Six Reasons to Evaluate Your Relocation Provider


Published on

Before the housing market crash, pricing was the primary criteria for selecting a relocation services provider. In today's uncertain market, however, pricing should take a back seat to service, processes and results. If you aren't getting the most out of your relocation company, now may be a good time to take a closer look at your partnership. Here are six common reasons to evaluate your relocation program.

Published in: Business
1 Like
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Six Reasons to Evaluate Your Relocation Provider

  1. 1. NEW YEAR, FRESH START New Year, Fresh StartSix Reasons to Evaluate Your Relocation Provider Written by Mike Canning, CRP
  2. 2. 2 NEW YEAR, FRESH START Relocation Industry Overview Today, every company relocating new or existing employees faces the same dilemma – cost containment. Whether you are moving a high-level executive who owns a home, or a college graduate just starting out, costs have risen exponentially across the board. Of course, this shift really started with the housing market crash in 2008, but few of us realized that the economic fallout would still be evident in 2012. Simply put, costs are still rising because homeowners are still struggling. Many homes across the country continue to depreciate, adding to the numberMany homes across of homeowners facing a negative equity situation (owing more than their home was worth).the country continue todepreciate, adding to the Unfortunately, it’s not just people who have to relocate today that are at risk. Back in 2008, hopeful transfereesnumber of homeowners postponed their home sale in an attempt to wait out the market. Now, four years later, many are still sitting onfacing a negative equity old homes, unable to recoup their initial investments and, now, the additional costs to run the home, empty orsituation. otherwise. In hindsight, we may have been able to stem some of the damage by developing loss on sale policies right away in order to encourage homeowners to sell. But, no one could have known the market slide would last this long. Many companies took a “wait and see” approach and benefits including loss on sale, lease management, or additional temporary living were granted by exception. Gradually, some of these benefits were incorporated into relocation policies. Consequently, there are numerous relocation benefit combinations in policies, some of which are more effective than others. Old Home Temporary Living Home Trips New Home Exceptions • Less equity • Limited availability • Increased need as • Slower processing • Exceptions • Fewer buyers • Increased demand process slows • Tighter lending plus taxes • Tougher appraisal • Increased cost • Increased cost due restrictions process to fuel costs Flow Chart of Rising Relocation Benefit Expenses Since all relocation benefits are growing more costly, employers are now scrutinizing the agreements with their relocation services providers. What is the benefit of the lowest service fees, or best sign on incentives, if the process ultimately costs more money because the policy or service approach is wrong? In a good economy, where homes sell fast and moves are completed within 90 days, pricing is a primary criteria for selecting the right vendor. In an uncertain market, like today, the decision should focus on service, processes and results. If you are in charge of relocation for your company, what, if any, concerns do you have about your current program? Most likely, the last thing on your mind is the initiation fee for the file. So, if service provider fees are not your greatest concern, what else would make you look for a fresh start?
  3. 3. 3 NEW YEAR, FRESH START Six Common Reasons to Evaluate Your Relocation Program 1. The Overall Program Costs Are Too High Program costs are often aligned with the amount of time the relocation process takes from beginning to end. Other factors include vendor selection, realistic and effective counseling, and the ability to make quick decisions based on comprehensive information. Of course, in a slow moving market, delays are inevitable. However, if your relocation service partner agreement is not structured properly, “service” and “partner” may be reduced to lip service. Beyond the Key Performance Indices (KPIs), relocation managers must look at what is motivating their vendor. Does the relocation company also suffer when the process drags out or do they somehow derive more income? For example: Do they charge a higher fee if a home is bought out? Are there management fees for homes in inventory? Are there any side agreements with sub vendors, such as temporary living providers, to pay fees for every 30 days utilized? Although these fees do not necessarily cost the company much per transferee, they can have an impact if the relocation partner does not share your same sense of urgency. Delay related costs, coupled with the tax ramifications, are significant. Delays happen, but you need a vendor who always works diligently to prevent additional costs when possible. 2. Poor Response TimeIf your relocation service Whether it’s a delay in contacting a transferee, arranging temporary living or preparing an ad hoc report needed forprovider is falling behind an important meeting, timing is critical. A service partner should be an extension of you. Therefore, their ability toon their responsiveness, meet deadlines is a reflection of you. If your relocation service provider is falling behind on their responsiveness,then there may be reason then there may be reason to take a closer look at the take a closer look at thepartnership. It is important to note, however, that a rarely talked about consequence of the slower moving housing market is the ways companies have restructured their work flow. Despite promises of hand-holding, dedicated service and 24/7 coverage, when the market lagged, service bottlenecks surfaced. Service providers structured for volume, now had to cope with more complicating circumstances. For example, in a brisk economy where homes sell with minimal effort, relocation companies can more easily provide hands-on, round the clock service by employing call center clerks with little experience to respond during off hours and move each file through the pipeline. However, when the process slows down, circumstances get complicated and hardship arises, it’s important that every person handling the relocation has the necessary training and background to provide relevant and timely advice. If the responding relocation counselor cannot give actionable guidance to the client or transferee, then time is wasted as a more experienced professional is de-briefed on the situation or, worse, someone unqualified or unknowledgeable of the situation makes a decision based on incomplete information or a lack of expertise.
  4. 4. 4 NEW YEAR, FRESH START 3. Negative Transferee Feedback Quite often, relocation is one of the most stressful moments in a transferee’s life, even when everything goes smoothly. Competent, timely and accurate assistance makes all the difference. If you manage relocation, you know that it is critical to address transferees’ problems before they escalate. Studying transferee feedback can shed light on trends and areas for improvement. When reviewing post-move surveys, it’s a good idea to focus on patterns. Was relocation counselor availability a recurring problem? Were payments delayed? Was conflicting information provided? Reviews should enable theIf you manage relocation, transferee to score the program as a whole, and also by individual components. Affording them the opportunityyou know that it is criticalto address transferees’ to review by grade, as well as written narrative, will help you to see how individual snags influenced the overallproblems before they experience.escalate. Careful attention to the feedback from transferees or assignees, not only help evaluate the effectiveness of your service partner, but they will also help identify problem areas in internal processing, initiations, service approvals and expense reporting. 4. Poor Inventory/Home Sale Management Most companies have no interest in getting involved in the residential real estate business. The last thing a successful home sale program needs is homes in inventory because the company will assume all the risk of loss and liability once a home is bought out. Carrying costs are currently averaging 1.25%/month and some markets are still declining in value, so it is imperative that service providers continually focus on aggressive marketing efforts and pricing strategies. They should also be adept at mitigating potential obstacles to a sale. Unfortunately, some service providers will just tweak the parameters by which a home is bought out, rather than addressing the reason for the buy out. Throughout the years, a chief complaint of transferees is the pricing of the guaranteed buyout – appraised value is always too low, or the inspection requirements are too stringent. In years past, these claims were not as justified as they are today. Today, appraisers are already concerned about overpricing a home, especially in declining markets. Relocation appraisers are even more aggressive because, unlike refinancing and appraisals for homes under contract, relocation appraisers do not have a price in place to justify. Instead, they must arrive at a value they anticipate someone will eventually offer. In order to do this, appraisers must define the time frame for such an offer. As an industry standard, 120 days is typically accepted. But, what happens when the average marketing time is more than 120 days? The appraiser must adjust the anticipated price to reflect a shorter than average marketing time. For those homeowners who were already close to what they owe on their mortgage, this market time adjustment pricing creates more hurdles to the move. To further hedge against potential inventory loss, some buyout offerings are as low as 80 percent of the appraised value, which essentially penalizes the transferee twice for the market time. Many providers now boast that they have a high amended sale rate (homes that find an outside buyer before going into inventory). A closer scrutiny of this statistic, however, shows that this is not necessarily beneficial to the employee or company. If the program only offers 80 percent of a value that is already discounted, the chances of a transferee being able to accept such an offer is low as they would have to pay too much to sell their home. In many instances, transferees have had little choice to do anything but to wait for a better offer to materialize. Avoiding taking a home into inventory is everyone’s objective. As always, employees should think of a guaranteed buyout as a safety net or last resort. However, unfortunately, some companies, rather than focusing on what it will take to get the job done, have focused, instead, on creating impossible barriers, such as drastically low offers,
  5. 5. 5 NEW YEAR, FRESH START whereby the transferee has little choice but to stay in limbo and wait out the market. Ultimately, it is better to focus on reducing the overall days on the market and effective pricing, than to simply impose so many barriers to reduce the likelihood of an inventory home. The latter does avoid inventory. However, the hardship to the transferee, and overall delay related costs, will possibly take a higher toll. An increasing number of employers have moved completely away from the guaranteed offer or have reduced its usage to a few senior executives. For these companies, the risk of inventory costs and depreciating value it is too great to bear. They prefer the reduced potential risk of a Buyer Value Option (BVO), or even the risk-free direct reimbursement plan. Of course, these programs carry their own downsides, including lost productivity, transferee anxiety, delay exceptions and the taxability of a reimbursement program. Regardless, relocation service partners should be just as aggressive in their help for all home sale programs. Just because there is less of a potential for exorbitant inventory costs, does not mean that other expenses incurred as a result of hardship, delays and exceptions, are nullified. 5. Sub Vendor Issues Although relocation service partners directly coordinate the activities of the program, they do outsource sub vendors to handle some origin and destination functions, including listing homes, temporary living, property inspections, appraisals, property management, household goods moving and destination area orientation/tours. It’s important for companies to know how service providers select the vendors that will have direct contact with the transferee. Are vendors chosen because they are best suited for the task at hand? Are they held accountableIt’s important for when the quality of service falls short of expectation?companies to know howservice providers select Be wary of terms like “Preferred Network” or “Affinity Team.” Although it is always preferable to have a list ofthe vendors that will have dependable “go to” vendors, membership should never be limited to those who are merely willing to pay fees ordirect contact with the otherwise compensate your service partner. These arrangements might exclude the best option for your transferee,transferee. and may even increase costs for your company. You should question the selection process to determine if your relocation provider is limiting your pool of options because they have pre-determined affiliations or financial agreements. Will they only work with a set group of vendors? Do they only use one particular company brand? Do they utilize or consider company preferred vendors? Are they excluding other good companies for competitive reasons? Any relocation partner making vendor decisions based on their own financial interests probably isn’t consistently choosing the best resources for their clients. 6. Your Partner Is Not Much of a Team Player Your service partner should be an extension of you. They need to be your eyes and ears throughout the process. They need to be working in your best interests. It is not enough to simply prepare monthly reports and hope for the best. You partner must be proactive about keeping you abreast of each challenge or development that could cross your desk. Whether it’s an irate transferee calling about a breakdown in service, or, worse, a call from the Senior VP, who happens to be the transferee’s golfing buddy, you should never be caught off guard about an issue. As the relationship develops over time, calls to clarify approach will slow as the service partner becomes more in tune with your response style. However, when issues come up, you should hear it first from your relocation provider. Of course, no relocation company is perfect. Mistakes are bound to happen. When weighing these reasons for dissatisfaction, it’s important to differentiate between recurring behavior patterns and occasional slip-ups. Perhaps one reason is not enough to move on, but a combination of several is. Only you can decide the threshold. Whether it’s time to review your relocation policy for some of the reasons above, or because your own company policy requires it, remember to think critically about the program and the provider. You should know exactly what you are measuring and it should always include the scope of the work, the level of the competency and the quality of each service being offered.
  6. 6. About XONEX Relocation Inc. XONEX Relocation is a third party relocation services company that offers the right solutions for corporate clients – solutions that meet the demands of relocating families in today’s hectic business climate. We help corporate America move their valuable talent with minimal interruption and maximum satisfaction for everyone involved in the relocation process. Our knowledgeable and caring staff combine cost transparency with creativity to structure benefit plans that are sensible and targeted to each client’s needs. Relocation at the speed of life.YO U R R E L O C AT I O N S O L U T I O N XONEX Relocation Inc. 20 E. Commons Blvd. New Castle DE 19720 1.800.986.6846 ©2012, XONEX Relocation, • Inc. All rights reserved. 01/12