­pert at driv­ing costs down. That’s how they are trained and paid. As best they do to quan­tify the ser­vice, a re­lo­ca­tion ser­vice is very dif­fer­ent than what pur­chas­ing typ­i­cally buys. Be­cause they do not work in re­lo­ca­tion, they do not com­pre­hend, nor value, the ser­vice re­quire­ments. The buyer of the ser­vice should be the depart­ment uti­liz­ing the ser­vice.

3. Re­duce the re­fer­ral fee the lo­cal bro­ker­age pays. In 1985, the typ­i­cal re­fer­ral fees agents paid for ac­cess to the re­lo­cat­ing em­ployee was twenty-five per­cent (or less). To­day, re­fer­ral fees are thirty-five per­cent (or more). When cor­po­ra­tions pres­sured re­lo­ca­tion com­pa­nies to re­duce ser­vice fees, the re­lo­ca­tion com­pany pres­sured agent re­fer­ral fees to main­tain their mar­gins. This ac­tion has caused many well qual­i­fied real es­tate agents who, be­cause they are in de­mand, to no longer ac­cept re­lo­ca­tion re­fer­rals.

4. Get ex­pert re­view of your re­lo­ca­tion pol­icy. Many re­lo­ca­tion poli­cies con­tain pro­vi­sions that do noth­ing to help the com­pany, nor the re­lo­cat­ing em­ployee, save money. Iden­ti­fy­ing th­ese pro­vi­sions is not easy be­cause some of the pro­vi­sions are real es­tate myths rather than fact. An ex­am­ple is a popular pro­vi­sion in many re­lo­ca­tion poli­cies that sets a max­i­mum price, based on an ap­praisal, at which an em­ployee can of­fer the home for sale. The myth is that ap­praisals are al­ways ac­cu­rate, and ask­ing more just extends mar­ket

time. Re­search con­ducted by a re­lo­ca­tion com­pany some years ago sug­gested al­low­ing the seller-em­ployee to ex­ceed the ar­ti­fi­cial price bar­rier some­times puts more eq­uity in the em­ployee’s pocket.

5. Hire the po­si­tion lo­cally. While there is a risk the new hire will not suc­ceed, there is also risk re­lo­ca­tion may fail. Depend­ing on job re­spon­si­bil­i­ties and other dy­nam­ics this op­tion may not be fea­si­ble, but there will be many oc­ca­sions this tac­tic will work and be a plus for other rea­sons.

Re­lo­ca­tion ex­ec­u­tive Jim Simon wrote a white pa­per ti­tled “The Ero­sion of Ser­vice In The Re­lo­ca­tion In­dus­try” in 2007. The ar­ti­cle de­scribed how ser­vice in the re­lo­ca­tion in­dus­try had slipped for a va­ri­ety of rea­sons. Cor­po­rate re­lo­ca­tion ex­ec­u­tives from em­ploy­ers and third-party ser­vice providers alike took no­tice, but near­ing a decade later noth­ing has changed.

The re­lo­ca­tion in­dus­try faults the re­ces­sion for higher costs, dur­ing which time vol­ume re­ceded. Cor­po­ra­tions added costly benefits to counter the ef­fects of fall­ing home val­ues or suspended or re­duced re­lo­ca­tions. The re­ces­sion sim­ply dis­guised the un­der­ly­ing causes tem­po­rar­ily.

Re­lo­ca­tion nir­vana

Cor­po­ra­tions can im­prove cost and ser­vice qual­ity by mod­i­fy­ing poli­cies and ap­proach with ser­vice providers. There is op­por­tu­nity for ad­di­tional cost sav­ings in updating pro­gram op­tions. Look for ways to re­duce loss-on-sale and hold­ing time in­stead of pres­sur­ing the ser­vice fee, which is a fairly small por­tion of the to­tal costs of re­lo­ca­tion. This is where the op­por­tu­nity for cost re­duc­tion lies in re­lo­ca­tion. —Richard Mont­gomery gives no-non­sense real es­tate ad­vice to read­ers’ most press­ing ques­tions. He is a real es­tate in­dus­try vet­eran. You can ask him ques­tions at DearMonty.com.

DEAR MONTY

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