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Planning and Cost-estimating Saves Huge Relocation Costs

Relocation experts say that one key to holding down costs is developing an actual-cost budget and reviewing it before relocation is even offered. It sounds basic, but few companies do it, says Frank M. Patitucci, chairman and CEO of ReloAction. Less than five percent of the companies his firm works with add up the costs before they decide to relocate an employee.

“They think of the person first, then look at the cost,” adds Maggie Ryan, senior vice president of GMAC Global Relocation Services.

Until a few years ago, Koch Industries, Inc., didn’t do up-front cost estimates either, says Julie Martin, relocation administrator for Koch Business Solutions. The wholly owned subsidiary provides relocation and other services to Koch Industries companies, which are involved in refining, asphalt, natural gas, chemicals, plastics, and ranching, among other ventures. Koch Industries is based in Wichita, Kansas, and employs 11,000 people worldwide.

In 1998, Koch companies were spending $30 million a year for relocations. As Martin met with business leaders in the companies to discuss the costs, “I realized that they did not know what they were signing off on” as they approved relocations. That wasn’t acceptable, Martin says. “We needed to understand how we were spending.”

She began working with HR leaders in each company, supplying information on how to help managers make smarter moves by estimating costs up-front, and assessing whether an employee was a good candidate for relocation. She also shared historical Koch company information on how relocations affected employee retention.

In 1999, as a result of better cost-estimating and better communication about the relocation process, the companies had reduced their spending by 10 percent, Martin says.

She has refined the process over the years, and supplies HR leaders with relocation cost comparisons from other Koch businesses, and companies in similar industries. She continues to report on retention trends that might be affected by relocations. She provides cost-estimation tools for managers. Martin also sends along information pieces that HR can use to remind managers of the issues they should explore before relocation, such as thoroughly researching potential local hires before considering an out-of-area job candidate, and looking into any employee family issues that might make a relocation fail.

As a result of all those efforts, she says, relocation expenses are no longer just reviewed (and regretted) in hindsight.

“We’ve gained a lot of trust with our businesses,” Martin says, “and so we’re having conversations before the decision is made to relocate someone.”

Workforce, May 2002, p. 38Subscribe Now!