Smart move

Mary Ellen Myhr of AIRINC explains how to optimize your global mobility program by aligning costs with business needs.

“Cutting too deeply or eliminating the wrong types of support can jeopardize business goals”
-Mary Ellen Myhr

We are experiencing the worst economic environment in memory, yet international business is still crucial for companies based in the US and elsewhere. How has this environment affected international mobility at these companies?  Are companies implementing cost cutting measures?
MEM. Not all companies and economic sectors have been affected by the downturn in the same way. Companies in heavy manufacturing and shipping, for instance, continue to struggle with severe financial conditions, while pharmaceutical companies have done well. European-based companies have not been affected as much as their US-based counterparts. Also, international business is more important to some companies than to others.

Thus cost cutting, while common, is not a priority for everyone and companies have responded to the downturn in different ways. Also, the manner in which costs are trimmed depends on the company, the industry and the markets in which the company operates. Cutting costs may actually harm some companies by reducing their ability to recruit needed talent.

For those companies where cutting costs is a priority, what are the easiest ways to do it?
MEM. The quickest way to reduce the costs of an international assignments program is to reduce the number of assignees by repatriating them to the home location. In many cases, localizing assignees can also be less costly.

The quickest way to reduce the cost of existing assignments is to reduce allowances tied to external market factors. For example, many rental markets have declined in the last two years. Reducing assignee rental guidelines allows companies to save on new assignments, but in some cases companies can also reduce the cost of existing assignments by negotiating leases down. The same is true for Cost of Living Allowances (COLA); companies are sometimes hesitant to reduce allowances even when exchange rate changes suggest that they should.

While these measures may seem obvious to those experienced in mobility, many companies miss such opportunities.

What are some other ways to reduce costs that may generate benefits in the long run?
MEM. Some companies are reducing subsidies within the framework of existing policies and eliminating some entitlements altogether. Companies that had already trimmed packages are reviewing elements previously left off the table, such as lowering housing budgets, reducing or eliminating incentives, adjusting hardship allowances for transfers within a region, and switching to a more conservative COLA methodology.

Finally, some companies are developing alternative packages that offer the flexibility to maintain high levels of subsidy for strategic assignments while reducing costs for developmental assignments.

However, even for companies facing dire financial constraints it is crucial to review proposed cost cutting measures carefully in light of the business needs driving each assignment. Cutting too deeply or eliminating the wrong types of support can jeopardize business goals if the right talent cannot be recruited to the necessary location, or the assignee and family do not sufficiently adjust after arrival. The focus needs to be on value, not just on cost.

How does a company maximize the value it receives from its mobility program?
MEM. Costs must be in alignment with the business needs driving mobility. Some companies have relatively simple and straightforward needs - one type of assignment to a small number of similar locations where assignees return to the home location upon completion; business units in similar industries with similar financial constraints. Here, a relatively simple and straightforward policy and administrative infrastructure may be sufficient.

Other companies have complex needs - multiple assignment types to a large number of dissimilar locations where assignees may go on to subsequent assignments; business units engaged in multiple industries. Complex needs may require complex delivery, such as flexibility within one policy or multiple policies for different assignment types.

Simple needs - simple delivery. Complex needs - complex delivery. Aligning delivery (cost) with needs leads to value.

Mary Ellen Myhr is Senior Manager at Associates for International Research, Inc. (AIRINC). She is responsible for mobility program strategy and policy consulting; and developing new products, service offerings, and new client relationships. She has over 20 years of experience in mobility, developing and supporting strategic and operational solutions for global companies.