Relocation Changes to Fit Changing Times

Economic, social, and technological shifts are affecting how HR handles relocations. Here are the latest trends, and how HR is responding to them.

August 7, 2002

Once, relocation was a simple business. Pick an employee who is on the management fast track. Pack him up. Plunk him and his compliant family down in Cincinnati or Singapore for a few years of business experience. Repeat every three years as needed.

It’s not that way today. In a wobbly economy, it’s harder than ever to justify the expense of relocation. The average cost of a domestic move for a home-owning employee is $45,000, according to Runzheimer International in Rochester, Wisconsin. A three-year international relocation assignment could cost a company $1 million, says Margery Marshall, president of Newark, New Jersey-based Prudential Relocation.

Some employees balk at relocations, concerned about sacrificing spouses’ careers and family stability, particularly at a time when some companies have relocated workers and then, a few months later, laid them off. Finally, the case for many relocations weakens as technological alternatives become more feasible. For some jobs, working via the Web, e-mail, teleconferencing, videoconferencing, and a beefed-up travel schedule have proved to be just as effective as working from a new location.

Smart companies are changing their relocation practices to adjust to these economic, social, and technological shifts, relocation experts say. Nearly 60 percent of the companies in the Global Relocation Trends 2001 Survey Report say they are seeking alternatives to relocations, and 91 percent of those companies say cost containment is the reason.

“The whole dynamic of relocation is changing as business changes,” says Maggie Ryan, senior vice president of GMAC Global Relocation Services in Warren, New Jersey.

The recession slows relocation
Domestic relocation is down, several market experts say. “It dropped with the slowdown of the economy, and dropped even more after 9/11,” Marshall says. “And now, I think companies are in a holding pattern.”

Overseas relocations also have slowed, according to the Global Relocation Trends 2001 Survey Report, conducted annually by GMAC Global Relocation Services, the National Foreign Trade Council, and SHRM Global Forum. Thirty-five percent of the companies surveyed reported a decrease in the expatriate population in 2001. Only 26 percent reported an increase, 17 percent below last year’s figure, which showed a 43 percent increase in the expatriate population.

But some companies buck those trends, says Laura Herring, president and CEO of The IMPACT Group, a St. Louis-based company that specializes in relocation assistance.

One client, Johnson & Johnson, has kept its domestic relocations “moving full steam ahead,” she says. “They want their people to take the moves for career development or business promotion.”

Herring thinks the tide is about to turn for other companies. “I think by the third quarter, as the economy picks up, we’ll see the floodgates open.” Many companies believe that relocations are integral to leadership, career development, and strategic business decisions, she says, because of the breadth of experience they give employees.

But even when the economy turns around, the experts say, organizations still face a daunting challenge: many employees regard relocation as a gigantic barrier to maintaining a balanced and happy life.

Dual careers, sandwiched boomers, and Generations X and Y
While companies might be able to sell relocation if a spouse’s job is part-time, lower paying, or less interesting than the employee’s job, it doesn’t work with true dual-career couples, relocation experts say.

“It’s not that one has a great career and the other just has a job, but both have serious careers,” Marshall says. “That means more complexity, and right up front, more declines for the move.”

With temporary assignments, companies save the costs involved in helping employees move, sell their homes, and find new ones.

Some employees decline relocations because they are uncertain if their company is going to stand behind them, says Kim Rutherford, vice president of operations in the east and northeast regions for the human resources and career transition firm of Drake Beam Morin. “We’ve seen folks go to a new place and then be put out of a job with a restructuring. People think two, three, four, and five times about relocation because of things like that.”

She and others in the field say that generational differences also factor into relocation resistance. Baby boomers are concerned about being far away from aging parents and about the effects of uprooting their children from school and friends. Generation X (born between 1965 and 1977) and Generation Y (born in 1978 and thereafter) simply look at work and loyalty very differently. “They don’t have that psychological contract that says they’re going to be with the company forever,” Marshall says. “And maybe they’ve seen their parents stung [by layoffs or failed relocations]. They think: ‘My career is not my whole world. It’s just my job.’”

Relocation alternatives and cost-saving strategies
In response to these relocation issues, there are strategies and alternatives that HR can employ:

Short-term assignments. Depending on the business need, companies can temporarily relocate employees to do project work, open a new plant, or gain a specific body of knowledge for career development, the relocation experts say. With temporary assignments, companies save the costs involved in helping employees move, sell their homes, and find new ones. Employees working on a project for six months or less often do not take family members along, further reducing costs.

“We are seeing more short-term assignments -- under 12 months,” says Bob Bill, executive vice president of Paragon Decision Resources, based in Rancho Santa Margarita, California. “Typically, there’s a project, or a start-up, and they’ll move talent around the world. They’ll train, get things started, then bring in local hires to take over, and the talent either moves on to the next assignment or comes back home.”

The in-house relocation experts at Avaya, headquartered in Basking Ridge, New Jersey, recently have been approached to develop a short-term assignment plan for employees in the finance group, says Michelle Ostrander, manager, global employee movement support. The technology company, which provides voice and data networks and communications solutions and services, has 23,000 employees based in more than 50 countries worldwide.

Avaya’s finance organization wants to move its recent hires through six-month rotational assignments at different company locations, Ostrander says. Not all the assignments entail moves, but some will, including a six-month international stint.

The finance organization wanted guidance on how employees would be housed during their rotations, since they are unlikely to sell their homes for so short a move. Managers wanted to know if employees could receive a housing allowance. “We have helped them put together a policy for all that,” Ostrander says.

For short-term assignments, housing could be a hotel, a corporate apartment, or an unfurnished apartment with furniture rental, according to Runzheimer International. The relocation firm recommends that companies think of temporary assignments in three different groups -- terms of up to six months, six months to a year, and more than a year, which is how many rental leases are structured. The IRS considers assignments beyond one year to be permanent relocations, and there are tax consequences. (For more on the tax implications of short-term assignments, see Runzheimer International’s article “Managing Temporary Domestic Assignments”)

Travel and technology. This could be called a blended alternative to moving. Instead of relocating, an employee mixes and matches the key components of travel and sophisticated technology to get the job done.

Raymond Lewis, director of communication for PricewaterhouseCoopers’ U.S. human capital practice, has this arrangement. He lives in Chicago, where he is a part of the firm’s diversity and work-life unit. But he spends two or three days a week in Manhattan for his primary assignment, working with the U.S. human capital practice. The firm’s technology, which “plugs you into everyone else in the organization,” makes his split-location work schedule possible. He’s convinced that technology can’t replace face-to-face communication, hence the frequent-flier miles.

“There’s a need to be there, to be involved in impromptu meetings, particularly in an environment where things happen quickly,” he says. “Nothing replaces face-to-face interaction and actual physical presence in meetings.”

The travel-and-technology approach has found a niche in the relocation industry. Two of the industry experts that Workforce interviewed for this story did not relocate for their current positions.

Ryan lives in Chicago and commutes weekly to GMAC’s headquarters in Warren, New Jersey. As senior VP of global relocation, she oversees employees across several time zones, and so “there was no valid reason for me to uproot.” She says teleconferences among her global team members are key to the process.

Such teams don’t coalesce and work smoothly without training, she adds. “We put them through a cultural orientation program on how to work as a global team. You’ll find in the Asia-Pacific, for instance, that team members are much more reticent. They don’t participate. It’s difficult enough in face-to-face situations, but in teleconferences, it’s really difficult.” Leaders learn to make sure that everyone at an electronic meeting is involved in the project and is a full participant in the discussion.

Pete Wayman recently began a new job as executive vice president of client relations for Cendant Mobility, which provides relocation management services to the private and public sectors. Although the company is based in Danbury, Connecticut, he continues to live in Dallas, but spends one week a month at the firm’s headquarters. The rest of the time, he’s usually on the road visiting clients.

“Our clients are all over the U.S., and my staff is all over the U.S.,” he says. “I live six miles from the Dallas-Fort Worth Airport and I use that as a launching spot to visit clients and our account executives. Several of us work from home offices so we can be closer to clients.”

Cendant’s computer and telephone systems allow Wayman to work remotely just as he would in the corporate office. He can access his workplace desktop from any location that has a Web connection. And he can trigger his phone to ring first in Danbury or in Dallas, depending on where he’s working. If he doesn’t answer in Dallas, the call cycles back to his assistant in Danbury.

Wayman recognizes that the nature of his job shapes his ability to work as he does.

“If I were doing the chief financial officer’s job, I couldn’t do it from Dallas. For some jobs, though, if you’re closer to the client, to the airport, to where the action is, it’s a help.”

Pre-decision counseling and other “soft” services
Sometimes, relocations really are necessary. And since family issues are the cause of more than 80 percent of failed domestic relocations, companies are deciding that they’d rather pay for relocation support services such as a spouse’s job search, community resource research, or ongoing counseling during the relocation.

The price of counseling packages varies depending on components, but ranges from $1,000 to just over $2,000, IMPACT Group CEO Herring says. She contrasts those numbers with the cost of a failed domestic relocation, which she estimates is $115,000. A company could pay for relocation research, spousal job counseling, résumé preparation, and job searches for numerous relocating employees for less than the cost of one or two failed relocations per year, she says.

For an employee who is on the fence about relocating, Herring recommends pre-decision counseling. “Before they accept the offer to relocate, employees will call us, and we’ll walk them through a needs assessment: what will the family need to make this a successful offer?” Then, IMPACT Group counselors help the family investigate the options in the new location. This can include the availability of services, such as schools for special-needs children, and options for the employee’s working spouse. If the job market is different in the new location, could she telecommute? Would she consider working as a consultant?

“What we say to the corporation is this: Give people the most accurate information in the most direct way, and they’ll make an informed decision.” Relocation experts say it is better for an employee to turn down a relocation than to make the move grudgingly, suffer with a miserable family, and ultimately quit the organization.

Lump-sum payments and tiered policies
If a relocation is an organization’s choice, there are things it can do to control costs:

Lump-sum payments. Rather than offer a full menu of services and pay whatever those might cost, a company can present employees with a certain amount of money, and let them apply it to what’s most important to them.

“It gives them more empowerment and accountability,” Marshall says. “The companies are saying, ‘We’ll provide this to you. It’s a benefit. But you need to take more ownership for it.’”

There are downsides to lump-sum payments, however, says Frank M. Patitucci, chairman and CEO of ReloAction, a relocation services company in Pleasanton, California. “It was a big trend about five years ago, and people went overboard with it,” he says. “They found that people didn’t spend the money on the things they should have,” and came back to employers asking for more.

Now, he says, lump sums play a part in moving programs, such as a sum to cover a house-hunting trip, with the details of how much is allotted to airfare, car, and hotel left up to the employee.

Tiered policies. A tiered relocation policy makes sense because it’s based on the idea that some jobs are harder to fill than others, and relocation payments and services should be scaled accordingly.

“Packages and policies used to be in a box: here’s what you get,” Marshall says. “It was developed for mid- to high management, for career development and exposure. Now we see very tiered policies. They’re based on level, job function, and how much a company needs you.”

“If you need a plant manager in China, you’ll pay whatever it takes to get him there,” Wayman adds. “If you don’t have him, you’ve got a problem. But a senior accountant job in Manhattan? You’re not going to relocate someone from L.A. to take that job. You can find someone closer.”

Workforce, May 2002, pp. 34-41 -- Subscribe Now!