Our recent webinar on cost optimization was widely attended and many folks wrote in requesting that we share the presentation, so we decided to provide this summary blog.
With 97% of global mobility spend on taxes and direct costs of assignment such as short and long term housing, shipment of household goods and travel and only 2-6% of spend attributable to a combination of internal administration and third party service fees, it’s no wonder that companies look to reducing policy benefits as the swiftest and obvious path to cost savings. We know however that severely cutting back or setting caps can impact ability to recruit, hire and retain the right talent for the assignment.
So it really makes good sense to stop and ask some important questions:
In this session we looked at how companies consolidate spend by leveraging their supply chain for greater efficiencies, clearly articulating the scope of work, and collaborating with supplier partners in seeking innovative opportunities to streamline service.
We also explored how companies can employ reportable metrics to empower better decision making, cost tracking and cost management in their programs and for planning future mobility strategies.
Representing a tri-regional engagement with multiple suppliers, our first panelist described processes her company undertook to uncover cost savings opportunities. Through Engagement surveys and supplier reviews, they learned that customers were not receiving optimal support and that Service Delivery needs to be optimized to deliver a better outcome for assignees as well as Business Partners, Hiring and Financial Managers.
This company’s goal was to identify cost savings of $2,000,000 and to reach this goal, our panelist and her team embarked on a Request for Innovation for Incumbent Suppliers to redefine their scope-of-services and service delivery model. Using a methodical approach of analyzing and prioritizing ideas, they built out a series of recommendations and are continuously reviewing results through a process called “constant calibration,” making it easy to define and refine programs and policies.
Our second panelist spoke about how her company undertook an exercise in peeling back the onion on mobility over-expenditures through a series of both tactical and strategic approaches. From a tactical standpoint, they engaged in a thorough policy benchmark analysis, and discovered their program was too rich in certain areas. As a result, they reduced some benefits such as the number of hours provided for language instruction, they discontinued financial support for spousal work permits, they changed policy language around home finding and pre-orientation trips and reduced or eliminated COLA, and transportation allowance in locations where these allowances were no longer necessary to keep an assignee “whole” in the host country.
From a more strategic perspective, the company was able to reduce costs significantly as a result of conducting contract reviews with ancillary service providers and changing the scope of work provided to remove duplicate coverage. Additionally, looking ahead to the needs of the business and by implementing a short term assignment policy as an alternative to the traditional long term package, they were able to reduce the total cost of assignments for a sizable segment of the mobile population.
We learned from our presenters that there are many ways to affect change within the program, both strategic and tactical. We also learned that steps taken at each stage of the assignment can help increase the value of the investment into the assignment and in turn reduce perceived and actual costs of the assignment.
To illustrate this, we take a couple of examples, such as pre-assignment stage. We have seen that companies that perform some pre-assessment report a reduced timeframe for assignees to adjust to the new location in terms of office productivity and the ability to settle in. We also see this among companies that approach the details of program administration on an ongoing basis – – such as reducing COLA to an Efficient Purchaser’s Index after an initial adjustment period at a higher rate and ensuring timely tax payments to host country authorities to avoid costly penalties. Finally, in the end phase, closely monitoring the length of the assignment, planning next steps before the assignment ends, and holding to the policy length of phasing out or localizing after a specified period can ensure adherence to project costs and control costs. And for those returning home, repatriation programs are critical to ensuring the assignee reintegrates well, and is therefore more likely to stay with the company for a longer term, in an engaged and high performing capacity – leveraging their international assignment experience.
What were the lessons our panelist learned?
They both learned that a critical step in affecting change and the ability to execute on cost savings initiatives is to determine the game plan, the timeline and to set appropriate expectations on what can be accomplished. At Weichert, using the Optimization Lab approach, we help clients categorize and prioritize, bearing in mind that that some actions will have greater impact than others, and some will be easier to implement than others depending on company culture, industry, size of program and many more other factors.
The top lessons learned were:
While I have captured here a summary of the discussion, both panelists have generously offered to make themselves available on request to discuss further. If interested, please contact me and I will pass on your information to them.