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Cup of Joe

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Can We Talk?

Like all things and all industries, the employee relocation industry has rarely stood still. Driven by the requirements and business imperatives from corporations spanning every industry and sector of the global economy, the thousands of firms that provide a dizzying array of relocation services have had to challenge themselves to become better.

1 September 2017

I fully realize that what I am about to say could easily be misinterpreted and lead you to believe that I am angry and complaining, which couldn’t be further from the truth. That said, I feel compelled to address an extremely provocative topic and I hope to do so in the most respectful way possible.  Quite simply, I believe it is time to shine the spotlight on an area of our industry that, perhaps not so surprisingly, will often garner significant attention in myriad forums, such as symposiums and related conferences, smaller industry gatherings, mobility services sourcing endeavors and of course, the informal yet vibrant industry grape-vine. However, it’s a topic that has yet to rise to a level of prominence and frankly, concern, I believe it warrants. 

Like so many of you whom have called our industry “home” for so many years, it is not accidental that relocation has been the only professional career I have ever had!  With very rare exception, my time in this industry has truly been a labor of love.  I realized early on that my deep appreciation and respect for others, along with the joy I derive from building and sustaining relationships, problem-solving and creating solutions aimed at helping others, served as a perfect match for the employee mobility space.  Now, more than thirty years later, I can still claim that my “work” isn’t so much “work,” as it is a natural extension of “me” and therefore, a place that still brings tremendous joy and fulfillment.

Like all things and all industries, the employee relocation industry has rarely stood still.  Driven by the requirements and business imperatives from corporations spanning every industry and sector of the global economy, the thousands of firms that provide a dizzying array of relocation services have had to challenge themselves to become better, leaner and more efficient, bigger, or smaller, expand product offerings, or shrink the menu and focus more acutely on a core set of services.  Technological advancements have been monumental and have played an exciting and vital role in so much of the change.  Thirty years ago, who could’ve dreamed that today, a relocating employee can submit an expense report, check on the status of his/her household goods shipment, locate interim corporate housing, explore new permanent housing communities and dialogue with their relocation management company supporting the move, all from something called a “smartphone,” from anywhere in the world!  In 1987, if someone posed that scenario as a 30 years from now “what if,” I might have replied with an even larger fantasy…such as suggesting the Cubs had a better chance of first winning a World Series!  Oh…ummm…sorry Cleveland friends! 

Through all of the change, our “why” has remained constant.  Fundamentally, corporations around the world, large and small, engage us to help make what can be an immensely challenging and stressful life event – relocating, less so.  Companies look to us because we are expert at not only managing the logistics and the seemingly endless number of inter-related processes involved in delivering our services, but, we are also tasked with serving as a beacon of hope and support during a stretch of time that can otherwise feel tumultuous.  Whether moving five hundred or five thousand miles, the emotions and the challenges are plentiful and make no mistake, they are real. 

As a buyer of mobility services, corporations have steadily increased the requirements of a relocation management firm, developing lengthy and exhaustive demands that often extend far beyond the basics of providing assistance to a relocating employee/family.  Today, a representative list of requirements would resemble the following:

  • Proven, extended period of experience
  • Sound, high-quality financials 
  • Highly functional technology platforms that are global, multi-lingual, multi-currency, able to integrate with a multitude of client data systems and, perhaps most important, ensure the highest levels of global data-protection that satisfies country regulatory standards
  • Proven, effective hiring practices that support leading performance results and superior thought-leadership capability.
  • “On-The-Ground” resources/capabilities around the world. 
  • Extensive global program/policy consulting and benchmarking.
  • A variety of program funding capabilities.
  • Ever-extending invoice payment terms.
  • A responsibly sourced and rigorously managed global network of supplier-partners who are able to comply with corporate client requirements.
  • Adherence to stringent Service Level Agreements (SLA’s), often accompanied by financial penalties when targets are not met.

Request for Proposals (RFP’s)/Requests for Information (RFI’s) have become so extensive, that responding to them often requires the input and assistance of large numbers of employees throughout a relocation management company (RMC).  RFP responses force RMC’s to invest massive quantities of time and resources, along with travel costs associated with progressing through the various sourcing phases.  In a good year, a RMC might win 30-35% of the RFP’s it responds to.  Which means 65-70% of the time associated with responding to RFP’s results in the business going elsewhere. 

I typed much of this article seven miles above the ground, on a plane that is owned by a company whose main source of revenue has decreased roughly 50% over the last 40 years.  In fact, since 2001, there have been roughly 50 airline bankruptcies, along with a host of mergers and sadly, complete failures (source: https://www.theatlantic.com/business/archive/2013/02/how-airline-ticket-prices-fell-50-in-30-years-and-why-nobody-noticed/273506/). I think it’s safe to suggest that, as airlines have battled immense, destructive financial headwinds, the passenger experience has greatly suffered.  Airlines have reduced the sizes of their fleets in an attempt to ensure maximum seat revenue for all flights that leave the ground, causing less flight options and routinely over-sold flights.  On an all-too frequent basis, we hear news of an ugly encounter between a passenger and an airline employee.  The relationship between customer and provider has arguably never been worse. 

Further, airlines have been forced to search out and secure new forms of revenue to compensate for the dramatic drop in airfare.  Those alternative revenue sources generally flow from passenger wallets.  So passenger costs – airfare combined with added fees/charges associated with alternative airline revenue sources, have increased, while the flying experience has deteriorated to levels slightly above transporting freight. 

I think it’s appropriate to compare what has transpired in the airline industry, to what is taking place today in the employee relocation market.  As airfare was for airlines, transactional management fees had long served as a major source of revenue for RMC’s.  However, over the past decade, management fees have been routinely bid down and in many instances, depending upon the move profile of the relocating employee, fees have been removed altogether!  In fact, in a growing number of instances, RMC’s go a step further by constructing a variety of “cash-back” platforms, thereby taking earned and traditionally held revenue and handing it over to corporate clients.  This trend has forced relocation firms to search out and source alternative revenue sources (sound familiar?), finding the vast majority of non-management fee revenue from their respective supplier networks.  There are several problematic and perhaps, unstainable attributes associated with this financial structure, including:

  • RMC’s by and large, use similar supplier-partners, particularly for the most commonly provided forms of support, such as:  Transportation of Household Goods, Real Estate Services (origin and destination), Mortgage, Title and Closing, Destination Services and Temporary Corporate Housing.  The amount of financial pressure felt by these and other providers has substantially increased as RMC’s battle their own fierce headwinds. 
  • The relocating employee profile continues to shift away from the traditional homeowner offered a form of home sale and new home purchase assistance, to those receiving no home sale, or, new home purchase assistance.  Internationally, three year assignments have largely given way to reduced benefit packages offered to assignees moving permanently, or, on shorter term engagements.  Changing employee populations, as well as global corporate and industry structural shifts have steadily produced greater numbers of “lower tier” benefit offerings, further depressing the revenue-producing potential for both the actual service provider and the RMC.
  • With minimal to zero management fees now locked in place, coupled with detrimental shifts in the profile of the relocating employee, corporate clients continue to seek routine program cost reduction commitments from their RMC partner that are often coupled with carefully managed quality metrics, all connected to penalties for underperformance.   

All of the facts presented above may appear to be a daunting set of circumstances.  However, as I mentioned at the start of this discussion, my aim here is to merely expose this information and my hope is that more formal, more visible and transparent discussions begin to surface, that in the end, creating improved and more sustainable financial solutions.   

My time in our industry has taught me a great deal…chief among the lessons I’ve learned is this reality - the relocation industry has always been represented by some of the finest “people” people any industry can muster.  Over the past 5 to 7 years, we have witnessed dramatic changes, particularly with respect to the financial foundations of our business.  All companies in all corners of relocation have been touched by these changes.  Many are no longer with us while many others have learned to survive and even thrive. 

Our industry and our collective “why,” has always been firmly rooted in the principles of collaboration and serving others.  Indeed, it is the very connections that span our industry, globally, that has carried us all to this point.  Our industry will continue to evolve.  The financial concerns I note above will likely persist for some time to come.  What it ultimately means, not only for service providers and corporate clients, but perhaps most importantly – the relocating employee, remains to be seen.  My most sincere hope is that our industry will do what I have seen it do for three decades now… come together… create and innovate… and CONNECT!

As always, I welcome your thoughts on this, or any other topic you would like to address.  I can be reached via email at:  jcardini@bristolglobal.com

Warmest Regards,

Joe Cardini 

President

Reference: Thompson, D (2013, February 28). How Airline Ticket Prices Fell 50% In 30 Years (And Why Nobody Noticed). https://www.theatlantic.com/business/archive/2013/02/how-airline-ticket-prices-fell-50-in-30-years-and-why-nobody-noticed/273506/

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