Mobility Cost Management: Optimize Holistically
Focusing on smart cost management is a regular business practice, however in today’s fast changing and uncertain economic environment, mobility leaders need to continue finding new ways to optimize mobility program costs.
Cutting benefits and the number of assignments are sometimes seen as an easier way to obtain short-term cost reduction, but doing so without a larger strategic framework could have an adverse effect in the long term. This article is the first of a two-part series and outlines steps global mobility leaders can take to focus on a more strategic approach to cost management.
First Things First: Establish an Effective Candidate Selection Framework
The cost of an international assignment is generally estimated to be two to three times base salary, and per Worldwide ERC’s latest Transfer Volume and Cost Survey, the average cost to relocate a U.S. employee who owns a home is over $85,000. While the monetary cost of the move is often most visible, internal conversations and considerations should not revolve solely around the cost of individual assignments. Moving the wrong employees on a group move or sending the wrong candidates on assignment not only puts the return on investment in jeopardy, but depending on the situation, it could also lead to assignment failure and attrition. To avoid this and to manage costs strategically, global mobility leaders should work with Talent Management and business leaders to establish some basic governance practices. Having a mutually agreed on set of the objectives for mobility, a process in place to justify the transfer or assignment and it’s cost before any candidate is selected is a significant step towards obtaining value from mobility. At the most fundamental level, companies need to ask and answer some critical questions:
- What are our objectives for employee mobility?
- How should international assignments be justified?
- Would it be more effective to source locally?
The second step is to consistently and equitably assess individual candidates proposed for the relocation. For international assignments, candidate pools can contain high performing individuals that have expressed a willingness to relocate and already have the skills necessary to succeed on assignment. From there, companies can assess the adaptability of individual candidates and any accompanying family members for the specific assignment location. In addition, everyone, including Mobility, Human Resources, Talent Management and the business, as well as employees need to have a clear understanding of how the relocation or assignment fits into their overall career plan.
Careful consideration of the transfer or assignment itself as well as the adaptability of the employee and accompanying family and the potential career impact before finalizing offers helps eliminate costly mistakes and ensures the right candidates are being sent to the right locations for all the right reasons.
Total Relocation Cost: Estimate, Track and Report
Having visibility to both estimated and actual assignment cost is critical for global mobility leaders. Yet, as BGRS’s 2016 Global Mobility Trends Survey reported, many companies don’t have streamlined cost management practices in place. For example, only 61% of survey respondents reported that they prepare cost estimates for all international assignments, and only half of respondents (51%) respondents said that they consistently track the actual total costs of assignments. When facing cost pressures, it is difficult at best to make effective decisions about cost reductions without comprehensive data.
Systematic comparisons between estimated and actual costs can yield valuable information for program- wide cost savings. If estimates are consistently incorrect, global mobility leaders may need to review assumptions and update the standard inputs to the estimates to increase accuracy. Tracking exceptions is also important; a significant number of exceptions may skew estimate to actual calculations. They also may yield insight as to where global policies and processes may need to be more flexible.
If global mobility leaders don’t have strong cost management processes in place today, one of the best ways to start managing costs more effectively is to start by engaging leadership, finance and HRIS in discussions to understand the potential impact of making the systems adjustments and process optimizations needed to streamline cost estimating, tracking and reporting.
Don’t Forget: Perform Routine Check-ups
Another important step mobility leaders can take toward strategically managing cost is to regularly schedule program assessments and policy suite reviews. Taking time to meet with suppliers and the relocation management company to review policy utilization and spend as well as other metrics is important and can help determine any critical data trends. If program or policy changes were recently implemented, global mobility leaders also need to ensure monitoring is in place to assess if the changes had the intended effect. What does the data, both quantitative and qualitative, say?
Talent mobility leaders should also plan routine comprehensive program check-ups that include feedback from key stakeholders, including the relocating employees and hiring managers, about the program performance overall, focusing on what is working and what is not, including discussions with business leaders about the value of their spend.
Regular consultations with third party subject matter experts help global mobility leaders understand industry trends. Changing market dynamics in mobility may lead global mobility leaders to consider potential opportunities for program optimization to meet the company’s overall needs.
Another aspect of regular check-ups includes peer benchmarking. Industry or other types of benchmark data can help global mobility leaders determine how their programs stack up. While managing cost is important, attracting and retaining talent is also critical. Understanding policies and the way benefits are structured by other companies is key to ensuring that costs are being managed efficiently while the program remains competitive.
Routinely assessing the mobility program’s performance, including spend patterns, allows global mobility leaders to make proactive changes to their programs to derive maximum value from their investment, and turns decisions about managing cost to strategic ones rather than reactive.
Click here to read part two of this series entitled, Mobility Cost Management: Make Policies Work.