Making the Right Decisions

Moderator
Ryan McConnell
Senior Director, Sales Development
Atlas Van Lines, Inc.

Presenters
Katy Meinhardt
Global Mobility Corp. Relocation Director
Fifth Third Bank

Sherri Bacigalupo
Global Mobility Leader
The Dow Chemical Company

Relocation Director Katy Meinhardt introduced Fifth Third Bank, a regional bank headquartered in Cincinnati, Ohio, and explained the obscure origin of the corporate identity (a merger of Fifth National Bank and Third National Bank – now you know). With a total work force of 22,000 located primarily in the Midwest, the company relocates about 250 to 300 employees per year. Katy noted that economic conditions have impacted move volume, and the company has "tightened up" its policies. Four policy tiers, based on grade, start with a $3000 lump sum (grossed up) and extend through a rich policy for senior executives.

To improve the efficiency of its relocation program, the mobility team conducted an RFP for household goods carriers in 2007 and completed the selection in 2008. As part of the process, Katy's team developed a matrix for approved services versus exceptions to ensure consistency in policy. Contracts with carriers now include service level agreements to assess performance and determine assignment volume. The process measures customer satisfaction, claim frequency, and timeliness. Suppliers receive feedback quarterly.

In discussing home sale assistance, Katy said both the Buyer Value Option and the Guaranteed Buy Out programs require employees to list properties within 107 percent of the most likely sale price (average of appraisals), based on a broker market analysis. As well, sellers must work with a third-party approved realtor. "It's important to make certain employees are listed right away with a highly qualified agent to get the job done in this kind of environment."

Katy defined loss on sale as the difference between the guaranteed buyout offer and the original sale price, excluding capital improvements. Assistance for affected employees is not formalized in the policy, but Katy mentioned success with a couple of creative techniques tied to employment: a 5-year forgiveness loan and a 10-year repayable loan with annual installments that coincide with the payment of performance rewards.

Global Mobility Leader Sherri Bacigalupo introduced The Dow Chemical Company, headquartered in Midland, Michigan, as a diversified manufacturer of chemicals and plastics with $58 billion in annual sales. She said the company employs more than 40,000 people and delivers products in over 160 countries.

Sherri is responsible for international as well as domestic relocation, including 19 locations in North America. Total relocation volume has fallen over the last two years, from about 800 moves in 2007 to around 600 moves last year. In response to the declining economy, the mobility group is now refocusing its policy to bring benefits closer to the market average.

The process began with identifying the top five areas of spend, which account for 75 percent of the company's relocation budget. These are: home sale assistance; household goods shipment and storage; tax gross-ups; cost-of-living allowances; and relocation allowances. The company measured these against the market median and identified savings opportunities in its programs for: home sale; guaranteed buyout; new hire lump sum; loss protection; and cost of living allowances. It also discovered the need for an employee repayment agreement.

Based on assessments and research, the mobility group is considering significant policy changes. Sherri described each and its potential savings. For example, by prioritizing an appraisal before listing and mandating an asking price within 105 percent of the expected selling price, the company expects to save $400,000. Changes in how the lump sum program is offered, such as basing an allowance on origin and destination locations, may bring savings of $1.3 million.

Other potential policy alterations include: changing the company's obligation for loss on sale from 90 percent to 80 percent; taking a tiered approach to calculating cost-of-living allowances; and requiring employees to share responsibility for the first 3 percent of cost-of-living allowances. Also under consideration: requiring employees who leave the company before a year of service to repay their relocation benefits.

The question-and-answer discussion explored related topics with candor: dealing with short sales; managing exceptions; controlling home inventories; communicating potentially unpopular changes in policy; assessing an employee's financial fitness to relocate; and determining buyout values.