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The State of Relocation Smooth Moves

Centralizing a company's scattered relocation services and integrating them with related HR functions can save money, ease difficult transitions and more quickly get key strategic employees down to business in their new setting.

February 16, 2006
Related Topics: Relocation Management, HR & Business Administration
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When job candidates interview with Automatic Data Processing Inc., they receive information from the company’s relocation department about the cost of living, lifestyle characteristics and real estate costs associated with the area where the job is located.

    "We’ve become an integral part of the interview process," says Rebecca Kirschbaum, senior director of corporate relocation and real estate services programs for the payroll and benefits administration firm. "That’s a very big plus."

    New hires have decided to join ADP because they know from the beginning--not just after they’ve taken a job--what life may hold for them in a new city.

    When ADP is looking to move seasoned managers, relocation also plays a key role through the company’s cost-of-living program. ADP provides a three-year mortgage subsidy when an employee migrates from a low-cost area of the country to a high-cost one--like ADP’s headquarters outside of New York City.

    On many occasions, "that program has closed the deal, especially for senior executives," Kirschbaum says.

    Unlike ADP, most companies do not take a holistic approach to employee mobility, according to experts. Their failure to centralize and integrate relocation services costs them money and undermines employee morale.

    Companies also tend to approach international relocations in an ad hoc manner. A recent study indicates that 25 percent don’t have a formal policy for global assignments. Case-by-case negotiations can result in different compensation packages for expatriates who work together, which fosters resentment and makes the moves even more expensive.

    In a recent study, Runzheimer International estimated that total employee mobility accounted for 2.5 percent of revenue for U.S. businesses. The cost per employee across the entire workforce was $4,000 to $5,000, or 8 percent to 10 percent of an average salary, put at $48,276.

    The cost for a truly mobile employee is $20,000 to $25,000 each. In its definition of employee mobility, Runzheimer includes relocation, international assignments, business travel, corporate aircraft, business vehicles and mobile and home offices.

    Adding to the cost of relocation is that it often involves senior employees who are being moved to acquire new skills or use their skills in new operations and regions. Runz­heimer found that the average cost of relocation for an employee making $100,000 annually is $40,142. For someone moving internationally, the figure rises to $147,710.

    Despite high costs, companies often are ad hoc in their approach. "Relocation and (related) HR pro­cesses and functions have been and remain fragmented," says Stan Lepeak, managing director of consulting firm EquaTerra.

    Most companies haven’t yet put a high priority on relocation. "It is not something that companies feel is at the same level as their benefits or compensation, but it’s right underneath," says Denise Oemig, director of client relations, global mobility services, for Runzheimer.

    In November, the consulting firm recognized companies that have succeeded in centralizing their relocation operations. ADP was one of them. Another was Deere & Co., the manufacturer of John Deere agricultural and construction equipment.

    Nine years ago, Deere put all of its relocation processes under one roof. Its seven-person staff provides one-stop shopping for employees on the move. It works with other Deere areas, such as travel and corporate aircraft, and outsources some functions, such as real estate management.

    Deere has saved money by better orchestrating relocation. "We have cut out 20 percent of costs over the last nine years by centralizing," says Teresa Woodworth, operations man­ager for employee services at Deere. A company survey indicates 82 percent of its workforce is satisfied with relocation procedures.

    Easing the transition while employees are uprooting their lives is the goal of Xerox’s relocation efforts. The company moves 120 to 150 workers domestically and 40 to 50 internationally in a typical year. Each time a relocation offer letter goes out, it includes the name of a person in relocation who will be the employee’s "sherpa" through the process. The company emphasizes personal contact.

    "We try to do a high-touch, we’re-here-for-you approach," says Mary­ellen Maloney, a Xerox corporate hu­man resources manager. "The goal is to remove any stress and angst an employee might have."

    One of the biggest fears related to moving involves selling a house and buying a new one. Like many companies, Xerox offers a mortgage program that helps employees who have to relocate from an area where housing is basically affordable, such as Rochester, New York, to a region where prices are skyrocketing, such as Stamford, Connecticut.

    ADP introduces employees who are moving into tough real estate markets to local appraisers who can target house bargains and good neighborhoods. On the selling side, the company helps employees market their homes and guarantees that it will buy a home for 3 percent less than its appraised value. ADP sells about 93 percent of its homes above the lower-than-appraised price and now takes 8 percent fewer into inventory.

    The company also has been able to save money through its three-year mortgage subsidy. By offering the subsidy, it has curtailed the 5 percent to 8 percent salary premiums it formerly offered in areas with higher costs of living. The reduction in salary inflation has helped the company save money.

    Another relocation trend that has made employees and companies happier is the use of lump-sum payments for relocation costs. Instead of having to wade through reams of reimbursement paperwork, employees are given an amount of money to spend in any way they see fit--for travel, hotels, movers or even to purchase a video for their kids to watch while Mom and Dad negotiate real estate deals.

    "Each employee has individualized needs for their move," says Maloney, who notes that Xerox has been using lump sums for more than a decade. She winces when thinking back on the days of reimbursements. "Administratively, it’s a nightmare," Maloney says. Lump sum "is a much more streamlined process."

    For most people, moving is an ordeal. Removing obstacles to relocation is even more important because it’s usually high-performing employees who are sent to new locations to develop their skills and lead projects central to company performance.

    "The quicker we can get an employee settled, the quicker they’ll be productive on their job," Maloney says.

Workforce Management, February 13, 2006, pp. 33-34 -- Subscribe Now!

Recent Articles by Mark Schoeff Jr.

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