The High Cost of Expat-Lite Programs

M.C. ESCHER (Dutch, 1898-1972), Rind, 1955.  

Current economic conditions have forced companies to take a look at their policies to see what can be trimmed.  For expatriate programs, corporations that did not already have a pared-down assignment program may be interested in incorporating one now as a result of an effort to introduce across-the-board austerity measures.

But to incorporate expatriate programs with a reduced benefits structure may actually increase the number of assignees that you probably wouldn't or shouldn't have sent in the first place and thereby inadvertently increase the overall cost of your international assignment program.

As many have learned the hard way, an attempt to save money while sending people on assignment almost begs to be thwarted.  In the end, what you may find is that you've done is actually introduced a more expensive program to move individuals who might have otherwise accepted a local package.  Also you may risk adding to the administrative costs of managing your assignment program.

Before outlining a stripped expatriate package, examine the reasons you are seeking to offer a reduced package.  Are there candidates that you would gladly send on assignment if only it were more affordable?  

Generally, it's not a bad idea to have an expat-lite program as long as you are looking to move more talent internationally -- not to move the same talent at less cost.  These programs may be right for lower level employees, or for those who have elected for themselves to go on assignment.  But don't expect that typical candidates for full assignment packages will be interested in (or even should) accept an expat-lite program, though.

MBA rotational programs or leadership development programs can work well if implemented as their own separate and distinct programs.  However, keep in mind that newer and lower level employees may have difficulty obtaining host country work authorizations in some locations.  Especially with some countries moving to tighten their borders to shore up the loss of local jobs.  Examine the candidates, their capabilities as well as likely home and host combinations ahead of time.  As with assignments, the selection of these candidates should be nominated by the company and not be open to 'volunteers' without a business case to send them.

If there is a strong desire to move talent that you may not have a solid business reason to justify one (meaning a temporary assignment with a plan to return or go onto another locale) then consider moving that talent on a local basis.  You may consider spending the time on defining a standardized local-to-local package that works.  It may be the standard local offer that includes international move benefits, language and cross-cultural support.  Key benefits to keep transferees (and you) out of trouble.

While some companies think of bringing back a deceptively simple lump sum (bucket o' money laissez faire) approach to international assignments.  Some companies are moving in quite the other direction.  They notice that offering a housing allowance rather than a housing reimbursement may encourage assignees to live in a cheaper area that could have safety issues.  Reduced oversight and management of assignment benefits may in effect 'buy' more trouble.

Wiechert Realty in their 2011 Trends report observed that some companies are incorporating a tiered approach to managing assignment benefits.  A cafeteria program that sometimes referred to as a 'Flex-patriate' assignment.  All assignees receive core benefits such as immigration, travel to the new location and tax equalization - while all other assignment benefits are optional and determined on a case by case basis.  I could see that such an approach may lead to more lost time in negotiating and then having to administer each package one-by-one.

At the same time, companies would do well to avoid the trap of sending persons who should go on a full assignment package on a local-to-local basis.  If there is a real intention for that person to return home, then to send that person on a local basis may experience costly tax implications.  In addition, employees may experience potential adverse hits to nationalized benefit programs.  The company should also clarify its approach company retirement programs as well as the tax treatment of and payment of long-term incentive plans for which this group may be eligible.  Well-run assignment programs foresee and address these issues - local offers will not.

There is either a business case or there is not - and the expatriate program is generally designed to foster international mobility.  The benefits are not offered arbitrarily and without good reason.  Paring them back in a vacuum may have unexpected implications.

A clever man commits no minor blunders. 

- Johann Wolfgang von Goethe

An Inconvenient Truth: HR, you're only as good as your vendors!

All Human Resources professionals are either supported by (or at the mercy of) the providers that support their organizations.

For, among others, the following services:

Picasso, "Girl before a Mirror" - 1932  

• Employment Law & Immigration
• Medical Insurance
• Benefits Management
• Leave Administration
• Drug Testing
• Work Life Balance
• Training
• Recruiting
• Payroll
• Tax
• Relocation, etc.

It usually goes that we inherit providers selected by previous managers.  And, most of the time, the HR people dealing with the day-to-day issues with a vendor don't get to select those vendors, or learn to make up for what that provider may not do so well - as an act of preservation.  It's just what good HR people learn to do...

Much tips the scales towards one provider or another, usually its price and capabilities.  Because at most companies the RFP process is so arduous, it does save time to go with an all-in-one provider.  You may go with one provider for Relocation support and also look for the potential to add other services on an as-needed basis.

Smaller specialized firms deserve a closer look.  Some reasons include:

• VIP Client-Status: I've observed that some larger service providers you may be one of many clients and get lost in the crowd;
• Real Subject Matter Expertise: A law firm that only specializes in employment law or immigration just has a distinct advantage;
• Advocacy:  These firms may have their own lobbyists to influence positive change.

This means that some specialized providers may be at a disadvantage over larger firms.  Larger firms with sales departments just as large as their customer service group.  I'm not casting dispersion on this, it's just good business.

Time and time again, the same service providers have a habit of making the same mistakes.  Human Resources will call them in with a list of areas for improvement, see service improve for a time, and then slowly but surely things start slipping again.  

But, avoid some pitfalls, if possible:

1. Though you may be tempted, avoid asking specialized providers to do something they are not equipped to do.
2. Don't leave them hanging.  Ensure the provider is well-connected to point people in your organization and understands your culture.
3. Avoid being a 'guinea pig' for a new service they may be adding to their offerings.  Wait at least a full year or two until they work out the kinks.
4. Your provider may get bought-out by another larger organization.  

In my industry, international relocation, there has been a lot of consolidation of settling-in providers in particular.  Though it takes more time, finding the best provider with local offices in your key markets is the best approach, in my opinion.  

People in the Expatriate Management business will probably know who I'm talking about - because two major settling-in providers were 'swallowed' up by one.  What I've seen is the really good local consultants are putting out their own shingles.  I think there may be a reason.  

But even before the consolidation, I had some major misgivings about the service provided by some of the formerly independent agencies.  The usual breakdown is something like the following:

The Hourly Approach

• Half-day program for business travelers;
• Full-day program for short-term assignments;
• Three days for single assignments;
• Six-days for assignees with families.

Some providers offer a flat-fee approach.  Services such as Intrepid New Yorker offers a service that for a flat rate, they will do what ever it takes to acclimate your assignee to the area.  They often have consultants that have relocated internationally themselves and have a first-hand appreciation of its complexity.  They are able to offer a real-time cross-cultural training approach to their settling-in services.  

Other firms will hire current real estate agents; and while these agents have a lot of transferable skills and knowledge that will help your transferee - I worry that their real estate agent will rear it's head and before you know it they'll be showing houses to purchase not rent - which hurts assignee mobility and causes other downstream problems seen during the bubble when housing took a nose-dive.  

Recommendations:

1. Negotiate a flat rate, not an hourly rate with your settling-in provider;
2. Look for firms that only do settling-in support;
3. Identify firms who use former real-estate agents (not active ones) and transferees;
4. Find firms that have consultants that you can contact directly - not ones that you have to go through many layers;
5. Ensure that assignees only have to do one intake needs-assessment and that information is shared between the relocation consultant and the settling-in service.

“Those who cannot change their minds cannot change anything.”  

― George Bernard Shaw