Workforce.com

Outsourcing Relocation -- First-Time Jitters

March 1, 1998
In the past, companies with limited relocation needs handled the job themselves. It was a relatively painless proposition. The transferring employee submitted a few moving appraisals, and HR selected the vendor and later reimbursed the employee. The workload was manageable. By most industry standards, companies of this nature typically handled 25 to 50 relocations per year. With limited HR staff, resources and experience, the job still got done.

Today, this niche market for relocation services has grown in size and complexity. The U.S. economy is expanding. Smaller companies are creating more jobs, and the tight labor market is driving competition for top talent. Consequently, companies are casting their recruiting nets far and wide—transferring people in all directions. Add the increasing number of acquisitions and mergers—along with globalization—and it’s no wonder relocation is overstretching HR’s tight agenda.

The problem is that when HR handles relocation, the function typically comprises only 10 percent of its overall responsibilities, according to Rick Schwartz, president of Valhalla, New York-based Prudential Relocation, a relocation-management firm. Keeping track of one relocation file today is tough enough. Moreover, relocation knowledge has become so specialized that even if HR had the time and interest, one staff member couldn’t possibly handle the multiple caseloads without keeping a pack of Rolaids nearby.

The good news is that companies with limited relocation needs are a growing niche market, says H. Cris Collie, executive vice president of Washington, D.C.-based Employee Relocation Council. That means vendor competition for your business abounds. Bigger firms tout their nationwide resources and longstanding reputation. Smaller firms seduce you with promises of more personalized attention and lower costs. Whom should you choose? Is bigger always better?

Indeed, if your company is increasing its relocation needs beyond 25 to 50 cases per year, you already may have surpassed your threshold. It could be time to consider outsourcing your relocation functions. Yes, the first time is scary. But with the right knowledge and strategies, HR can select and partner with the right management firm. To make it easier, Workforce interviewed large and small relocation firms. We also talked to HR at companies with limited relocation needs. Following are their responses to some of the most frequently asked questions—and useful strategies to make your job easier.

Q: Is there an increasing number of companies with limited relocation needs seeking management services?
A:
Yes. According to Collie, companies in emerging industries, such as high-tech, are suddenly faced with expansion into new markets. They’re also being challenged by the need to maximize employee productivity as soon as possible after a transfer occurs. Companies, therefore, increasingly are turning to relocation professionals for help. "I see a potential in this market for relocation companies of all sizes. This environment really represents a new business opportunity, rather than just wooing clients away from competitors." In HR, therefore, leverage your potential as a client. Clearly articulate your goals and expectations so you can hold out for the right bidder.

Q: Are HR’s options for relocation firms better than ever?
A: Yes. Due to the consolidation of a few larger firms, the number of smaller and regionally concentrated relocation companies has grown. The founders and staff of these firms often were employed by these larger firms, says Leo Foley, chief operating officer of Winfield, Illinois-based Horizon Relocation Corp., a full-service relocation management firm. In addition, some relocation experts have become independent relocation consultants. Some have started their own firms or aligned themselves with van lines, real estate firms and mortgage companies to enhance a company’s relocation program. So there’s no shortage of relocation experts out there.

But Collie advises you not to base your final selection on the size of a relocation firm, but rather to consider service, costs and culture compatibility. Large and small firms alike should be able to provide personalized and cost-effective services. Shop around.

Q: At what point should HR begin thinking about a relocation firm?
A:
Before it’s too late, advises Donna J. Malinak, president and CEO of Bernardsville, New Jersey-based Forward Mobility, a small-to-medium size, full-service relocation management firm. Regardless of whether a company relocates one or several thousand employees, each relocation must be handled as a unique and individualized event. Studies, she says, have proven time and again that if a company wants to retain an employee after a relocation, the employee’s family and lifestyle needs must be met through the relocation process. "It’s never too soon to discuss the welfare of your employees. Waiting for your 25th relocation before you seek relocation assistance is like waiting for your 25th child to be born before you consult with a doctor."

Not everyone measures his or her company’s needs in the same way, however, says David Gold, manager of HR at Space Applications Corp. in Vienna, Virginia. "I would consider seeking the services of a relocation firm at the point HR was doing more than one relocation at a time." Whether you seek the services of a relocation firm now or later, HR must initially establish a company relocation policy that reflects the company’s budget and service capacity for different levels of employees. That’s the starting point.

Q: Why is HR having a harder time managing its relocation functions?
A:
As the relocation volume increases, it heightens HR’s workload. Each relocation case is unique, often fraught with special needs and unexpected problems. With so many players in the relocation process—van lines, real estate agents, mortgage lenders, immigration authorities, tax consultants, school and community-resources personnel, career-development specialists for spouses and elder-care professionals—HR professionals are less able to track multiple caseloads on top of their current job responsibilities. Says Pat Rhodes, manager of relocation services at Miami, Florida-based Ryder Move Management Inc.: "[Human resources managers] have been catapulted into a competitive recruitment environment. Today’s job candidates have been beneficiaries of other relocation policies. They’re more sophisticated, more confident. They want to know what you’re going to do for them. They know what to ask for. These factors are driving the volume and [complexity of relocations]."

If the difference between a small and large firm are significant, establish priorities and weigh the tradeoffs.
For example, at Chicago-based Tony Stone Images, an international provider of visual content for media publications, HR is right on the brink of needing such assistance. Due to acquisitions and reengineering, HR needs to focus on organizational development, motivating employees and increasing the company’s bottom line. "Relocation is too much for one person to handle," says D.J. Smetzer-Fineberg, North America HR manager. "Our concern has always been costs, but now, I’m open to looking at large and small firms. I want someone who can handle everything—immigration, real estate and the emotional aspects of relocation." The lesson for HR is to assess its capacity to handle the relocation function. Estimate how much time and money is currently being diverted from other strategic responsibilities. Build your case for outsourcing and know your needs and expectations.

Q: What, if any, could be the advantage of going with a smaller relocation company?
A:
With smaller companies, the consultants typically handle smaller caseloads than do larger relocation firms. They’re likely to deliver on their promises for consistent, customized, flexible and personalized services. With the more complicated relocation cases, the staff at smaller companies will be accessible and quick to solve unexpected problems. "Small companies do bond with their clients, and they’re less apt to have [staff] turnover," says Jim Anderson, a Trumbell, Connecticut-based consultant for Runzheimer International, a global management consulting firm. "The key thing is to find a cultural fit." The HR person, however, should ask these smaller vendors if they also have the economic capacity and nationwide network to handle the business. This would include a company’s technological capacity to track all phases of the relocation process.

Q: Is there any downside to hiring smaller firms?
A:
None by virtue of size alone. However, owners of smaller firms are aware that their greatest challenge is to convince clients of their capacity to deliver full services. HR managers often select larger firms because the relocation industry is relationship-driven. They value reliability based on a previous positive experience or industry track record. If the differences between a small and large relocation firm are significant, establish your priorities and weigh the tradeoffs of costs and services.

Q: Are the staff at these companies as qualified as those at larger companies?
A:
The difference between relocation expertise should be judged on a case-by-case-basis. Knowledge and reliability aren’t functions of a firm’s size. Because many of the staff at smaller firms came from larger companies, HR can ask the representatives about their professional backgrounds. Test their knowledge with probing questions that reflect your companies’ needs and expectations. Don’t make any assumptions on quality of service based solely on size. Give each prospective candidate a chance to win your business.

Q: How are larger relocation firms improving their service to this niche market?
A:
Although there’s a perception that larger firms aren’t interested in lower-volume accounts, some are bucking the myth. Many larger firms have formed separate divisions within their companies to handle the small-move accounts. Often these divisions are made up of staff who were previously employed by mid-size firms that were acquired by the larger firms.

Among the larger firms going after this niche market is Prudential Relocation. Schwartz says the company has made several recent efforts to improve its services. They include a client survey, a quarterly newsletter targeting companies with increasing relocation needs, three new sales staff, a cross-functional team, and new service-delivery options. If companies with limited but growing needs want speed, financial strength, national coverage and personnel stability, larger relocation firms will still be viable, he adds. The HR staff’s concerns, in this case, would be to examine the company’s immediate accessibility, costs and personalized services.

Q: Are there any other downsides to be aware of?
A:
One possible downside of working with larger firms is that many have a well-established approach. Thus they may not be as flexible as smaller firms. By clearly defining your expectations of services and the boundaries in which the firm should operate, you can better assess its ability to adapt to clients’ needs, says Edward Ferris, president of Plus Ultra Inc., a management consulting firm in Doylestown, Pennsylvania.

Q: Are van lines an option for managing relocation needs?
A:
Some van lines, such as Indianapolis-based American Red Ball Transit Co. Inc., have expanded their services to include relocation management. The company’s primary niche market is 40 percent military and 20 percent corporate clients. With 65 employees, the company usually handles approximately 10,000 shipments per year. But as competition within the relocation industry increases, the company has established a network of referrals to handle relocation every step of the way. One of its greatest assets is the ability to track goods anytime, anywhere, says Katrina Blackwell, president of American Red Ball. "Our niche is the 10-to-50-moves-per-year company. We don’t go after the 500-a-year account." HR, therefore, might want to consider the quality of services provided by van lines as well.

Q: What outside resources would be helpful to HR in selecting the right vendor?
A:
The most obvious resource is the Employee Relocation Council. You can visit its Web site at: http://www.erc.org

Also, contact your local chapter or the national office of the Alexandria, Virginia-based Society for Human Resource Management. Each organization should be able to provide you with a list of referrals and fellow HR managers who have worked with various relocation firms. Nothing tells it better than actual experience.

Q: How should HR go about the search?
A:
Benchmark as many firms as possible. And take the time to visit the office of each prospective vendor. Says Horizon’s Foley: "Meet the people; feel out their commitment to service. A good, basic HR question is, ‘Would I like this staff to service my family’s relocation?’ In short, test the chemistry. Employee relocation is a very personalized business because of the service being provided to individuals and their families. It’s a very painful process. There has to be a good fit, and an office visit will tell you much more than could ever be learned from a proposal."

Q: What kinds of questions should the vendor’s staff ask HR?
A:
You can evaluate a firm’s attention to detail by the questions it asks the employer. Because relocation involves more than moving household goods, see how attentive the staff is to personal family issues. Relocation representatives should be asking questions such as: Does the employee have children with special needs? Does the employee have a spouse who will require employment? What kind of living environment is the employee seeking? What kind of housing priorities does he or she have? Are there any physical or emotional needs that require special attention? The interview process is a two-way street. HR should come to the table with as much information as possible. But let the prospective candidate demonstrate its sensitivity to your employees’ needs.

Q: How can HR better forge the partnership once a contract is signed?
A:
Once a vendor is selected, HR managers and the relocation firm should clearly map out each other’s roles and responsibilities, transactions and interfaces. HR should manage the interface with the relocation firm as a high-level supply management relationship, says Ferris. The relocation company should take care of business in a highly effective, efficient and customer-oriented way. "[HR] doesn’t want to be involved in every minor decision. Relocation firms should make good decisions on a company’s behalf, based on pre-agreed parameters. In this set-up, quality planning and time definition are essential," he says. For HR to best measure its customer satisfaction, have predetermined cost, service and efficiency metrics prepared each month, and set up supplier performance reviews each quarter to review how the process is working.

Workforce, March 1998, Vol. 77, No. 3, pp. 70-77.