Buying Relocation Services

How corporate procurement and HR departments are changing the game for the better

Real Estate magazine has recently noted major changes in employers' buying processes for relocation management services, and asked RIS Consulting Group's Peg Guinta and John Sculley to comment. RIS Consulting Group has advised and led relocation management sourcing projects for U.S. and multi-national clients since 1991. Sculley also serves on ERC's Procurement Task Force, which received its President's Award for demonstrating pioneering work in this field.

Real Estate magazine: We are seeing an increasing role of procurement and sourcing professionals in the global mobility arena. Why is this happening?

RIS Consulting Group (RISCG): Cor-porations today are operating on the premise that their areas of greatest current spending are also potentially their best savings opportunities. They are using procurement departments more strategically, not just to execute routine purchases but to target and restructure any high-spend budget items.
This expanded mission for pro-curement has grown beyond buying raw materials and OEM product components into all kinds of service purchases, including HR administration and, inevitably, employee relocation services as well. Even in companies with strong internal relocation expertise and successful service provider relationships, procurement now commonly initiates service re-bidding and controls the evaluation process and resulting contracts.

RE: In your opinion, what factors have most influenced this shift in responsibilities?

RISCG: Often called Strategic Sourc-ing, this is fundamentally a bottom-line improvement device: "Buy more for less."

We see some organizational influences too. Companies today conserve their own people for their core businesses. Senior executives have thinned administrative staffing in recent years, outsourcing more traditional staff functions and relying on a few senior HR generalists rather than many specialists. Even very large companies may allocate very little or no direct staff resource to relocation management.

Of course, a complex and costly process like relocation often can be improved and made more cost-effective. However, because companies have less resident expertise and focus on relocation management, they do not understand its high total costs very well and often perceive savings opportunities that are unrealistic without impacting transferee benefits.

RE: What is the goal of ERC's Procurement Task Force?

RISCG: The Employee Relocation Council (Worldwide ERC) recognized growing concerns about recent ineffective buying processes for mobility services. To some HR professionals, it seemed that procurement too often left out important qualitative factors in simplistic, price-based decision processes that commoditized relocation services. Procurement people, on the other hand, often felt they were imposing some needed rigor and price discipline into managing expensive (and sometimes relationship-based) relocation supplier contracts. Resulting service provider contracts were sometimes misfitted to the corporations' real needs.

ERC saw some validity on both sides and sought to create a collaborative buying process for mobility services that would best utilize both HR's service sensibilities and procurement's objectivity and performance-measurement orientation. Under the co-leadership of a mobility service buyer (Jack Clarke of FMC Technologies) and a service provider (Peter Wayman of Cartus), ERC assembled in 2005 an interdisciplinary Task Force of experts from corporate HR and procurement functions, global service providers and independent relocation consultants.

Now in its second year of work, the Procurement Task Force has sought to define best practices for mobility procurement as a foundation for professional development of procurement and HR/relocation. Key outputs have included:

- Educational sessions at ERC's National Relocation Conference and Global Workforce Symposium
- A booklet on the recommended "Process Flow for Procuring and Maintaining Mobility Services"
- Initial standard definitions of selected Key Performance Indicators (KPIs) for use in mobility service level agreements (SLAs).

In its next phase, the Task Force will emphasize new publications and outreach sessions that will engage procurement professionals in two-way educational efforts with HR/ Relocation. Related literature and work tools are already available at the Procurement Center page on Worldwide ERC's Web site, www.erc.org.

RE: How can procurement and mobility professionals best bridge the gap in their efforts?

RISCG: In an ideal process, procurement and mobility share responsibility for buying relocation services on their mutual employer's behalf at an optimum value-that is, an ideal balance of service and price considerations. To do so, they need to acknowledge the complementary skills and experiences that each can bring to the buying process.
Mobility should be able to analyze the firm's past relocation experience and iterate the company's unique relocation needs: ongoing staffing and service requirements, quality standards and budget tolerances, both at customer and business-user levels. Mobility should also know the relocation marketplace's competitive landscape and policy/program trends.

Procurement adds strengths in facilitating the formal buying process, ensuring that only qualified firms are considered, framing criteria and information collection, and managing the planned time frame to scheduled completion. Procurement also focuses on compliance, financial analysis and process documentation aspects, protecting the firm from subjectivity and unnecessary risks in selecting suppliers.

Supported by other selected internal and/or external evaluators, procurement and mobility can together devise a bidder evaluation process that will concentrate on the most relevant dimensions of potential suppliers and will result in fully market-competitive financial terms.

RE: Is a universal Request for Proposal process possible or desirable?

RISCG: The perennial idea of a "one-size-fits-all" RFP seems attractive and expedient, but ultimately cannot work. Every employer has unique mobility needs, influenced by its industry type, geography, demographics, competitive position, financial strength and staffing strategy. A good RFP reflects these needs and collects only information relevant to the firm's criteria. While standard terminology and KPIs are useful, the questions asked must be company-specific.

RE: How can a company determine its own particular mobility needs?

RISCG: For most companies, past history is the starting point: whom have we moved, from/to where, services utilized, cost, satisfaction levels, etc. The firm should then anticipate changes in its move volume, patterns or policies. The best inputs are from a mix of internal (executive, business-user and customer levels) and external resources (industry peers, professional associations, service providers and regulatory agencies).
A needs assessment may involve surveys, interviews or other research. Some firms can accomplish this through their HR and procurement departments, while others augment their teams with specialized relocation consultants.

RE: What are some of the most pressing overall issues impacting the mobility
marketplace?

RISCG: Improvements in mobility procurement are coming at a critical juncture. It has never been more important for service buyers to break through the "look-alike" appearance of relocation services and to understand the impacts of differences in service models and provider performance.

This is partly due to supplier consolidation and globalization. Mobil-ity companies are rapidly moving toward similar global full-service models, but they may come from
different core competencies and have important differences in structure and capabilities that affect their suitability for a given client. Buyers need to know what fits them best and to discern the real differences in suppliers.

Also, supplier performance gaps will be magnified by the softening real estate market. Operational weaknesses of some relocation companies have been masked by strong home sales in recent years, but may soon be revealed at the expense of indiscriminate clients. Procurement can tighten performance standards, supplier risk/accountability and ongoing service levels.

Mobility services are currently a buyer's marketplace where employers can secure very high service commitments at unprecedented low prices. Although this situation is attractive, it is also laden with pitfalls. The service buyer may face loss-leader pricing that is not sustainable over the long run of a contract, or a low bidder that cannot remain a viable provider. Buyers must consider not only what the providers offer but whether they will be able to deliver at the expected cost and satisfaction levels over the full contract term.

RE: Where do you see the mobility industry heading?

RISCG: Overall, the mobility industry is maturing at a fast pace. Service breadth, knowledge management and global supply chain depth are growing rapidly. New integrated technologies link clients, relocation managers, transferees/assignees and all supporting specialty suppliers in increasingly robust Web applications. Mobility providers deliver remarkably high service value, considering their tough, problem-prone environment.

However, client and customer expectations are rising fast too. Employee mobility is a corporate strategic tool and its cost an investment in global positioning. Employers want suppliers that are administratively complete and consistent, and they expect strong ongoing advisory support at very low fees. As the competitive bar is raised and clients become smarter shoppers, the pace of consolidation in the mobility industry will further accelerate and we should expect more suppliers to drop out of the competitive race.
The influence of procurement is here to stay in the mobility arena, and we should welcome and embrace these added skills and sharper pencils that will help HR drive improving service values in the coming decade.

Peg Guinta, CRP, projects director, RIS Consulting Group, has supported corporate clients and relocation service companies since 1996 in market research and reporting, service satisfaction program management, relocation program analysis and design and policy writing. For more information, e-mail peg@rismedia.com.

John B. Sculley, CRP, is vice president and managing director at RIS Consulting Group. Formerly a VP of a major relocation management company and of an international site-consulting firm, Sculley was also executive director/CEO of a major Connecticut not-for-profit. For more information, e-mail johnsculley@rismedia.com.

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