Cost Pressure: Setting the Stage for a More Strategic Engagement
As companies move employees across borders to attract and develop future leaders in the organization, talent mobility has become a critical function in successful organizations. At the same time, it is clear that mobility strategies continue to be strongly influenced by wider economic conditions.
The slowing pace of growth in China is worrying business leaders and has dampened overall optimism because of its far-reaching global implications; the outlook for emerging and developing economies is anticipated to remain variable. This uncertain economic outlook, combined with the increasing demands on Human Resources functions to integrally support business success, has meant that cost continues to be a primary concern for Global Mobility.
Historical Global Mobility Trends Survey Data
Global Mobility programs traditionally carry a high cost, and the pressure on reducing these costs has not diminished. According to BGRS’s 2016 Global Mobility Trends Survey, 69% of respondents indicate that there has been a push to reduce international assignment costs during the past year. Although this is down slightly from last year, it is still well above the historical average, and has continued as an upward trend since 2008.
Cost and Industry
Certain industry sectors are experiencing variable cost pressures. The volatility in oil prices has impacted the energy industry; and growing challenges in key emerging markets such as those in South America have also hit sectors, such as manufacturing, particularly hard. We see these reflected in the survey data as a significantly higher percentage (80%) of energy company respondents report cost reduction efforts in their international assignment programs than overall respondents (69%). The industry with the largest percentage (82%) of respondents reporting cost reductions in their global mobility programs is the manufacturing and engineering industry.
What’s more, nearly all (96%) respondents report that the pressure to reduce costs has either increased or stayed the same compared to last year. While only 39% of respondents indicate that the pressure to reduce costs had increased compared to the previous year, 57% say it stayed the same. Rather than a waning focus on cost, we see this as the normalization of cost pressure and that the demand to manage mobility costs is firmly embedded in the mobility landscape.
This year’s 2016 Global Mobility Trends Survey report also reveals, however, that despite a sustained focus on cost, companies still have some ways to go in terms of implementing consistent cost practices in their international assignment management programs. In particular, three sets of key survey results highlight areas where cost management processes could be improved:
- Cost Estimates: only 61% of respondents prepare cost estimates for all international assignments, 9% don’t prepare any type of international assignment cost estimates.
- Cost Benefit Analysis: only 26% of respondents require a cost benefit analysis as part of the business justification for all international assignment types; 57% don’t prepare for any international assignment type.
- Tracking Actual Assignment Costs: only 51% of respondents report that they consistently track the actual total costs of international assignments.
Gaining visibility to both estimated and actual international assignment costs is a critical challenge for Global Mobility. It’s difficult to have meaningful conversations with the business management and leadership without speaking their language, which often relies on data and comprehensive cost information. At an individual assignment level, having an accurate estimate of expected costs, especially for the tax component, is crucial to manage not only expectations but also to drive proper downstream processes such as accruals. If costs need to be cut across the program, it is difficult to make those decisions effectively without a holistic picture.
Cost as a business reality is always going to be a key driver in how global mobility programs are managed. The challenge for many mobility leaders is that in order to manage costs effectively, data, and cost data in particular, are needed. According to the 2016 Global Mobility Trends Survey results, technology and process gaps seem to underlie the problem. Survey respondents report the number one challenge to getting accurate reporting data is that the data resides in multiple, disconnected sources; second was that the data was not currently being captured. Thus, making true advancements in this arena ironically may well require an investment. However, an investment to bolster cost management practices will go a long way in allowing Global Mobility to have more strategic discussions with business leaders, discussions about the value of international assignments and the way that Mobility can be best leveraged to meet both company and business objectives.
Visit the 2016 Global Mobility Trends microsite at globalmobilitytrends.bgrs.com to learn more.