Historically, relocation program managers have required transferees to submit receipts for most relocation expenses. This requires the transferee to gather, account for and then submit receipts. Someone then has to review and then approve/deny the numerous relocation expenses incurred during the relocation process. Because this is a very labor intensive process (i.e. reviewing receipts), the practice of providing transferees with a set lump sum for certain corporate relocation expenses has grown in popularity. Lump sums first began with the introduction of the Miscellaneous Expense Allowance (MEA), which set forth the idea of providing one lump sum amount to cover small miscellaneous expenses. The use of lump sums was then expanded to pay for food expenses (per diems), based on a fixed daily amount, and then lump sums were set for specific relocation features—such as the home finding trip. In this example, the home finding lump sum would be sensitized per transferee by using the number of trips and total days allowed in the policy, as well as the cost of the destination location.

Today’s tough real estate market has led to an increase in policy exception requests—primarily in the area of temporary housing. Most policies have been designed to offer specific benefits (i.e. home finding, temporary living, etc.), but now—given the state of the real estate market—more and more companies have begun grouping specific taxable benefits into one managed lump sum. A current best practice approach is to take the trio of home finding, temporary living and miscellaneous expense benefits and combine them into one managed lump sum amount—allowing the transferee to choose how they wish to spend this money, versus a “one-size-fits-all” approach. By having a managed lump sum program, exceptions decrease since transferees are empowered to spend their lump sum on the expenses which are a priority to them. And lastly, companies can share in the savings, as lump sums often cost less than providing relocation reimbursements individually.

If you are interested in incorporating managed lump sums into your relocation program or need more information, you can e-mail me at david.barlow@sirva.com .
For more information about managed lump sums, please review our white paper.

Imagine that you are just leaving a meeting where you were told that your employer has decided to relocate a group of people from one location to another. The CEO told you that you are expected to manage the move. He/she stresses to you that the success of this group move is critical to the future of the company and everyone is counting on you to, "make it happen." Any number of business scenarios could lead to this decision.

Even though this may be your first experience in managing a group move, you may have heard stories about the stress group moves can bring to an organization and the people who are working on the relocation. You may recall hearing how a group move does not always turn out as planned, and that a lot can change between the time the plan is initiated and the last employee is in place at the new location.

Whatever you do, you need to be prepared for the responsibility of:

• Business disruption
• Talent loss
• Low employee morale
• Cost overruns
• Having your plan for the move challenged by others

You may not be able to eliminate all of the issues, but if you can bring an effective plan to the project and assemble the right team to execute the plan, the odds that the move will be a success and that you will survive the group move will be greatly  improved. The intent of our "How to Effectively Plan for a Group Move" white paper is to provide you with a proven approach to effective group move management.

 View white paper

If you would like more information about corporate relocation services including group move management consulting, contact us.

The five cultural dimensions (individualism vs. collectivism, power distance, uncertainty avoidance, masculinity vs. femininity, and time orientation) provides valuable insights into the cultural practices of different countries. This is the type of information that global relocation managers need in order to better understand cultural similarities and differences while on an international assignment. The ability to effectively communicate with people from all over the world is also key to a global manager's success. An expatriate will have to interact with all types of people in the assignment location, i.e. employees, customers, shareholders, regulators and vendors. Effective cross-cultural communication requires finding integrated solutions and compromises that allow decisions to be implemented by members of diverse cultures.

Cross-cultural training will provide relocating employees with a starting point for the preparation of working overseas or long distances, addressing cross-cultural communication and cross-cultural conflict resolution. For example, by knowing whether a society is individualistic or collective, an global manager would benefit by knowing what to do in cases of decision making, offering incentives or even scheduling meetings.

Knowing the cultural dimensions of the society he or she is working in, the expatriate will have a point of reference when investigating what to expect with respect to all management practices.

Depending on assignee needs, there are a variety of cross-cultural training programs available. Prices typically start at $1,500 to $3,500 for one to two day programs, and increase as the duration and complexity of the services increase. These costs are miniscule, however, when compared to the overall cost of a global relocation assignment, and could save your organization from absorbing the financial burden of a failed assignment due to the assignee's inability to adjust to his or her new location. Read more.

Accurate and timely accounting of relocation expenses has a far-reaching impact on the overall performance and success of a corporate relocation program, to both the company and the individual transferee. With relocation costs per employee homeowner topping $70,000 in recent years (according to averages reported by Worldwide ERC), effective management of expenses can easily exceed several million dollars annually for a company. Because all relocation services funnel through the expense management function, to be appropriately recorded and paid, this function is a significant responsibility for those managing the relocation program. As a result, corporate relocation managers and/or payroll managers should consider several key issues when evaluating the effectiveness of the expense management process in their companies...read more.

It's important to define key roles and responsibilities when creating a relocation policy. That is why we've outlined some key points that should be kept in mind.

Internal and external resources
Identifying internal resources early in the relocation process will enable the transferee to assimilate into the new organization quicker, he/she will feel more comfortable, and will also feel more in control of the move.

Setting transferee expectations
Clearly lay out the company's expectations for the transferee during the relocation. This will help prevent the transferee from straying outside the policy.

Supplier network capabilities
Define the role and responsibilities of your company's supplier network, as it is important to be clear about what the supplier can and cannot do on behalf of the transferee.

Key contact list
Include key contact data about each resource that will assist the transferee. This works best if its is organized in the order in which the event will occur in the relocation process. That way the transferee has a frame of reference as to when contact should be made. Naturally, relocation programs work best if there is a clear primary contact that can orchestrate the  required tasks.

For more information about this, visit our resource library.

Group moves occur for a variety of reasons and in most cases can be treated (relative to the IRS rules) exactly as other non-group moves. A group move, however, may not meet the IRS 50-mile test. In that case, consideration should be given to providing a short distance group move policy. The IRS 50-mile test generally requires that in order for certain costs associated with a relocation to be excludable from income, the distance between an employee's old residence and the new work location must be 50 miles greater than the distance between the employee's old residence and the old work location.

It is not uncommon for companies to change office locations, or have multiple facilities in the same geographic area, where the distance between an employee's old and new work location may or may not meet the IRS 50-mile test. For example, in larger cities, where a move may be from one side of a metropolitan area to the other, it is likely that the IRS test will not be met. These "short distance" office relocations, however, can significantly impact the commuting patterns of employees. It is highly unlikely that employees impacted by an office move, where their commute could be increase by up to 49 miles, will simply accept an "IRS explanation" as to why they are not entitled to relocation benefits. Employees will often make their feelings known and ask management to consider providing some or all of the relocation benefits provided in a standard regular or "long distance" employee transfer.

The relative distance that a short distance group move involves, necessitates a closer look at the specific features provided in a company's relocation policy to see if benefits should be offered for a short distance group move. Properly structured, short distance group move programs reduce absenteeism, attrition and administrative time, and are often far less costly than a normal relocation program.

For more information about short distance relocation packages, visit our relocation resource library and view our white paper.

There is no such thing as a small relocation, but some companies don't require the large-scale support needed by those relocating hundreds or even thousands of employees annually. For these companies, SIRVA Advantage might be the answer. SIRVA Advantage is a program developed specifically for companies that relocate fewer than 30 employees per year. Currently, 120 companies participate in the program.

Through the program, companies have access to a dedicated service delivery team with specialized experience in small-volume relocations. Users don't have to be experts in relocation because all the details are handled for them. SIRVA can get a relocation program up and running quickly, and because they manage every aspect of the program, companies don't have to worry about the details. Transferees receive the full benefits of having a corporate relocation provider manage their transfer without the large corporate relocation budget.

"Companies that relocate a small number of employees have different needs than those of their large-volume counterparts," said Tim Callahan, senior vice president of sales and marketing SIRVA, Inc. "These companies may not be as familiar with the process or the complexities involved in different domestic or international relocation scenarios because they simply don't relocate employees as often."

Using SIRVA Advantage, companies can choose their services á la carte, which offers them the flexibility to develop a cost-effective custom program to fit their needs. SIRVA Advantage provides companies with guidance and assistance on a range of relocation issues, including:

• Domestic and international support
• Fixed-fee or traditional home sale programs
• Home marketing services
• Home finding and new home purchase services
• Home rental and temporary housing services
• Mortgage services
• Move management
• Tax and legal services
• Vendor contracts
• Online relocation tracking and reporting

One-on-one attention and interactive tools
The Advantage process starts with a consultation between our client and SIRVA Advantage's Business Development Manager, Jane Yanosko, to coordinate services tailored for each transferee - with this program a corporate relocation policy is not needed, SIRVA's abbreviated contract serves as the purchase order for all services authorized by the client. Once services are determined and the transfer process is initiated, the client and the transferee receive dedicated support from relocation counselors and associates focused on serving clients with fewer than 30 relocations annually.

In addition, transferees have access to MoveOurHome.com, a Web portal designed to help them take an active part in their move. MoveOurHome.com has up-to-the-minute relocation information configured on a per-client basis. On the site, transferees can view company-specific policy information and transferee-specific relocation program information.

"Transferees can submit, view and check the status of expense reports, communicate with their relocation counselor, and specify home and area preferences," continues Callahan. "They also have access to an online move organizer and essential destination information such as weather, crime statistics, school reports, population figures and other community information."* SIRVA Advantage was developed based on input from current customers and internal service teams, and is designed to provide a company will a small or no relocation program a high level of service on a more flexible, on-demand basis.

To learn more about SIRVA Advantage, contact Jane Yanosko, SIRVA Advantage business development manager, at 800.531.3840 or jane.yanosko@sirva.com.

Companies continue to report that their employees are increasing reluctant to relocate. While the usual factors of family and spousal employment are even more magnified in tough real estate markets, one additional factor may be the home sale program the company offers. When the transferee is provided with a “pure” BVO/BVX home sale program, there is no guaranteed home buyout offer. These BVO/BVX programs have generally worked well in good real estate times; but when so many sellers are chasing even fewer qualified buyers (as is now the case) these relocation programs become less successful.  Even when transferees do all the right things—prepare the property for sale and list it at or near the most probable sale price—they still struggle to find buyers. This creates more pressure for corporations to extend temporary living benefits.

In some cases, it may make sense for companies to consider converting BVO/BVX home sale programs to AVO/AVX programs with required mandatory marketing times (e.g. 90 or 120 days). Here the best of a BVO/BVX program is maintained with ample time to find an outside buyer but also with the added assurance that if a buyer cannot be found then a guaranteed buy-out offer can be generated. This can be thought of as an “emergency parachute,” which can be used to complete the sale of the home and thus the corporate relocation. Also keep in mind, AVO/AVX corporate relocation programs ensure compliance with the recent revenue ruling (2005-74) which approves the use of AVO/AVX programs while not specifically approving BVO/BVX programs.

Have you considered this or have you already switched to an AVO/AVX relocation program? Are your employees more willing to relocate?

The complex and rapidly changing socioeconomic and political climate in China, together with a massive shortage of skilled workers, makes human capital and global workforce development particularly challenging. As a follow-up to SIRVA's China Urban Index, released in 2006, SIRVA Relocation recently completed a study to address the lack of readily available relocation data and trending on mobility policy and practices in China. The results are documented in "The SIRVA China Mobility Report."

Thirty-seven leading global companies contributed to this unique SIRVA research initiative, the results of which have formed a valuable benchmark framework for human resources professionals to observe current key mobility policy and practices in China. This benchmark report on key findings and trends represents SIRVA Relocation's analysis of the most up-to-date data spanning seven industry sectors in both Tier 1 and Non-Tier 1 regions in China. 

Substantial differences in infrastructure and accessibility exist between Tier 1 and Non-Tier 1 regions, which companies must evaluate when creating policies to introduce employees to these varied conditions. 

Below is a check-list of key findings for this study.

Key Findings
Current Assignments: While all participating companies reported traditional international short- and long-term assignments, there is an emerging trend of new assignment types. Twenty-eight percent of companies have domestic short- and long-term and permanent one-way assignments and 33 percent of companies report permanent one-way moves into Tier 1 and Non-Tier 1 locations.

Emerging Trends and Associated Challenges: As companies in China look to expand their business with locally or regionally hired resources, rather than high-cost, international long-term assignments, it is anticipated that future permanent one-way assignments will increase more than any other assignment type. Companies have found permanent one-way assignments to be the most challenging, contradictory and controversial, making it difficult to establish a framework for policies and practices.

As a result, assignment terms and conditions are handled on a case-by-case basis due to lack of benchmarking data and experience among human resources professionals and global mobility managers. Consequently, inequalities are widening in remuneration packages as talent becomes more valuable, so new models will have to be developed to mirror evolution in emerging assignment types.

Domestic relocations are new to China. Like regionally hired permanent one-way moves, they are predicted to increase. These moves, which originate and conclude in China, are used predominantly in Non-Tier 1 cities where there is significant growth.

Cross-cultural Awareness: Most companies provide cross-cultural awareness programs to transferees: however, few companies currently enforce mandatory sessions. SIRVA expects more companies will emphasize cross-cultural training to ease the transition into Chinese culture and create an understanding of language and customs.

Assignment Administration Outsourcing: 70 percent of companies surveyed outsource assignee administration and between 86 and 92 percent outsource various assignee support services. However, companies outsource contract preparation and international compensation. SIRVA is witnessing an increased trend in companies consulting with external providers for mobility policy development due to a lack of available resources and global mobility expertise in-house.

Assignment Representation across Industries: The following graph provides a snapshot of industries and assignment types in Tier 1 and Non-Tier 1 locations. Click here to view the graph.

Of the surveyed companies, IT/telecom and petrochemical industries show the highest representations of assignee population in Tier 1, followed by manufacturing and pharmaceutical.  IT/telecom and petro-chemical industries also show the highest representations in Non-Tier 1 regions, followed by manufacturing and automotive.

The study also indicates the majority of assignments in Tier 1 and Non-Tier 1 regions are long-term and short-term assignments, followed by permanent one-way moves. 

For more information you can visit http://chinaindex.sirva.com/study.asp

• Tie benefits to desired behavior: Companies have every right to require transferees to follow established home sale processes. The process to be followed should be clearly stated in the company's corporate relocation policy along with the benefits to the transferee.  Reasonable expectations include complying with the company code of conduct and following the corporate relocation service providers' recommendations which are based on the company's policy. Penalties for not complying with the terms of the policy, as well as any home sale incentives that are to be offered, should also be clearly outlined.

• Require full property disclosure and educate transferees on ineligible properties: Accurate assessments of property history, condition and initial ownership risk when a home is sold limits future risk potential and protects both the company and transferees. Transferees should understand that purchasing ineligible properties may cancel future home sale benefits.

• Require active transferee marketing participation:  Home marketing needs to be well planned, supported and implemented properly by all parties involved. Because the real estate market is changing rapidly, marketing strategies must be adjusted quickly, and prices need to be reduced in shorter intervals. Failure to adequately react can extend marketing time, increase corporate relocation program costs, push homes into inventory, decrease the pool of potential buyers, and reduce the final price transferees receive on the home sale.

• Evaluate all offers: Every appraisal should be thoroughly reviewed before giving it to the transferee in order to ensure they properly recognize the current market conditions. Do not hesitate to negotiate down to 95 percent of the appraised value. This also minimizes the emotional reaction to perceived "low" offers and the potential loss of an offer that would have been acceptable to the company.

• Require mandatory home-finding assistance:  Home-finding assistance reduces home loss-on-sale risk for those transferees (such as new hires) who are future relocation candidates and ensures employees don't purchase ineligible properties. It also helps mitigate the challenges of current market conditions, such as selecting a qualified agent, planning home-finding trips, evaluating financing options and reviewing contracts.

• Develop home sales programs that fit your company's risk profile:  Home sale programs vary in risk based on several factors. These include program type, number of controls in place, current market conditions, locations where homes are sold or purchased, past company practices and company culture. It is critical that companies are aware of the risks involved and create a home sale program that meets the company's overall service, cost and risk objectives.

For assistance incorporating these real estate best practices into your corporate relocation program or to learn more about how to mitigate real estate risks via a home sale program, visit David Barlow's blog.

What can companies do to leverage technology in order to reduce cost, increase accuracy, compliance and reporting capabilities in the global mobility space?

There are now technologies and best practices to help manage global mobility cost, data and compensation accrual for tax reporting and budgeting purposes, to allow for compliance, risk mitigation and financial planning. These are areas that are important to all companies but in the past have been a challenge to achieve in a complex global compensation and tax arena.

New specialist companies--with the latest technology--can provide companies with cost estimates and linking processes, which streamline reporting and reconciliation. They also track actual expenditures, including employee compensation and benefits. Tracking such expenses involves leveraging technology to effectively and accurately navigate through global compliance and regulatory issues, and linking reporting processes to create greater efficiencies.

New, sophisticated services and programs can streamline otherwise very labor-intensive reporting processes. In addition, they can provide customized reporting solutions on a faster, real-time basis while also reducing the rate of error. Providers exist for these purposes—to provide administrative, back-office payroll and financial reporting solutions on a global scale.

When evaluating what type of program is right for a company—whether it is payroll management, tax preparation or managing global compensation—executives should select ones that are compatible with multiple countries and multiple sets of payroll codes. 

Companies always struggle with tying together numbers at the end of year, but there should be ongoing, real-time reporting and analysis so that annual financials become merely just another step. Let the providers program do the work for you and provide effective, accurate data to your organization.

What’s new? Well, everything that has to do with the current real estate market is new to most of us. We in the relocation industry have experienced almost two decades of prosperity and have gotten used to the good life.

 

Suddenly, we find a huge number of transferees are “upside down”, “under water” or any one of a number of other terms or phrases to describe a phenomenon that arises out of the transferee being unable to sell their home in a timely fashion for an amount of money that allows the employee to pay off the liens on their homes.

 

Issues that were only occasionally raised are commonplace today in the management of relocation home sale programs.

 

A few of the issues that will be discussed in the future:

1. Caps on relocation costs – In an economic downturn where everyone is focused on cost containment, is it tax-safe to develop home sale programs where there is a cap on commissions, closing costs, etc. requiring the employee to share in the costs?   
2. The one year rule - What does it really apply to? Are there tax implications and exceptions to the rule?
3. Directed offers – It seems that using directed offers is becoming more common with employees finding themselves unable to realize enough from the sale of their home to pay off their liens. What about the use of directed offers and the tax implications of using them?
4. Loss-on-sale – What are the best practices in offering a loss-on-sale program?
5. Short sales – What is a short sale process? How prevalent is its use? What are the benefits of using the process and what are the tax and cost ramifications of using it for the employee and the employer?

If you have other issues you would like me to discuss, let me know in the comment section of the blog.

 

Hank

Avrom Goldberg
Managing Director, Asia-Pacific and the Middle East
SIRVA Relocation

Lorraine Jennings
Manager, Consulting Services, Asia-Pacific and the Middle East
SIRVA Relocation

As Avrom Goldberg and Lorraine Jennings explained, it is important for relocation professionals to stay up-to-date on relocation trends in China because of the country’s power as regional and global economic engine.  For each of the past 30 years, China has demonstrated eight to 12 percent economic growth, and it is showing no signs of slowing down.  In order to provide attendees with valuable insights and analysis of the current relocation trends in this rising economic power, Avrom and Lorraine described the findings of the SIRVA’s China Mobility Report.  While Avrom and Lorraine could not summarize the entire 95-page report during the presentation, they shared highlights of their findings.

 

Increased demand for deployment to China, one trend discussed during the presentation, is expected to continue.  However, the sources of assignees selected for deployment are changing.  Traditionally, assignees to China came from Australia, Europe, the United Kingdom and the United States.  Recently, hiring has been more concentrated in Asia, with most assignees coming in the form of returning Chinese workers or locally hired foreigners.

 

Companies who continue to send assignees to China are using a variety of selection and planning processes that do not follow a pattern.  For example, pre-assignment visits ranged from a brief three days to a full week; some companies offer extensive cross-cultural training for assignees while others do not; certain companies assign mentors, some extend mentoring programs to leadership programs, and others offer no structured mentoring to assignees in China.  In these areas of their relocation programs, companies are not following a uniform trend, but rather they are doing what is in the best interest of their individual organizations.

 

On the other hand, companies are moving in the same direction in other areas of their programs.  For example, many companies are changing their philosophies of hardship allowances.  While 51% of companies offer hardship allowances across all assignments, many are developing new ideas of what places they consider “difficult.”  Avrom and Lorraine mentioned Shanghai and Beijing as places that recently necessitated hardship allowances, but may no longer justify as high of a level of compensation.  Furthermore, many companies are shifting from a host-based to a home-based approach for hardship allowance policies, which illustrates that companies are finding a home-based method more effective in China’s current economic framework.  

 

Regardless of which specific policies and programs companies decide are most useful when sending their employees on assignments to China, the companies within SIRVA’s study agreed on the obstacles that they must overcome.  They identified the following as the top-five human resources and mobility challenges they face when filling assignments in China:

 

• Creating effective policy frameworks for separate groups, such as locally hired foreigners or international new hires who are not full assignee
• Understanding, capturing and reporting the total cost of assignments to the company, including measuring the return on investment of the assignments
• Locating quality service providers in China with a strategic vision
• Developing a young workforce with global cultural competency
• Finding credible benchmarks for hardship allowances and housing data for assignments in China

 

The Panel:

 

Maura Carey, CRP

Vice President,

Strategic Accounts

SIRVA Relocation

 

Amy Carter

Global Supply Chain Manager

Intel Corp.

 

Peggy Love

President & CEO

Full Circle International

Relocations, Inc.

 

Sandy Palmer, SCRP

Manager, Corporate Relocation

Cargill, Inc.

 

While concrete, logistical items such as household goods shipments or home marketing assistance receive priority treatment in corporate relocation programs, for employees and their families, the “soft” transitional and settling-in services can make the difference between a successful and a failed relocation. As Maura Carey and her panel discussed, the complex process of relocation is hard on the entire family, not just the employee.

 

Relocating employees and their spouses want and arguably need several “touch points” during the relocation process, where they can receive assistance ranging from the concrete (locating daycare for small children) to the less tangible (ideas for helping teenagers adjust to their new surroundings). Companies can incorporate introductions to social and job networks, school assessments and recommendations, and specialty tours of shopping and cultural areas into their relocation programs in order to ease the family’s transition. Not only are such services relevant from a comfort standpoint, but they are also important from a business perspective. Effective destination services should increase transferee acceptance rates as well as provide a tangible, differentiated benefit for recruitment and employee development.

 

In order to illustrate some of the points made during the discussion, Sandy Palmer, manager of corporate relocation for Cargill Inc., reviewed a case study. During the last four months of 2007, Cargill conducted a Transition Support Services pilot program. One key finding was that transferees and their families unequivocally enjoyed and appreciated having someone to walk them through the settling-in process, check-in frequently and assist with the “soft” transition issues early in the assignment. Amy Carter, global supply chain manager for Intel, referred to the family’s first two weeks in the new location as the “Golden Window” of opportunity to make sure that they feel comfortable in the new surroundings. Failure to achieve this comfort can sour the entire assignment or even prevent the employee from accepting a future relocation assignment. Basic “niche” services such as stocking the refrigerator prior to the family’s arrival in the new home or getting the children involved in activities immediately can help the transition, Amy explained.

 

Building on the comments of the other panel members, Peggy Love, president and CEO of Full Circle International Relocation, Inc. asserted that destination services must involve two elements, local knowledge and a focus on the adjustment process for the family. Also, she emphasized the importance of customizing the transition program for each family because the success factors vary for each family’s situation.

 

Keeping in mind that Peggy cited family concerns as the biggest reason for an employee turning down an assignment, companies cannot overlook transition services when designing their corporate relocation programs. Even domestic transferees can receive tremendous help from a one to two day orientation in their new area.  When the employee and the family experience a smooth relocation transition, it not only mitigates stress and inconvenience, but it also allows the employee to focus more quickly on the reason for the relocation in the first place: the job.

 

What transition services are your transferees and assignees asking for to support their success in the new location?

Kathryn Cassidy

Vice President/General Manager, Global Assignment Services

SIRVA Relocation

 

Julian Yates

Vice President, Global Client Services

SIRVA Relocation

 

 

As its title illustrates, Julian and Kathryn’s presentation this morning explored the fundamentals of global relocation and the essential elements of a successful relocation.  After discussing the wide-ranging reasons for globalization itself—which range from a push for technology improvements to a desire to add diversity—Julian and Kathryn discussed why companies’ have the need to relocate employees internationally in the first place.  Many drivers of global relocation are similar to those for domestic relocation, such as relocating an employee to mange a special project.  As attendees learned, however, global relocations present new challenges not present in domestic relocations.

 

Relocating an employee and his or her family internationally simply creates more room for problems to arise.  As Julian and Kathryn explained, issues can stem from administrative tasks, such as obtaining visas and work permits, or from the many aspects of situating the transferee’s family in the new location, such as finding schools for the children or employment for the spouse.  Furthermore, relocating an employee globally versus domestically presents more cultural, financial and logistical concerns that the company must consider.  Despite the challenges of relocating employees internationally, Julian and Kathryn provided attendees with best practices that companies can use to ensure successful global relocations for their employees. 

 

Developing and maintaining a strong global relocation policy topped their list as the most important factor for successful global relocations.  In addition to employing a good policy as the foundation for an effective global relocation, Julian and Kathryn explained that careful candidate selection can improve the success of global relocations.  By screening possible candidates and selecting only adaptable, flexible people for global assignments, companies can avoid potential problems from the start.  Using benchmarks, performing cost estimates and analyses, using proven providers, and having a repatriation and reintegration plan were just a few of the additional best practices Julian and Kathryn gave attendees to keep in mind as they explore global relocation within their own companies.

 

What challenges has your company overcome in dealing with global relocations?

David Barlow, SCRP, GMS
Senior Vice President, Client Support Services
SIRVA Relocation

Hank Roth
Senior Counsel
SIRVA Relocation

This morning’s attendees found David Barlow and Hank Roth’s presentation, “Reducing Real Estate Risk in Your Corporate Relocation Program,” extremely relevant to the current real estate environment.  David and Hank presented the discouraging statistics that illustrate the poor condition of the housing market.  For example, at the end of January, housing inventory rose 5.5%, and existing home sales fell 23.4% from January 2007.  Additionally, January’s 233,001 foreclosures were an increase of 57% from the year prior.  January was also the month with the second-highest number of foreclosures on record behind August 2007.  Since June 2006, home prices have declined in all but three of the top 20 U.S. real estate markets, Seattle, Portland, OR, and Charlotte, NC.  Clearly, the “good times” of the housing market are over.

After the housing prices dramatically increased from January 2000 to June 2006, the unfavorable state of the current real estate market leaves the question of what caused the real estate markets to fall.  David and Hank discussed in-depth the reasons for the real estate market landing in its poor position today.  Various factors contributed to the downturn of the real estate market: speculators created artificial demand only to leave the marketplace entirely;  the Federal Reserve tightened credit by raising borrowing rates from 1.25% (June 2004) to 5.25% (June 2006);  owning a home became less affordable as the gap between home prices and income widened; manufacturing jobs in the Midwest took a huge blow; and homeowners were sold loan products that only met short-term wants and needs, which left them unable to sell or refinance due to lack of home appreciation.  Furthermore, investors pulled out of sub-prime mortgage markets after experiencing large losses, which eliminated 20% of the market in a single week during August 2007 due to the product, qualifying and liquidity changes this move caused.

The poor housinge market and the resulting real estate risks present a genuine problem today for companies with relocation policies as they face difficulties in selling the homes of their relocating employees.  In order to minimize this risk, David and Hank presented attendees with the “SIRVA Dozen” consisting of 12 real estate risk controls for companies to implement:

1. Use qualified real estate agents at both departure and destination
2. Require two broker market opinions (BMAs)
3. Delay appraisals to provide opportunity to market home before incurred costs
4. Support a mandatory marketing period (at least 60 days)
5. Establish list-price caps; 105% or less
6. Modify a BVO/BVX to an AVO/AVX
7. Tie benefits to desired behavior
8. Require full property disclosure and educate transferees on ineligible properties
9. Require active transferee marketing participation
10. Evaluate ALL offers
11. Require mandatory home finding assistance
12. Develop home sale programs that fit your company’s risk profile

Which of the SIRVA Dozen has been the most helpful for reducing real estate risk in your company?