Relocation revival

Copyright: David Lawson - Arthur Andersen Review 1996

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Britain is on the move again. The exodus of firms from central London is set to take off after several years in the doldrums and close to 100,000 people across the country are estimated to be included in career or group moves by employers, an increase of almost 40 per cent on last year. This is partly because economic growth is encouraging companies to dust off expansion plans postponed in the recession. But more complex factors are also at work - and these focus as much on people as on economics.

Movement has traditionally been driven by occupation costs. Periods of growth led to soaring rents and accommodation shortages which pushed firms out of city centres. London was a particular generator, sending some companies scurrying the length of the country to find new sites and buildings. Today there is plenty of elbow room to expand, with acres of buildings standing empty following the last frenzied round of construction. Rents have also halved in London, yet around 8,500 jobs will move out of the city centre this year - three times the 1995 total, according to property consultants Jones Lang Wootton. That figure could soar even further by next year, with almost 40 firms considering relocation.

The motivation for moving has changed, however. Mergers and acquisitions have triggered firms to rationalise. Business process re-engineering and outsourcing of non-core services have also reduced space demands, encouraging firms to seek smaller, more efficient premises. More than 60 per cent of moves now under way in central London are designed to improve organisational efficiency, says JLW.

But perhaps the most significant break with tradition is that staff attitudes are now as important as figures on a balance sheet. Companies accept that better working conditions are vital to attract - and hold on to - skilled workers. That means finding better premises, often in landscaped surroundings away from congested town centres.

But more effort also goes into easing the pain of staff moves. Counselling has become almost automatic, often at staff homes, as managers realise that families need as much help as the workers involved. Finding new homes, schools - even jobs for working partners - have all become part of the service.

People are being recognised as a company's most important asset, says Sue Shortland, manager of the CBI Employee Relocation Council. The success of starting up in a new location relies heavily on whether key staff can be persuaded to move - and their capacity to get back up to speed when they arrive.

This imposes new responsibilities on personnel departments - just at a time when many have been through their own painful downsizing. Even those in firms remaining in existing buildings are facing heavier workloads. Around 40 per cent of relocation involves individual career moves, according to Andrew Finney, managing director of Hambro Countrywide Relocation. Modern working patterns are moving towards short contracts, project-based planning and more flexibility among staff about where they work.

This means even the smallest firms need some kind of relocation policy. Moving people is expensive - between 20,000 and 25,000 per head. But it can cost even more where a firm has to negotiate in a vacuum with a staff member who will want to claim as much compensation as possible, says John Carolan, managing director of Black Horse Relocation. Avoiding friction is as important as controlling costs, however. A group move can - and should - be planned carefully to avoid this, says Ms Shortland.

Communication is the first priority. Senior managers need to keep information confidential at the early stages, otherwise scare stories spread like wildfire, draining morale. But staff quickly need to be informed about moves which will fundamentally affect their lives.

For all the extra flexibility being accepted as part of modern working conditions, people are aware of the greater difficulties and expense of relocating nowadays, says Mr Carolan. Ten years ago they could buy and sell homes with ease, and alternative jobs were much more accessible - not just for them but for working partners.

Once a move has been formally announced, much of the disquiet can be eased by simple information. Most moves involve reasonably short distances. Jones Lang Wootton points out that cross-country shifts have almost disappeared apart from a feu large government departments. Movement out of London tends to be into the suburbs or surrounding counties.

Even a couple of dozen miles can be crucial for staff, however. In a survey of 160 blue-chip companies earlier this year, Black Horse found that almost half of movers had school-aged children, which would mean significant disruption in education plans. Employers have sometimes failed to appreciate these problems. One study by Black Horse found that 90 per cent of relocating parents were worried about schools yet only a third of employers saw it as a potential pitfall. The same applies to the 'trailing spouse'. Around 40 per cent staff have a working partner and 75 per cent of these were concerned about job and money prospects. Again, only a third of employers saw this as a potential problem.

Some firms overlook even more basic issues such as the legality of demanding that a worker move. Contracts may state specifically that employment is at a particular place of work. Enforcing a move could spark redundancy payment rights, adding to the bottom-line costs.

Even where moves are permitted, firms may still face claims. For instance, the courts recently ruled that relocation can discriminate against women. Their partners tend to be main breadwinners, so they cannot move. Employment law also demands reasonable periods of consultation, particularly with trade unions where redundancies may be involved.

Planning for these kinds of issues has to begin as early as possible rather than just tacked on, says Mr Carolan. Companies can then sketch out which staff will be reluctant to move and correlate this against those considered essential to make the move a success. It is not unusual for relocations to be cancelled after weighing the advantages and difficulties and long before the idea reaches the ears of staff.

But the hard work really starts once the board comes down in favour of a move. Until relatively recently, this was piled on the shoulders of personnel departments, and for some it proved a crippling weight. Most companies rarely, if ever, face the problem of uprooting a complete workforce, so they have little experience to build on. Even for the giants, major relocations are rare, and few had the manpower to carry the burden during waves of movement seen in the 1960s and 1970s.

That led to the gradual growth of an army of advisors, and membership of the Association of Relocation Agents has swollen to more than 150 in the last few years. At a basic level, local agents find homes for busy executives. Groups like Hamptons, ARC, PHH and PriCOA offer a much wider range including counselling and computerised property databases.

The biggest are Black Horse and Hambro Countrywide, which lay out a complete battle plan for handling more than 5,000 people each a year. Charges range from less than 100 to more than 2,000 per head, depending on what companies require.

Every company should have a policy which at least covers the essential issues such as accommodation expenses, says Mr Carolan. And it is important to explain these in detail to staff. Moving home is legendary as the most traumatic experience anyone faces apart from a family death or divorce - and that was before the market collapsed. Employers used rely on bridging loans; some still do. But the total cost was calculated at the beginning of the decade as close to the national debt of a small Latin American country. As buyers disappeared, staff incentives fast became an open-ended drain on resources.

Specialist now offer alternatives. A host of small operators around the country set up as homefinders, but that was both expensive - around two per cent of property values - and not always successful. In any case, selling existing homes was the factor driving staff to breakdowns - just when they should be concentrating on starting up new locations.

More sophisticated packages are now commonplace. Specialists will buy employee's homes, so they have a guaranteed sum to find another. The shorter this period the better: more than half the movers questioned by Black Horse earlier this year picked out the most difficult period as between starting a new job and being joined by their partner or family.

Perhaps blowing its own trumpet, the agency also picks out the fact that this stage averages 14 weeks when organised by a specialist but 21 weeks when done by companies who organise relocation in-house. The reasons are fairly obvious; an agency is doing this sort of work all the time. Personnel departments have other things on their plate. They have also been among the hardest-hit sections where companies have looked for staff savings through reorganisation, says Mr Carolan.

Another big advantage to outsourcing home sales is its tax efficiency. The 1993 Finance Act practically brought relocation to a halt by imposing an 8,000 limit on tax-free relocation expenses. But the industry quickly worked out the current method of shifting the 'beneficial interest' on homes to companies (or agencies) so that costs such as agents' fees, maintenance and losses can be removed from this 8,000 limit.

The big problem is that firms must keep a close track of relocation expenses and report back to the Inland Revenue or face a 3,000 fine for each incorrect submission. Relocation specialists have treated this as an opportunity rather than a problem, however, by offering cost-tracking services. Others have moved swiftly to develop computer software for companies to deal with this complex and potentially time-consuming operation.

In fact, agencies have leaped at every opportunity to develop services. The 'trailing spouse' is now part of the relocation language. Half of movers have working partners, says Andrew Finney of Hambro. Firms can choose packages which range from basic advice on how they can change career to a complete job-search and help-line, depending on the importance of the staff member involved. Education advice follows the same pattern, ranging from a list of schools in the new area to a detailed one-to-one programme for the children involved.

All this costs money but Mr Finney points out that it costs as much to pay a recruitment agency to find new staff as it does to move them. Competition is also driving down fees. The education search, for instance, now starts at around 65 per staff member - a tenth of the level when the service was introduced a few years ago, says Mr Finney.

OVERSEAS

The Danish media had a field day when their country was selected as the best place in the world to live a couple of years ago. In fact, it has been at the top of the list for some time, according to research by the University of Pennsylvania.

The findings might surprise many an international executive with sights set on the throbbing business hearts of London, Tokyo or New York. But it comes as no surprise to their wives and children. While decision makers rate countries and capitals according to property costs, support services and telecommunications, the people they move - and their families - see things on a more personal level.

Quality of life is as crucial a factor as finance in international relocation, according to Jean Crawford of consultants Jones Lang Wootton. But that means different things to different nationalities. Safety and comfort are universal, so Denmark would rate highly - but not as high as the research indicated, as this included factors such as human rights and the status of women. Most globetrotters are less extreme.

Good housing, schools and leisure facilities are essential, although a Japanese would look for clean, modern buildings, with access to recreations like golf, while a Briton or American would seek more character in the architecture and soccer or softball pitches.

This can make resettlement difficult without knowledge of the cities involved, an increasing problem as business becomes more international. With the advent of a single European market, companies are as likely to shift staff to Brussels or Bologna as Birmingham, according to PriCOA, an agency which has grown out of US roots to help move UK staff around the world.

Financial factors also creep back in. Taxation varies immensely and requires skilful balancing, says Andrew Finney of Hambro Countrywide Relocation. This is why most relocation specialists rely on a combination of high-level experts and network of local representatives, who guide staff and their families into new homes.

The simplest thing can throw an expensive relocation into chaos, says Anita Saunders of Hamptons International Relocation. One executive, for instance, relied on his legendary negotiating powers to find a bargain through a Prague taxi driver. Two weeks later the family had to be found another home because the water and electricity refused to work. Another lasted a little longer in a beautiful Italian villa but his marriage almost disintegrated when his wife - who could not drive - found the isolation intolerable.

So while Frankfurt, Milan, London, Tokyo and New York remain magnets to the business world, individuals given a choice based on quality of life would probably choose Scandinavia or Holland, with Stockholm, Madrid and Paris as their favourite cities.