Getting Off on the Right Foot: The Role of Cost Projections in Mobility Success
The Next Generation of Relocation Technology Tools Offers Greater Insight, Flexibility, and Accuracy for Pre-assignment Decisions
Corporate relocation spending is often scrutinized as companies look to create efficiencies and manage costs. It is easy to see why relocation spending is under a microscope when costs can reach upward of $2 million for a single three- to five-year international assignment.
As relocation costs have increased, mobility professionals are under more pressure to accurately estimate assignment costs to obtain relocation approvals, establish financial budgets, track budget-to-actual costs, and reduce total relocation spending.
Delivering on these expectations begins with developing accurate pre-assignment cost projections, which must consider all moving, repatriation, and ongoing costs. A new generation of tools, including global cost estimators, that use real-time and company-specific information have led to more accurate projections with detailed expense insights, faster authorizations, and better forecasting.
Creating accurate projections requires gathering relevant costs associated with relocation, such as taxes, visa, and immigration, family needs, and even requests for exceptions.
The accuracy of cost projections ultimately comes down to what data is used to construct the estimate. Traditional methods often rely on assumption tables—some of which are updated only once a year—to generate cost projections.
One of the ways tools such as global cost estimators lead to more accurate cost projections is their use of real-time, auto-transmitted data, which enables mobility professionals to create projections using current costs. This is vital, as costs such as airfare and household goods moving services can fluctuate based on availability and seasonality.
Global cost estimators can also be programmed with company-specific data tables so companies can use their own historical relocation data when creating projections. This is a more reliable approach compared to using assumption tables or even industry average costs that might not accurately reflect the costs incurred by the company, and it helps mobility professionals generate more meaningful insights relative to their company’s specific situation.
In addition to creating more accurate cost projections, global cost estimators also reduce the time required to create cost projections from days to minutes. This means initiations are routed more quickly and gain faster executive approvals, which gets employees to their destination faster, so they can begin their new roles sooner than ever.
Manually generating cost projections can take several days and can cost upward of $1,000 per report. Because of the amount of time and costs required, companies rarely generate multiple cost projections. Instead, they typically generate projections only for one candidate and one assignment type, which provides a limited view of their relocation options.
Long-term assignments are no longer the only relocation option available. Global cost estimators provide a more holistic view of assignment costs by allowing mobility professionals to compare total relocation costs using multiple candidates and scenarios.
For instance, if a company needs to place resources in Germany for a specific business need, its mobility team could examine several relocation options to find the right candidate and assignment type. They could generate projections for shortterm, long-term, and cross-border assignments for three different candidates.
While these candidates might have the same skill set, the cost to relocate these individuals can vary depending on their salaries, departure location, family situation, and other factors. Having an apples-to-apples cost comparison of each scenario allows mobility professionals and the business unit manager—who may have budget responsibility—to carefully weigh assignment costs and business value to select the best option.
Using traditional, manual methods, mobility teams would have to create nine separate cost projections. Manually generating cost projections for multiple situations can be a challenge. The variance in destination and assignment type with regard to benefits such as housing and transportation, education allowances, hardship allowances, and language and cultural training creates complexity. New tools can supply more relevant data and simplify the process to create a clearer picture of the holistic costs required for each scenario.
Additionally, corporate culture, which can vary greatly from company to company, could affect which model of cost projection would be appropriate. For companies in which mobility plays an integral role in their business strategies, there may be greater emphasis on comparing different scenarios to determine the right candidate. Mobility professionals can also use these tools to “reverse engineer” cost projections to achieve a specific assignment cost. For example, by eliminating or adjusting options such as education, homefinding, or temporary living expenses, mobility professionals can reduce total relocation costs to meet a desired budgetary target.
For companies with more modest relocation needs, the traditional manual approach to cost projections may prove sufficient. Further, specific planning needs can impact the level of detail and flexibility needed. For companies creating cost estimates for an engineering project in which assignment costs become part of a competitive bid, accuracy and speed in creating a cost projection is crucial.
UNDERSTANDING THE VALUE
The initial cost estimate remains important throughout the completion of an assignment. The company’s return on investment is determined, in part, by comparing actual expenses against the assignment budget, which is created from the initial cost projections.
Budget-to-actual reports, made possible by effective global cost estimates, allow for timely cost analysis that can reveal that expenses have exceeded the budget. These discoveries provide opportunities for review to determine whether something changed in the scenario.
The insights gleaned allow companies to more accurately forecast future assignment expenses. They can also use the comparison to identify spending trends to uncover opportunities for improvement, set policies that reduce exceptions, and support a high-quality mobility experience for employees.
A new generation of global cost estimator tools enables companies to identify greater cost-efficiencies, continually fine-tune their mobility processes, and improve overall program management. They reduce errors and inefficiencies, shorten relocation cycle times, create tracking and reporting opportunities, and increase employee satisfaction.
By Sean Raney, SVP, Global Compensation & Payroll, SIRVA Worldwide Relocation & Moving and Wendy Badlan, Senior Manager, Global Compensation & Payroll Services, SIRVA Worldwide Relocation & Moving.This article was originally published in the (June, 2016) issue of MobilityTM, the monthly magazine of Worldwide ERC®. Reprinted with permission.