Securing Global Destination Assistance: a Central or Local Affair?
12th Oct 2004
Destination services are crucial to an international assignment. Felice Wilson addresses the four models of procuring destination services and how a company can select which fits its needs best.
Among companies that relocate employees internationally, almost all agree that assignees and families need assistance settling in foreign locations. Help with homefinding, area familiarization, daily living matters, and school selection is commonly provided in some form. But there is no common form of provision.
Companies secure destination assistance by one or a combination of four basic models that are either locally or centrally directed. Each presents a relative balance of advantages and disadvantages to involved parties--international HR, the local receiving office, and the assignee and family. Based on interviews with corporate relocation professionals and perspectives of industry experts and assignees, this article weighs the pros and cons of these four models, offering points to consider when reviewing policy against business objectives.
Locally-directed assistance. The responsibility for supporting assignees in a new location lies with the receiving host offices in the destinations. This can be via in-house host office support where company employees help expatriates settle in or through host offices contracting local destination service providers.
Centrally-directed assistance. The decisions on the selection and management of destination services providers are made at the corporate level. This can be through corporate HR directly contracting destination services providers or corporate HR outsourcing the contracting of providers to a relocation management company.
The best-suited model for a given company depends on several factors. For example, the mature multinational with annual global deployment in the hundreds will certainly approach destination services from a different angle than the small software company sending 10 people to open their first international office.
Policy also matters. Is there a formal international policy, and, if so, is it global, regional, or otherwise multiple? What are the budgeting requirements, and does the corporate or local business unit pay for destination services? Are there company-wide service metrics in place for selecting providers, and are metrics even realistic for remote, un-serviced locations? Is cost savings a higher goal than convergence, or vice versa? These questions, and more, help relocation departments fashion a deliberate program for supporting expatriate needs in unfamiliar and foreign destinations--the ultimate goal being a satisfied employee in a successful, business-growing assignment.
In-house Host Office Support
In this situation, an internal employee of the receiving office helps the assignee settle in. This is usually a local national hired for a different, usually administrative function. They might help orient assignees in the city, connect them to resources, help bridge language barriers, and answer questions on an ongoing basis. In terms of finding a home, they might recommend different neighborhoods and assist in lease negotiations, but usually refer assignees to real estate brokers.
An office that receives numerous expatriates annually, such as a European headquarters, might hire a full-time expatriate assistant, but usually this person’s core function is to manage immigration, documentation, and licenses, rather than look after daily living issues.
Pros. The most commonly cited advantage of this model is cost savings. Especially when receiving offices are financially responsible for the assignment, they can choose to save third-party fees by internalizing assistance. Firms that normally contract services for individual moves might organize local employees to help for group moves, claiming significant marginal savings. On-site accessibility, language help, and the absence of outside providers in remote, under-developed locations are other reasons companies keep help in-house.
Cons. Companies that use the in-house model express satisfaction, on the whole, but drawbacks might stack up unseen. Host offices may avoid paying fees, but incur hidden costs when salaried staff diverts time to non-core functions.
“It loads them down with work,” said an international relocation manager who implemented a centralized policy, partly to relieve local offices. And though some local employees may go out of their way to be helpful, they are rarely trained in understanding the needs of expatriates and cannot offer value-added services that dedicated destination services providers can. There is no structure for setting and measuring service standards in one office or across locations, and inconsistencies and assignee grievances can easily follow, even if unexpressed.
“For the most part, internal employees are able to meet expatriate needs,” said another HR manager whose policy allows receiving offices to assist in-house. “But things could get overlooked if they have other job responsibilities.” This haphazard hand-holding unnecessarily adds risk to expensive and valuable expatriate assignments.
On-site accessibility is convenient for the expatriate, but less so for the accompanying spouse or partner. If a company employee is involved in lease negotiations, setting up personal bank accounts, and other issues that touch on finances, assignees lose financial privacy within the firm. Likewise, assignees who wish to keep personal matters private from the company have no independent advocate to turn to with questions and concerns.
Host Office Contracting Local Providers
This model is very much in practice. Even many multinationals that outsource their international relocation program to one-stop management companies reserve destination services for the receiving office. One reason is that some global companies move to global policies over time and with scale. In the meanwhile, local offices develop long-term relationships with local providers, which are later preserved separately from other centrally managed pieces. Thus, the findings of ERC’s 2000 International Survey--that 52 percent of respondents had one global policy and 35 percent had multiple policies--do not necessarily reflect the percentages of companies that direct destination assistance centrally or locally.
Pros. International relocation managers count those long-term relationships as the primary plus. Based on a history of service, those local providers understand client expectations and expatriate needs, and that history often wins over potential costs savings and consistencies elsewhere. Distant from and unfamiliar with company locations around the world, many corporate relocation managers feel host offices can better select local destination service providers.
“Hopefully they know a good service when they see one,” said an international relocation manager for a firm with 700 expatriates in 66 countries. “With me sitting in the United States, it’s hard to tell the local offices I’ve got a better service.” As second resort, when a local office does not have a provider, the company might then ask its relocation management company to locate services. Another reason some companies separate destination services out from centralized global policies is that there are tax advantages when receiving offices pay assignment costs.
Whether destination services are locally or centrally contracted, assignees and families benefit from having a third-party advocate whose core function is to facilitate a smooth settling-in process and whose performance will be evaluated.
Cons. Inconsistency and administrative complications top the list. One expatriate manager overseeing nearly 100 expats from her company’s corporate office is worth quoting: “It can be a nightmare from an administrative stand point. There are no processes in place to get things paid. For year-end tax reporting, we need to know what needs to be grossed-up, rather than having to ask host countries for host country data. For example, if I’m reviewing Joe Expat’s data and don’t see destination services on the records, but know he got them, I have to ask the host office where that is. They might say is was accounted for it in expenses, but it shouldn’t be.”
It can be a burden for host offices to select and manage providers and difficult to align them with corporate business objectives and values, resulting in service inconsistencies across locations. In the worst case scenario, potential conflicts of interest arise if, for example, in the absence of a formal bidding process, a local office contracts a spouse of an existing employee who acts as an estate agent, receives a commission from the company, and is privy to an expatriate’s personal and financial information. If the head office is “hands-off” of local contracting, such situations can go unmonitored. Finally, if firms move to centralize destination services management, local offices tend to resist the weakening of their provider relationships.
Headquarters Directly Contracting Providers
Moving to centrally directed destination assistance, this model is rarely practiced in its pure form and often is mixed with one or more other models. In less degrees of formality, the corporate HR selects providers on an ad hoc basis, filling in where host offices have no pre-existing local relationships or in-house staff support. Within regional policy frameworks, the relocation manager of each regional headquarters yields responsibility over service provider selection in their destination areas. Companies moving toward a global policy, but overruling outsourcing, are the best candidates for direct contracting.
Pros. The corporate relocation manager has direct control in selecting destination service providers around the world that best meet corporate business objectives, in terms of service delivery standards, metrics, costs, and more. Standardizing processes and reporting also can be implemented from the top down. When contracting with a global destination services provider, the company can leverage volume pricing based on total company deployments. If the global provider is one company, rather than a network, it might offer the added benefit of uniform global pricing, standardized service metrics, and central operations, reducing the workload of the corporate relocation manager.
Cons. Finding, screening, selecting, and managing multiple and distant providers means an increased workload for the corporate relocation manager, who must also develop systems for reporting. For companies with many locations and a large expatriate workforce, the burden is too much in the absence of a global provider. In practice, it is rare that a corporate relocation department can tightly manage a robust network of individual local service providers. Either a hybrid of two or more models is at play, or corporate managers come to conclusions similar to one international relocation manager with an expatriate population of 110: “I can’t know all the local providers of all our destinations,” he said. “I want a middleman to manage this. If a problem arises, then it should come back to me.”
Total Outsourcing to a Relocation Management Company
That brings us to our final model--outsourcing global service provider selection and management to a relocation management company. Three years ago, according to ERC’s 2000 International Survey, 18 percent of companies outsourced the administration of their entire international program. That reflected a huge increase from 8 percent in 1996. About 30 percent of corporate relocation managers interviewed for this article have moved to total outsourcing since 2000, transferring responsibility for destination services from host offices to the relocation management company and indicating a continuing trend toward total outsourcing.
Pros. Outsourcing relieves corporate HR and host offices from the burden of managing service providers. It is a one-stop shop for the corporate HR overseeing a large expatriate workforce, as well as for individual assignees. Placing responsibility with a third-party whose core competency is in relocation management adds value through total process management for the assignment, best practices service standards and metrics, consistency, knowledge of industry trends, and innovative technology and programs.
“Everything’s in place,” said an expatriate manager who recently contracted a relocation management company. “ISO processes, billing processes, financial ramifications for poor performance, and performance metrics built into the contract. I can call them and say, ‘we have so and so moving’ and never have to pick up phone again. I know it’s going to flow smoothly for all things I’ve authorized.”
Finally, greater cost synergies stem from the volume of the relocation management company client base.
Cons. Companies that outsource have few complaints. But because the corporate relocation manager is less involved in deployment management, answering assignee questions and addressing problems can be more challenging if they arise. The transition to total outsourcing can cause friction with host offices that might resist or resent weakening local relationships, and there is a general diminishing of firm control.
“One disadvantage is not having total visibility into the service delivery and control over service quality and over choosing providers with the lowest pricing in each location,” said a corporate relocation manager overseeing 500 expatriates.
Selecting What Is Right for You
Whichever model is optimal for a specific company’s relocation program, destination assistance should go beyond commission-based real estate services. In focus groups, assignees commonly express that housing needs are important, but human needs are of paramount concern. Whether assistance is locally or centrally directed, companies should measure and evaluate providers on their ability to purposefully piece housing into the fuller picture of community, recreation, spousal issues, culture, daily living, and education, as well as provide reliable destination information that assignees can access after move-in.
The ultimate goal of destination assistance is to lay a solid foundation for a successful assignment during the crucial settling-in period. Professional destination consultants achieve this by acting as a personal advocate to the assignee and family, by communicating closely with the responsible HR manager, and by proactively solving problems along the way. Corporate relocation managers achieve this by defining a coherent model for securing expatriate assistance, understanding that a solid expatriate program is built on sound policy.
Felice Wilson is an American who works as International Development Manager with Going-there. This article is reprinted with permission of Worldwide ERC from the May 2004 issue of MOBILITY.
