One demographic that companies continue to relocate with great frequency is key executives. And while the stakes are high on any corporate move, they’re considerably higher when VIPs are being relocated.
These are typically the most critical members of the mobile workforce—the ones your company wants to keep happy under any circumstances. They’re also most likely to have “unique” needs and requests, such as moving wine collections or antique cars, finding private schools or selling million-dollar homes. Additionally, their opinion of their relocation experience can have considerable impact on your department–and, in many cases, your entire company–bringing added pressure to the table.
Considering the high visibility, it’s important to have a game plan. In our experience helping companies across the globe move their most critical talent, we’ve identified a number of best practices that can increase your chances of success.
Senior-level executives typically represent a company’s most valued talent. But what sort of relocation benefits make sense for this demographic? And can “over-delivering” to this group cause strife among lower level mobile employees?
In this podcast, WRRI’s Consulting Manager, Jennifer Connell, joins us to discuss best practices for executive relocation benefits and current trends around this issue.
Listen using the audio player above, or download the mp3 here.
Depressed home values may be an increasingly widespread problem for relocating employees, but the concerns run even deeper for relocating executives, whose departure homes can cost well into the millions.
Companies moving these high-level execs will sometimes offer overly-generous provisions to cover any loss on the sale of their homes, which, depending on the market, can run upwards of $1 million and beyond. Companies defend such practice as a necessary cost of retaining prized talent, but according to an article in the Wall Street Journal, shareholders at some corporations view these benefits as expensive “bail outs.”
The article quotes statistics from WRRI’s 2010 Mobility and the Current Real Estate Market survey:
About 74% of companies reimburse some or all of a staff member’s home-sale loss, according to a March survey by Weichert Relocation Resources Inc. of 185 companies. That’s up from 63% in a similar 2008 survey.
Nineteen companies divulged largely sizable outlays for residential losses of a relocated senior officer in their latest proxy statement, reports Equilar, an executive-compensation research firm. Seven occurred at the 100 biggest businesses, ranging from Delta Air Lines Inc. to Wal-Mart. No Fortune 100 concern disclosed the reimbursements in their 2007 proxies.
It’s a topic that will likely garner more attention in the coming year when, as the article points out, all U.S. public companies must hold an advisory investor vote on executive pay—as mandated by the new financial-overhaul law.
An recent article in Ignites, a newsletter of the Financial Times, commented on how the housing market is “stifling” corporate recruitment efforts:
As companies search far and wide to recruit top talent, their efforts are increasingly being stymied by the historically bad housing market.
Relocating talent has generally become much tougher in the sluggish economy. A combination of floundering home prices, fears over job security and worries that a spouse might have a hard time finding work has contributed to the problem, consultants say. At the same time, companies remain budget conscious.
The result has been a spike in the number of job offers that have broken down over relocation negotiations, says George Wilbanks, managing director at Russell Reynolds. In the past 20 years, one or two deals a year might have fallen apart because of issues related to relocation. Now it is several a quarter, he says.
“The policies at most firms have not changed,” he says. On average, companies will pay between $100,000 and $250,000 to move a C-level exec to a new city, or up to $50,000 for a mid-level manager. “The piece that has changed is the real estate piece. That is a real problem for people,” he says.
You can read the rest of the article, for which our Director of Consulting, Ellie Sullivan, served as an expert resource, here.
Results of Weichert Relocation Resources’ 2010 Mobility and the Current Real Estate Market survey capture input from close to 200 relocation and HR professionals responsible for over 26,000 annual moves, and reveal that companies are updating their relocation policies with greater regularity to overcome mounting obstacles to employee mobility—-particularly employees who can’t afford to sell their homes or have difficulty securing mortgages.
The fact that companies are updating their policies at all is intriguing, when you consider that as recent as six years ago, some of the policies I reviewed hadn’t been touched in more than a decade. This chiefly because back then, there was little reason to adjust them, since markets were stable and employees were typically ready and willing to move. Today, there are more challenges to contend with, including a recession, the velocity of business change, shifting workforce demographics and depreciating home values.
According to our results, 90 percent of respondents changed their policies over the past year to control costs and motivate employees, indicating that despite the current economic picture, companies still realize the importance of maintaining a mobile workforce.
Companies are also being more strategic in managing their programs. Rather than casting a wide net of similar benefits for all mobile employees, they’re taking a more targeted approach, offering specific packages to specific employees and new hires to convince them to accept moves.
Among the strategies being used to help employees overcome real estate-related difficulties, 75 percent of respondents provide alternatives to traditional homeowner benefits, either formally or on a case-by-case basis. Some of these include offering delayed home sale benefits or delayed home purchase or allowing homeowners to become renters. Additionally, 33 percent added or increased loss-on-sale assistance, with the most common maximum dollar cap rising to $50,000.
Our survey also found that pre-decision programs—-seen as an emerging trend in WRRI’s 2008 survey—-are gaining in popularity, with 65 percent of companies currently offering pre-decision and 11 percent planning to offer it this year. This shows a more proactive approach on the part of companies, as pre-decision programs can help gauge the probable success of a relocation before any significant financial investment is made.
Additionally, our survey found that:
— Companies are wresting greater control of the home sale and marketing processes to minimize costs and avoid inventory. Seventy-one percent of respondents enforce list price guidelines for employees, with the most common guideline, implemented by 65 percent of respondents, restricting employees from listing at more than 105 percent of the appraised value or broker’s price opinion. The study also found that 70 percent of respondents require employees to work with company-approved brokers, while 96 percent will evaluate offers below the appraised value of their employees’ homes.
— Forty-two percent of companies are adopting tiered levels of home sale benefits for their employees, up from 25 percent since last year’s survey. At the same time, fewer companies are offering employees only a traditional guaranteed buyout program, down to 25 percent in 2010 from 34 percent in 2008. In most cases, the guaranteed buyout is reserved for senior-level executives.
— Although companies strive to avoid policy exceptions, market volatility and lengthy home marketing periods are making more employees hesitant to move, forcing companies to offer more and greater exceptions. The most common, cited by 42 percent of respondents, is extended temporary living.
WRRI will present the complete 2010 survey findings during a free webinar for corporate relocation professionals on Thursday, May 13, 2010 at 2:00pm ET. To register, click here.
Tracking trends in how companies administer relocation benefits to senior level executives is often difficult, simply because of the wide variance in how companies define this segment of their population. But the results of our recent Mobility and the Current Real Estate Market survey sheds a bit of light on current corporate practices.
Among survey respondents, only 17% of companies identify senior-level employees as the group most affected by the housing market. This is likely due to the fact that they are the group most often eligible for a guaranteed offer. However, this segment can also be the most vocal of employees, not to mention their critical importance to the long-term success of the company.
Regarding loss-on-sale, 43% of companies report that among current employees, those at the senior-level would receive this form of assistance; 22% of companies also report that senior-level new hires qualify as well–a dramatic difference from mid-level managers of whom far fewer qualify. In addition, 38% of companies report tiering the amount of duplicate housing.
It’s worth mentioning that in addition to the studies and benchmarks that we conduct, our group has reviewed more than 300 policies over the past year. Below are some of the benefits most often offered to executive level employees:
Overall, I recommend that the benefits for executive level should be consistent with the types of benefits already provided to existing employees, and enhanced to reflect the differing needs of this group. Of course, companies are more cost-conscious these days than ever and are finding it necessary to revise other areas of their program to meet their needs while managing their budgetary guidelines.