Third Party Warns Clients of Dangers - Relocation Report

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Third Party Warns Clients of Dangers - Relocation Report
Volume 35, Number 2
In This Issue
Fixed-Fee Programs on the Rise,
Third-Party Company Warns Clients of Dangers . . . . . . . . . . . 2
U.S.-Based Third-Parties Set Up
Branch Offices World Wide to
Serve Clients, and Solicit Prospects . . . . . . . . . . . . . . . . . . .3
FMC Technologies Readies to Expand, Relocation Program
Ready to Roll . . . . . . . . . . . . . . . .4
Global Relocation Trends: Rise in
Cross-Border Moves . . . . . . . . . .4
Above and Beyond Generation
X—Expats from the Y and Z Generations. . . . . . . . . . . . . . . . .5
Procurement May Step Back
When Market Gears Up. . . . . . .5
DOJ Cuts Back Temporary Housing Benefits by Half, Realigns
Functions. . . . . . . . . . . . . . . . . . 6
RE/MAX’s Dave Liniger Offers
10 Predictions for Real Estate in
2012 . . . . . . . . . . . . . . . . . . . . . .6
More Women on Boards Could
Boost Productivity . . . . . . . . . . .7
Costs, Employees’ Expectations,
Emerging Markets Top Challenges, Says Cartus Survey . . . . . . . .7
Wheaton Says Purchase of Bekins Places Company as
Fourth Largest in U.S. . . . . . . . 8
Who’s Where . . . . . . . . . . . . . . .8
February 13, 2012
UK-Based Relocation Management
Company Opens Florida Office
American relocation management companies are increasingly
opening up branches in Europe,
Asia, the Middle East and Africa
(EMEA) to serve the needs of
clients in those regions and to
solicit new global business (see
box on page 3).
But few foreign relocation
companies have set up offices in
the U.S.
HCR, a UK-based third-party
company, however, appears to
be an exception to the rule. The
company established a U.S. base
of operations in Florida about
eight months ago. The company,
which refers to itself in its website as UK’s largest independent
third-party and property-related
services group, relocates nearly
10,000 annually.
Decision to open up a U.S.
branch was announced in a December 2010 press release. According
to Adrian Leach, HCR’s business
development director , the office
was launched to ”give outstanding support to our North and South
American clients and suppliers
through a U.S.- based office.”
She added that HCR’s “global presence continued to gather
pace through our World Connect
network of independent Destination Service Providers.” HCR’s
World Connect program, she
explained, linked together small
and medium sized employee
relocation providers in over 100
countries with “local knowledge.”
Since the opening of its U.S.
office, HCR has played an active role in the global relocation
industry. HCR partnered with
Forum Expatriate Management
to launch an “exclusive” global
mobility networking chapter in
Florida, the company said in a
press release.
Its first event, scheduled for
April 4th, will feature a panel on
Short Term Assignment, Extended Business Traveler and Commuter. Presents are expected to
include KPMG, AirInc and three
corporate HR professionals.
In late February, HCR will
continued on page three
THE RELOCATION REPORT
Page 2
February 13, 2012
Fixed-Fee Programs on the Rise, Third-Party
Company Warns Clients of Dangers
A third party provider reports
that fixed-fee contract prices are
often inflated but says clients that
sign up for them will pay almost
anything to lessen risk and avoid
taking homes into inventory.
A well-run traditional home
sale programs provides as much
protection for half the price, Mike
Canning, broker vice-president
of global business development,
Xonex, tells Relocation Report.
Fixed-fee relocation programs are increasingly popping
up in conversation as relocation experts consider relocation
policies best suited toward the
current market.
“Such programs may become
popular again for the near term,”
said Canning, “as people look
at numbers from last year and
say ‘We spent a lot of money on
inventory cost and other things
involved with the home, maybe
we should look at (fixed-fee programs) to protect ourselves.”
But do such programs really guarantee cost containment?
Fixed fee programs promise
overall savings, lower risk and
budgeting predictability, explained Canning. But fixed-fee
programs are only worth it if the
fee is less than the closing and
carrying costs of the home.
That’s rarely the case, Canning said. “Most of the companies selling fixed fee relocation
programs are betting against this
outcome,” he wrote in a February 12, 2012, blog. “Savings
are based on arbitrary, and often
times exaggerated, estimate of
costs as a percentage of the home
sale price.”
While an aggressive marketing plan and direct cost program
might average less than 8 percent
for a BVO and 11 percent across
guaranteed programs, he continued, he has seen the basis for the
fixed fee program average nearly
double that amount.
Xonex Audits Fixed-Fee Program
Costs
Canning told Relocation
Report that he got a call from a
company which wanted to switch
providers but didn’t understand
the difference
between direct expenses
verses fixed-fee
programs. The
company asked
Canning to
review several
moves, and gave
him charts of
relocating employees’ closing
statements and
fees.
“They (company) gave us
three examples,”
he said. “We went
through each one
line –by-line,” he
said, “and asked
ourselves if we
move this person
from here to here,
into a 4-bedroom
home, two cars, four kids, and the
home is valued at this amount…
what should be the fee?
“To get quotes from title fees
and attorney fees we went to our
providers,” he explained. “We
asked them, ‘What would you
charge for closing? We wanted
hard numbers…The numbers
worked dramatically differently,”
and results “alarming.”
The company’s third-party
collected more than double of
what Canning’s company would
have collected under a regular
transaction (See chart below).
continued on page three
*Numbers have been changed to protect the innocent.
Same pricing scale applied.
(Chart Excerpted from January 12, 2012, blog post)
February 13, 2012
THE RELOCATION REPORT
Fixed-Fee Programs on the Rise
continued from page two
The company charged its
client $146,612.50 in fixed-fees
on a $920,000 home sale. Under
a traditional relocation program
Xonex would have charged about
$68,573.50, less than half the rate.
Canning said that during the
reviews Xonex also found a peculiar fee structure in which one fee
was charged prior to a home having
to go into inventory, but increased
if the home failed to sell by the
takeover date. Under such circumstances, Canning said, what’s the
incentive of selling the home?
He added that clients who
trust their fixed-fee provider
will be in for a shock when the
market improves and they realize
how much they’ve been charged.
“People (clients) will look at this
and say, ‘We were raked over the
coal with these charges. What
makes the relationship (between
a third-party and client) work is
that there is a connection, trust.
Vendors see you as an extension
of them.
“If you are at every turn making money on their hardships,”
he said, “you will not be likely to
remain their partner.”
U.S.-Based Third-Parties Set up Branch
Offices World Wide To Serve Clients,
and Solicit Prospects
• 6 offices in Asia/Pacific (Singapore, Bangalore, Beijing, Chengdu,
Hong Kong, Shanghai)
• 7 offices in UK/Europe (Swindon, Amsterdam, Geneva, London,
Munich, Paris, Zurich)
• 9 offices in the Americas (Danbury, Chicago, Irving, Los Angeles,
Memphis, Minneapolis, Montreal, Omaha, Sacramento)
SIRVA:
• 7 offices in the U.S. (Chicago, Cleveland, Ft. Wayne, Minneapolis,
New York, San Jose, St Louis)
• 2 offices in Canada (Edmonton, Toronto)
Page 3
UK-Company HCR
continued from page one
be represented at the South West
USA Totally Expat Show in Houston, widely attended by global mobility professionals from the west
coast. HCR said that Houston is
in “prime oil and gas country, and
the USA’s second biggest center
for Global Mobility.”
HCR was also invited to join
Worldwide ERC Global Mobility Specialist Certification
Review Board, will helps provide guidance for the organization’s Global Mobility Specialist
program.
The Relocation Report is published
twice each month by Federal News
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Editor:
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Telephone (301) 318-7397
Fax (301) 587-9056
Email: [email protected]
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Designer:
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Email: [email protected]
• 3 offices in in Europe (Prague, Swindon, Chorley)
© Copyright 2012. ISSN 0275-7613
Weichert:
• 4 U.S. offices (Morris Plains, Boston, Chicago and Houston)
• An office in Toronto, Hong Kong, London and Calgary
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THE RELOCATION REPORT
Page 4
February 13, 2012
FMC Technologies Readies to
Expand, Relocation Program Ready to Roll
FMC Technologies is expanding its workforce despite the economic downturn and its executives
are confident that the company’s
relocation program will adequately
meet the needs of relocating transferees and new hires.
was ours,” he said, “6 percent of
market value. Everyone thought we
were crazy, but we wanted to keep
homes out of inventory and didn’t
want employee to dilly dally if they
had an offer near the appraised
value.”
The company is in good shape,
said Jack Clarke, director of global
mobility services, because relocation policy changes were put in
place prior to the economic downturn. FMC runs a “hybrid” relocation program, managed in-house
with the help of service providers.
FMC uses Cartus and Weichert to
provide relocation services, Parsifal
to conduct audits, and American
Escrow to do closings.
The company also increased
marketing days from 90 to 120 and
expanded its tiered program. Tier
1, 2, and 3, included home buying
benefits and was geared toward
key managers and executives. Tier
4 was targeted toward renters and
Tier 5 toward new hires.
FMC also works with
nearly 10 moving companies—up from 3—which
submit bids on moves
posted through the company’s Move Metric
system. “Every day we get
calls from someone trying
to sell their services,” he
said. “We say, ‘if you want
to work with us, and if the
quality is high” submit a
bid.
Relocation Policies Reflect
Forward Thinking
Relocation policies
put in place anticipating
changes in the economy
served the company well. Clarke said FMC offered
employees incentives to
sell their home as far back
as 1980s. “The highest
incentive in the business
FMC’s policies also helped lift
the morale of some employees who
couldn’t sell their home despite best
efforts. “We have a policy where
we pay up to $50,000 in losses to
try to keep the transferee reasonably whole,” he explained. “We
have situations where the employee
is severely under water with their
mortgage. We address those on a
case by case basis.”
Clarke said the company “is
only obligated to make up the difference between what employees
purchased house for and the price
forced to sell at.” Luckily, he said,
the company moves “lots” of employees from south western states
where the market drop was not as
severe. Plus, their homes were not
as expensive.
Global Relocation Trends: Rise in Cross-Border Moves
The rise in cross-border moves are resulting in more permanent and selfinitiated relocations, said Natascha Clark, HCR vice-president, business development, in a January 18, 2012, article posted in the company’s website.
“I’m also anticipating an increase of assignments and cross border moves
within Asia, South America and the Middle East,” she said.
Which industry is moving where? Clark identified trends across industry
sectors.
• IT and Technology: More companies are moving people from East to West
• Building & Construction: The number of assignments to Africa, Middle
East and remote Asia are on the rise.
• Automotive: Cross-border and regional moves within Europe are increasing.
• Finance: The growth of extended business travelers continues.
Future Expat Locations
Clark reports that the next eleven countries identified by Goldman Sachs
as having a high potential of becoming the world largest economies in the 21st
century next to Brazil, Russia, India and China (BRICs) include: Bangladesh,
Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea,
Turkey and Vietnam. “These emerging countries (especially the African states)
are quickly becoming future expat locations,” Clark said.
February 13, 2012
THE RELOCATION REPORT
Page 5
Above and Beyond Generation X—
Expats from the Y and Z Generations
Who are the expats of the future? Natascha Clark, HCR vicepresident, business development,
describes the difference between
the Y and Z generations in a January 18, 2012, article posted in the
company’s website.
Generation Y expats are more
likely to “jump in to any assignments opportunity,” she said,
“without considering consequences to their career, and they tend to
be less demanding about relocation benefits than the seasoned
expat.”
Clark said that typical Generation Y expat benefit packets may not
include, for instance, COLA, cross
culture training or home leave, and
they are willing to accept a Local
Plus package. The growth of “contract” based employees will become
more common.
Very little is known about
Generation Z—those born between
1995-2010—because they haven’t
entered the workforce, she explained. But the differences may
be “starker” than ever, she said.
“Generation Z will be a materialistic generation,” she added,
“and those that become expatriates will expect to bridge the gap
between home and host with the
greatest of ease. In the next decade, Generation Z will comprise
10% of our workforce and they
will be entering the workforce
in an era of declining supply i.e.
there will be more people exiting
the workforce than entering it.”
But Generation Z may also
“suffer more shortfalls than
anticipated” because the future
of global relocation is uncertain.
“Cost saving and talent retention
remain two major trends in the
global mobility industry,” she
explained. “Will Generation Z
choose to employ skilled nationals in the growth destination,
or will they move their talent to
ensure absolute continuity and
further career progression?”
Although those comprising
the Generation Z will be technologically savvy, they will also
have learned from their parents
how to survive difficult economic times. As such, they’ll be
more likely to value education,
hard work and family life than
the Traditional and Baby Boomers before them.
Future expats, she added, will
live in a world where more emphasis will be placed on cultural
awareness so “they’ll learn from
others in a destination location.”
Procurement May Step Back When Market Gears Up
Procurement executives still
don’t understand why relocation
costs are so high despite the industry’s educational efforts, but their
role in the selection process is expected to diminish as the economy
improves, speculates an industry
source.
By that time, he said, companies will acknowledge that rising
relocation expenses were caused
by the weak real estate market not
vendors’ fees.
Some corporate clients question the worth of procurement’s
participation in the process.
“Procurement isn’t adding any
value,” said the source. “We have
to determine a number of (factors)
that as not as tangible as price. I
think the trend is going to be away
from procurement much to the
relief of everyone.”
tiny amount of overall relocation expenses. The source said:
“If companies are spending, say,
$10 million in relocation, about 5
percent of that goes toward service
fees, that’s about $500,000.
The source reports that in
some companies procurement
has little influence in the vendor
selection process.
“You are not going to make
much of a dent in the $10 million
by beating somebody down by
$300 a move on service fees,” he
added.
Procurement managers, which
still complain about the rising
relocation costs, don’t realize
that vendors’ fees represent a
“They (procurement) still have
the attitude,” the source added,
“‘it’s only moving people, how
hard can that be?’”
Page 6
THE RELOCATION REPORT
February 13, 2012
DOJ Cuts Back Temporary Housing Benefits by
Half, Realigns Functions
The Department of Justice
(DOJ) said it will reimburse relocating employees for 60 day of
temporary quarters expenses, half
as many as it had in the past. These
cuts will save the agency nearly
$10.3 million a year.
Reducing relocation benefits is
part of larger cost-cutting measures
DOJ is undertaking to streamline
operations, according to an agency’s press release. DOJ expects
to save another $130 million by
realigning functions, reassigning
employees to different divisions
and consolidate offices.
The agency also proposes to do
the following:
• Eliminate the Drug Enforcement
Administration’s (DEA) Mobile
Enforcement Teams and reassign the 145 positions associated
with the teams to fill vacancies
with the DEA fee-funded Diversion Control Program to better
support DEA’s mission. Savings: Up to $39 million.
• Consolidate Antitrust Division
field office space in Atlanta,
Cleveland, Dallas, and Philadelphia into the Chicago, New
York and San Francisco field offices as well Washington D.C.’s
division. Ninety-four positions
will be reassigned to provide
additional staffing resources to
larger investigations. Savings:
$8 million.
• Merge the Justice Management
Division’s strategic planning
and management functions to
increase efficiency and effectiveness. Savings: $1.3 million.
• Consolidate sub-regional office
locations to better use existing
workspace and enhance information sharing.
• U.S. Marshals Service: Subregional office space will be
reduced or consolidated resulting in a $381,000 savings.
Changes to specific agencies
include the following:
• Bureau of Alcohol, Tobacco,
Firearms, and Explosives:
Five sub-regional offices will
be consolidated resulting in a
$292,000 savings.
• FBI: Twelve sub-regional offices will be reduced or consolidated resulting in a $674,000
savings.
• DEA: Up to seven sub-regional
offices will be consolidated
resulting in $395,000 savings.
• U.S. Attorneys: Field office
space will be reduced and
consolidated resulting in a
$200,000 savings.
RE/MAX’s Dave Liniger Offers 10 Predictions
for Real Estate in 2012
Dave Liniger, chairman and co-founder of RE/MAX, sees several positive factors that could take hold in 2012.
“Interest rates will remain at or near historic lows and home prices will stabilize and start to rise by the end of the year,” said Liniger
“There’s no question, the housing recovery will be slow and steady,
but for many cities the turn-around is already happening.”
With interest rates lower than most people have ever seen, and
prices lower than they’ve been in years, the current marketplace has created a unique environment that may not be repeated for decades, he said.
“Informed and savvy consumers and investors recognize there’s
great opportunity in this market and they are leading the way to
recovery,” Liniger added. The top 10 predictions are:
1.
2.
3.
4.
5.
Continued low interest rates
Home prices stabilizing and starting to rise
Increasing numbers of home sales
Rising inventories, mostly due to increased foreclosures
Distressed properties will make up about half of all sales
6. An improved Short Sale process to help avoid foreclosure
7. Homeownership rates continue to fall
8. Foreign and domestic investors will buy 25% of homes
9. Increasing reliance on real estate agents
10.Increased use of Mobile and Social technologies
February 13, 2012
THE RELOCATION REPORT
More Women on
Boards Could Boost
Productivity
Low representation of women in top jobs is undermining Britain’s economic recovery, U.K. Prime
Minister David Cameron said at the Northern Future
Forum meeting, according to a February 9, 2012,
article features in People Management (PM).
Cameron explained there was evidence that promoting more women to senior roles would boost business
performance and that the UK could learn lessons from
countries like Norway, which impose boardroom gender
quotas, according to the article.
“The evidence is that there is a positive link between women in leadership and business performance,
so if we fail to unlock the potential of women in the
labor market, we’re not only failing those individuals,
we’re failing our whole economy,” Cameron told PM.
The U.K already helps women set up and run their
own business. But the Nordic and Baltic countries are
way ahead of Europe in ensuring women are represented in boards.
Page 7
Costs, Employees’ Expectations,
Emerging Markets Top Challenges,
Says Cartus Survey
Company costs, employees’ changing expectations and emerging markets represent the three most
significant challenges international corporate relocation managers face today, according to Biggest Relocation Challenges: International Assignments, a recent
Cartus survey on international mobility.
Nearly 68 percent of respondents reported concerns about international assignments costs, the report
pointed out. One-third of them have instituted formal
cost estimation and budgeting procedures on transferees, and 21 percent aligned relocation benefits
to more closely match employees’ levels within the
organization (tiered services).
Nearly 45 percent expressed worry about employee expectations and attitudes, “an issue that underscores the difficulties companies are having with
identifying capable and willing candidates for assignments,” the survey pointed out.
Under Norwegian law, women must make up at
least 40 per cent of the board, while similar quota
laws have been passed in Spain and Iceland, the article pointed out.
“Traditional benefit-laden expatriate packages
are less common now because the focus on costs is
making companies more savvy,” said John Arcario,
executive vice president at Cartus. “Many companies
are offering global assignees very targeted benefits
packages. At the same time, employee demands are
increasing, but they appear to vary by generation.”
In February 2011, attempts were made to increase
women on boards by at least 25 percent, but the measure was not mandatory. Cameron said employers
must be pressured to promote and recruit women into
leadership posts.
Arcario pointed out that “Generation Y” or “Millennial” assignees are comfortable “negotiating” assignment
benefits since they have few family obligations. But
more qualified seasoned employees job struggle with
balancing career advancement with family obligation.
According to the article, Martin Webster, head of
corporate governance at law firm Pinsent Masons, argued that, “Improvements have been made in the last
year in the number of women on boards, but most are
non-executive roles, and often it is the same women
on multiple appointments.
Companies entering into emerging markets will face
other challenges as well, including attracting skilled
candidates for international assignments and ensure
employees adapt to the new area both professionally and
personally.
We’d love to hear from you!
Contact our editor, Marcy Kogan, at
[email protected]
with comments, questions and suggestions.
Employee expectations, the study concludes, will
likely continue to weigh heavily in international relocations “as companies balance talent management against
an expanding global footprint,” Arcario said. He added
that talent management is key to a company’s success,
and companies should invest in “new initiative to motivate, engage, and support their workforce.”
Page 8
THE RELOCATION REPORT
February 13, 2012
Wheaton Says Purchase of Bekins Places Company as
Fourth Largest in U.S.
Wheaton Van Lines purchased
Bekins Van Line, creating the
fourth largest household goods
carrier in the U.S., according to a
press release issued by Wheaton.
that’s so well recognized,” said
Mark Kirschner, CEO of Wheaton
Van Lines. “Consolidation in the relocation industry is inevitable as the
market shrinks with the economy.
The asset purchase agreement
is in process and the transition of
ownership is expected to be complete by mid- March 2012.
“But,” the company continues,
The press release added that
when the acquisition is final, both
brands – Wheaton World Wide
Moving and Bekins Van Lines –
will continue to be operated as
separate brands with combined
operational efficiencies.
The new Bekins will be headquartered in Indianapolis, also the
corporate headquarters of Wheaton.
Together, the brands will increase
the van line’s agency base from
240 agents across the country to
approximately 370 nationwide, according to Wheaton.
The acquisition, Wheaton said,
is designed to bolster both brands
and bring increased operational
capabilities to bear for the combined company’s entire client base
– including private individuals and
corporate clients.
Nearly 38 employees will be
added to Wheaton’s corporate staff
in Indianapolis bringing the total
number of corporate employees to
about 175. Bekins offices in Hillside, Ill. will be shut down.
“It’s rare to have an opportunity
to acquire a brand like Bekins, a
company that truly helped to create
the moving and storage industry, an
innovator in that space and brand
“acquiring the Bekins brand and
becoming partner to 130 Bekins
agents will allow the van line to
grow its market share overall and
put us in an even better position to
compete moving forward.”
Who’s Where?
Carolyne Hotze, regional director at Long & Foster, is no
longer with the company.
Lisa Hulet joins SIRVA in Canada as vice-president of relocation sales. She was previously a vice-president of marketing for
United Van Lines Canada and vice president of business development at Prudential.
Denise Mitchell, now account manager at Prudential, is
no longer with SIRVA, where she served as vice-president of
client services. She also worked for Graebel in business development, and for Mobility Services International as director,
client services.
Tom Paton joined NEI as proposal writer. He was previously
with Prudential and MSI.
David Dance left Suddath International, where he serviced as
vice president, finance & strategic development, and joined Paramount Transportation as president. He also worked at Cartus, as
director of global supplier relations.
Tiffany Johnston joined Weichert Relocation Resources
as vice president of client services, headquartered in the thirdparty’s Chicago office. Johnson most recently served as president of National Rental Service. Lisa Prather joined Weichert
as vice president of operations, working from the third-party’s
office in Houston. Prather served as vice president at Corporate
Relocation.
Elizabeth Stewart joins Altair Global Relocation as vice
president, client services. She will work out of the Atlanta Region
Service Center in Shelton, Connecticut and report to Katherine
Couture, senior vice president for the Atlantic Region.