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Calendar
MOBILITY • Vol. 31 No. 6 • June 2010
EXECUTIVE COMMITTEE
JUNE 2010
President
GMS™ Training and Certification June 7-9 Frankfurt, Germany Global Workforce Summit : Focus on Europe, Middle East & Africa June 10-11 Frankfurt, Germany ®
MICHAEL (MIKE) C. WASHBOURN, SCRP, GMS, Pfizer Inc., Peapack, NJ Vice President SUSAN SCHNEIDER, SCRP, GMS, Plus Relocation Services, Inc., Minneapolis, MN Secretary/Treasurer PAMELA (PAM) J. O’CONNOR, SCRP, Leading Real Estate Companies of the World®, Chicago, IL Chairman, Board of Directors AL BLUMENBERG, SCRP, NEI Global Relocation, Omaha, NE
OCTOBER 2010 GMS™ Training and Certification October 26-27 Seattle, WA Global Workforce Symposium October 27-29 Seattle, WA
MAY 2011 National Relocation Conference May 18-20 Las Vegas, NV
BOARD OF DIRECTORS CORI L. BEAUDET, SCRP, GMS, SC Johnson—A Family Company, Racine, WI LISA CARAVELLA, CRP, Bank of America, Plano, TX JAY K. DELICH, SCRP, SRA, IFA, Arizona Appraisal Team, LLC, Scottsdale, AZ MARIO FERRARO, International SOS Pte Ltd., SINGAPORE MARK GIORGINI, GMS, China Vanke Co. Ltd., Shenzhen, CHINA WILLIAM (BILL) GRAEBEL, GMS, Graebel Relocation Services Worldwide, Aurora, CO JOHNNY H. HAINES, SCRP, GMS, Deloitte, Hermitage, TN LARS LYKKE IVERSEN, Santa Fe Relocation Services, Hong Kong, CHINA CHRISTOPHER (CHRIS) JAMES, Bechtel Corporation, Phoenix, AZ JO LAY, SCRP, GMS, Coldwell Banker Central Region Relocation, Chicago, IL EARL LEE, Prudential Real Estate and Relocation Services, Scottsdale, AZ STEPHEN C. MCGARRY, SCRP, WPP, New York, NY SANTRUPT MISRA, PH.D., Aditya Birla Management Corporation Ltd., Mumbai, INDIA
OCTOBER 2011
JOY MORRISON, SCRP, GMS, PepsiCo, Inc., Purchase, NY
Global Workforce Symposium October 12-14 Denver, CO
JOHN PFEIFFER, GMS, Mustang Engineering, L.P., Houston, TX
MAY 2012
EX-OFFICIO
National Relocation Conference May 9-11 San Antonio, TX
OCTOBER 2012 Global Workforce Symposium October 3-5 Washington, DC
STEVEN A. NORD, UPS, Atlanta, GA
PANDRA RICHIE, SCRP, GMS, Long & Foster Corporate Real Estate Services Division, Chantilly, VA C. MATTHEW (MATT) SPINOLO, SCRP, GMS, CARTUS, Memphis, TN
Chairman, U.S. Advisory Council AL BLUMENBERG, SCRP, NEI Global Relocation, Omaha, NE Chairman, Foundation for Workforce Mobility KEVIN E. RUSSELL, SCRP, PHH Mortgage, Mt. Laurel, NJ Chairman, Global Advisory Council SANTRUPT MISRA, PH.D., Aditya Birla Management Corporation Ltd., Mumbai, INDIA Chairman, Government Relations Council C. MATTHEW (MATT) SPINOLO, SCRP, GMS, CARTUS, Memphis, TN
MAY 2013 National Relocation Conference May 15-17 San Diego, CA
MOBILITY (ISSN 0195-8194) is published monthly by Worldwide ERC®, 4401 Wilson Boulevard, Suite 510, Arlington, VA 22203, +1 703 842 3400. MOBILITY examines key issues affecting the global mobility workforce for the benefit of employers and firms or individuals providing specific services to relocated employees and their families. The opinions expressed in MOBILITY are those of the authors and do not necessarily reflect the opinions of Worldwide ERC®. MOBILITY is printed in the United States of America. Periodical postage paid at Arlington, VA, and additional mailing offices. Worldwide ERC® members receive one annual subscription with their membership dues. Subscriptions are available to both members and non-members at $48 each per year. Copyright © by Worldwide ERC®. All rights reserved. Neither all nor part of the contents published herein may be reproduced in any form without written permission of Worldwide ERC®. POSTMASTER: send address changes to M OBILITY , Worldwide ERC ®, 4401 Wilson Boulevard, Suite 510, Arlington, VA 22203
2 MOBILITY/JUNE 2010
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Perceptions
Taking the Pulse of Our Industry f I was a nurse and our industry was my patient, I would take its pulse and pronounce it “relatively stable:” a few
I
steps away from the recession but not yet consistently back on solid ground. It’s a good time to determine a prognosis for our future, and consider a few thought-provoking features of today’s workforce mobility environment.
A few years ago, the Worldwide ERC® Foundation partnered on research with the Thunderbird School of Global Management titled, “Global Mindset Defined: Expat Success Strategy.” The final report noted that successful assignees understand cultural similarities, differences, history, and global business; know how to build and manage global alliances, partnerships, and value networks; and can effectively manage corporate requirements and local challenges. The expectations are the same for today’s global assignees, but with a slight modification: after the economic reset, assignees may be more at risk. In the last year or two, some assignees were pulled back early and had no place to go. So more than ever, when employees go on global assignment, they are taking their careers into their own hands. But there’s good news, too: because maintaining a powerful global reach is essential today, mobility strategies tend to follow the “Towering Inferno” rule—if reductions are necessary, cut floors, not corners; e.g., move fewer assignees rather than lessening the experience of current assignees, allowing for belt-tightening on the economic front while maintaining a competitive edge. The need to cinch costs even more stringently in the current environment brought us another interesting wrinkle: what is the best strategy to build a powerful, talented workforce when resources are constrained? One of the things I see happening, and what I believe will be more of a trend, is that companies are focusing 4 MOBILITY/JUNE 2010
on how to be the number one employer of the top talent in a specific field, within their overall organization. So, for example, if you are a medical professional company, you may want to build your brand to be the foremost employer of the best cardiologists, versus anesthesiologists or other specialists. This kind of strategy allows a company to put a stake in the ground for that talent, and to hold onto that position. In effect, companies who do this are saying, “we are willing to invest in our specialty (e.g., cardiologists), and are moving away from an overall recruiting approach. We know that may mean less mobility activity, but we are committing to be to be acutely deliberate in our talent management strategy.” Being “acutely deliberate”— whether from a talent management strategy perspective or a cost and product line perspective—is a theme that runs throughout the industry after our experiences in the last few years. We know that after the housing market crash in the United States, the numbers were reset and won’t ever go back. But some great stuff came out of the last two years! Anybody will tell you that they and their companies are more efficient,
more focused on key important deliverables and on total global business. We’ve also returned to some fine old business fundamentals, and are taking a good hard look at who we want to be to our customers, and what we can best provide. Along with this increased scrutiny of our business and customers, we need to look more deeply at ROI, in America and around the world… it’s very toplevel, and incorporates far more than just workforce mobility. And we need to be thinking beyond the traditional relocation experience, to the entire compensation and benefits arena. If we want to reinvent ourselves, it’s imperative to think about the whole landscape—health care, retirement, equity—so we can be broader and conversant on anything an employee requires to be mobile. All of us, in any industry, must be ready for some of these remarkable and unexpected shifts. And whatever the future holds, we need to take a look at how the experience will be different for all of our touch points, and adjust our work and skills to meet it (And I’ll be sure to keep taking our industry’s pulse along the way!). —Peggy Smith Chief Executive Officer Worldwide ERC®
rac_report_member profile07 5/6/10 1:25 PM Page 3
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MOBILITY Magazine of Worldwide ERC®
Features
20
36
The European Union: Everything You Ever Wanted to Know but Were Afraid to Ask By Anne Dean, GMS
27
The Global Economy: Closer Than You Think By Tom Wortham, CRP, GMS
30
The Basics of Split Payrolls for Expatriates: Splits and Shadows By Amy Parrent, GMS, CBP, CCP
36
The Expatriate Experience in South Africa
66
By Michelle Colona and Danielle Turner
47
The New Worldwide ERC® Summary Appraisal Report By Jan Hatfield-Goldman
58
Analyzing the Perfect Storm: the Present State of the Moving and Storage Industry
78
By Eric Reed, CRP, GMS
66 72
Afghanistan By Ellen Harris, GMS, and Greg Forgrave
Israel— Where Cultures Collide By Michele Bar-Pereg
78
Locating Suitable Housing in Amsterdam
82
By Ilona Eichler
82
Moving Abroard? Don’t Forget to Pack Your Brain By Maureen Rabotin, GMS
88
Responding to Change in the Business World Through Industry-specific Quality Standards By Boris A. Populoh MOBILITY/JUNE 2010 7
MOBILITY Magazine of Worldwide ERC®
DEPARTMENTS
MOBILITY
2 CALENDAR
STAFF
4 PERCEPTIONS
Jerry Holloman
Taking The Pulse of Our Industry By Peggy Smith
Vice President & Publisher Managing Editor Frank Mauck EDITORIAL ADVISORY COMMITTEE
10 AROUND THE WORLDWIDE ERC®
Chairman
12 EXECUTIVE SPOTLIGHT
Alex Alpert, Wheaton World Wide Moving, Tucson, AZ
Jo Lay, SCRP, GMS, Coldwell Banker Central Region Relocation, Northbrook, IL
Tamara Bianchi, CRP, Capital Relocation Services, Denver, CO
15 INDUSTRY SPOTLIGHT 15 WORLDWIDE ERC® TRENDSPOTTING
Robert F. Burch, SCRP, Alexander’s Mobility Services, Baltimore, MD Christopher R. Chalk, CRP, GMS, Graebel Relocation Services Worldwide, Alpharetta, GA Alex Chua, Newport Real Estate Limited, Shanghai, CHINA Brenda Darrow-Fuhs, Bank of America, Longmont, CO
18 QUICK TAKES
Terry Baxter Davis, SCRP, GMS, Ernst & Young LLP, Cleveland, OH
92 RAC REPORT
Marge A. Dillon, CRP, GMS, Xerox Corporation, Lewisville, TX Sean Dubberke, RW3 LLC, New York, NY
95 GLOBILITY®
Kari Hamilton, ABODA, Inc., Redmond, WA
96 LAST PAGE
Tim Denney, Stirling Henry Global Migration, Sydney, AUSTRALIA
Deborah A. Dull, CRP, GMS, Crown Relocations, Houston, TX Nancy F. Harmann, CRP, GMS, Latter & Blum, Inc., Realtors, New Orleans, LA Gustavo Higuera, GMS, Prudential Real Estate and Relocation Services, Washington, DC Christine E. Holland, GMS, Massachusetts Institute of Technology, Cambridge, MA Ronald Huiskamp, GMS, Dwellworks, LLC, Kirkland, WA Rob Johnson, SCRP, GMS, Altair Global Relocation, Plano, TX Tacha Kasper, CRP, Leading Real Estate Companies of the World®, Chicago, IL Tim McCarney, GMS, Weichert Relocation Resources Inc., Norwell, MA Elizabeth Perelstein, School Choice International, White Plains, NY Patricia Pollard, CRP, GMS, Coldwell Banker United Realtors, Houston, TX Michelle Sandlin, CRP, John Daugherty Realtors, Inc., Houston, TX Stefanie R. Schreck, CRP, GMS, American International Group, New York, NY Scott T. Sullivan, Brookfield Global Relocation Services, Woodridge, IL Mara Terrace, Siemens Corporation, Global Shared Services NA, Orlando, FL Sherrie Tessier, CVS, Woonsocket, RI Allie Williamson, CRP, OneWorld Relocation Services, Naples, FL GLOBAL EDITORIAL ADVISORY COMMITTEE
Chairman Joy Morrison, CRP, GMS, PepsiCo, Inc., Purchase, NY Michele Bar-Pereg, Bar-Pereg Group, Amsterdam, THE NETHERLANDS
Design/Production: Ideas, Communicated, LLC, Vienna, VA, www.ideascommunicated.com Printing: CADMUS Specialty Publications, Richmond, VA Reprints: Katina Moaney, CADMUS Reprint Services, ercreprints@cadmus.com; +1 800 487 5625 Advertising Sales: Glen Cox, National Sales Manager, The Townsend Group, +1 301 215 6710; ext. 109; gcox@townsend-group.com
Lorraine Bello, GMS, Ricklin-Echikson Associates, Inc. (REA), Millburn, NJ Lorelei Carobolante, SCRP, GMS, GPHR, G2nd Systems, LLC, San Ramon, CA Scott Craighead, SCRP, GMS, Blue Sky Executive Search, New York, NY Anne Dean, GMS, Living Abroad, LLC, Norwalk, CT Cindy Madden, CRP, Cartus, Danbury, CT Derrick Kon, Mercer (Singapore), Pte. Ltd, SINGAPORE Anne-Claude Lambelet, GMS, The International Relocation Associates (TIRA), Geneva, SWITZERLAND Tacita Lewars, GMS, Globaforce Incorporated, Calgery, Alberta, CANADA Andrea Massoud, GMS, Living in Brazil, International Relocation Services, Barueri-Sao Paulo,BRAZIL Jeff Napton, SIRVA Relocation, Westmont, IL Nino Nelissen, GMS, Executive Mobility Group, Schlipol Airport, THE NETHERLANDS Constance Pegushin, Berry Appleman & Leiden LLP, San Francisco, CA Maureen Bridget Rabotin, GMS, Effective Global Leadership, Paris, FRANCE René Rosemary Stegmann, GMS, Relocation Africa, Cape Town, SOUTH AFRICA Rita Wagner, GMS, Interdean International Relocation, London, UNITED KINGDOM Nick Woodhams, GMS, Woodhams Relocation Centre, Sydney, AUSTRALIA
8 MOBILITY/JUNE 2010
rac_report_member profile07 5/6/10 1:27 PM Page 3
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Around the Worldwide ERC®
Foundation Walk Remembers Janet Holloman; Raises Funds for Ovarian Cancer Research and Outreach n May, we held our Foundation Walk in conjunction with our National Relocation Conference in Orlando, FL, to honor Janet Holloman, the late wife of Vice President and Publisher of MOBILITY Jerry Holloman, who passed away March 25, 2010, after a courageous year-long battle with ovarian cancer. Janet was a petite, pretty, happy woman with a personality three times bigger than her tiny frame, a great laugh, a beautiful and constant smile, the kind of heart that kept her looking out for others even as she grew more ill, an incredible artist who worked with realism and whimsy in equal parts, and creativity that knew no bounds. And she was also an advocate for better education about the disease that claimed her. Ovarian cancer is the fifth leading cause of cancer-related death among women. Currently, only one in five women are diagnosed in the early stages of the disease, when survival is most likely. Almost 15,000 women died last year from ovarian cancer—the numbers are staggering. Because ovarian cancer often goes undetected, is misdiagnosed, or is diagnosed in later stages, Janet was committed to ensuring that her friends and family members were properly educated about screening and early detection. Wanting to carry forth Janet’s focus on promoting education on this deadly disease, the Foundation took up the charge to raise funds for the National Ovarian Cancer Alliance and Foundation Outreach, a cause that became so important to Janet in her final year. Our early Friday Foundation Walk on May 21, was a remarkable event; an opportunity for our registrants to connect with each other during a brisk “walk and talk” (or to stay happily in bed and “sleep-walk,” knowing that their contribution would represent them!). The entire Holloman family was in Orlando for the walk: Jerry, (who was staffing the NRC with other Worldwide ERC® colleagues), daughter Jennie and son-in-law Keith Hash; son Jamie and daughter-in-law Jill and their three children—Bella, Alexa and Austin. The Foundation thanks these companies for their generous sponsorship of our t-shirts: Ebby Halliday Realtors®, Morreale Real Estate Services, North Texas Relocation Professionals, St. Louis Regional Employee
I
10 MOBILITY/JUNE 2010
Relocation Council, and The Paxton Companies, which also sponsored the walk wristbands. In addition, The Foundation thanks these individual contributors and organizations that pledged $100 or more before May 1, to the Walk and were recognized on the event tshirts: Craig Anderson, SCRP, GMS Sheila Barr, SCRP Al Blumenberg, SCRP Joan Brady, CRP, GMS Anita Brienza, GMS Jack Clarke, SCRP Kate Dodge, SCRP Mario Ferraro Shelley Giles, SCRP Greater Richmond Relocation Council Johnny Haines, SCRP, GMS Harry Norman Realtors® Laura Henneberry, SCRP, GMS Jamie and Jill Holloman Jennifer Holloman Hash and Keith Hash Jerry Holloman Linda Howard, SCRP Lars Iversen Chris James Carlotta Landschoot, CRP, GMS Janie Linders, SCRP, GMS Martha Marshall, SCRP, GMS Pam O’Connor, SCRP Janelle Piatkowski, GMS Gail Plummer, SCRP Cathleen Podell, CRP Bob Portale, CRP, GMS, and Joanie Portale RE/MAX Allegiance Relocation Services Kevin Rich, SCRP Pandra Richie, SCRP, GMS Kevin Russell, SCRP Piper Sheffield, CRP Peggy Smith Matt Spinolo, SCRP, GMS Stewart Relocation Services Tina Streiff Swenson, CRP, GMS Chip Wagner, SCRP And thanks to the many other contributors who donated through our online walk registration page and on-site!s.
rac_report_member profile07 5/6/10 1:33 PM Page 3
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Executive Spotlight obility Services International, Newburyport, MA, has named Melissa Graber, CRP, GMS, regional director of client services. Beltmann Relocation Group, Roseville, MN, has named Brett Battina, CRP, president of the company’s moving and storage division. RE/MAX Alliance Relocation, Parker, CO, has named Kelly Chapple relocation manager. Arpin International Group, Dublin, Ireland, has named Natasza Przybylska move coordinator. SIRVA Inc., Chicago, IL, has named Joseph Halboth, CRP, executive vice president. Coldwell Banker United, Realtors®, Columbia, SC, has named James E. Altman, Jr., sales associate in the company’s Irmo office. John Wall and Shea Wall have joined the Midtown office as sales associates. Linda Brener has joined the Builder Services office as a sales associate. Craig Johnson has joined the Camden office as sales associate. The MIGroup, Ontario, Canada, has named Ralf Borchert vice president, client relations for the AsiaPacific region. Martin Foxwell was named vice president, client relations in the company’s New York office. David Johnson, CRP, has been named vice president, international client services and administration in the New York office. Elyse Huettl, CRP, GMS, has been named vice president, client services and administration in the company’s San Francisco, CA, office. Roy Brace has been named vice president, global moving services, in the New York office. Michaelene Spaulding, CRP, has been named vice president, client services and administration in the company’s Chicago, IL, office. Tyler Fearn has been named vice president, client services and administration in TheMIGroup’s Vancouver, Canada, office, following the retirement of Steve Lee. The Minnesota Employee Relocation Council, Minneapolis,,
M
12 MOBILITY/JUNE 2010
Worldwide ERC®, Arlington, VA, has named Peggy Smith chief executive officer. Smith comes to Worldwide ERC® from software giant Microsoft Corporation, where she was director, global mobility, with responsibility for more than 5,000 annual global moves. Michael Washbourn, SCRP, GMS, 2010 Worldwide ERC® president and chairman of the Search Committee, which presented Smith as the Smith CEO candidate to the association’s Board of Directors for their evaluation and approval, noted that, “Peggy has served in the top tiers of leadership in Worldwide ERC®, including president and chairman, and on numerous committees and task forces for the association. She has a keen understanding of the economic environment that impacts our business, a recognized sensitivity to and deep knowledge of a broad range of mobility issues, and the ability to build and sustain collaborative relationships: the perfect blend of skills, experience, and vision for our organization and our members.” MN, has announced its 2010 board of directors. Patti Holey, CRP, Wells Fargo Bank, N.A., was named president. Julie Rice, Equity Corporate Housing, and Kristen Ruliffson, Relocation Today, were named co-vice presidents. David Arnold, CRP, GMS, Alexander’s Mobility Services, was named treasurer. Jill Burke, CRP, GMS, SIRVA Relocation, was named secretary. Sherry Johnson, CRP, Roger Fazendin Realtors, Inc., was named education chair. Doug McElrath, CRP, GMS, RE/MAX Results, and Eileen Hachey, CRP, GMS, Plus Relocation Services, Inc., were named membership co-chairs. Beth Anderson, CSM Corporation, and Angela Faircloth Kucharski, Marriott ExecuStay, were named community cares co-chairs. Lee Waage, CRP, Plus Relocation Services, Inc., was named web chairperson. Houston Relocation Professionals, Houston, TX, has announced its 2010 board of directors. Andrea Vaughn, CRP, Wells Fargo Home Mortgage, was named president. Steve Rogers, SCRP, GMS, Citi Global Executive Banking, is exofficio. Marian Blalock Sauers, Weichert Corporate Housing, was
named vice president. Kathy Henderson, CRP, TheMIGroup, was named treasurer. Norma Chaney, Heritage Texas Properties, was named secretary. Piper Sheffield, CRP, Stewart Relocation Services, was named board member in charge of events. Larry Matthews, Armstrong Relocation, was named board member in charge of sponsorships. Michelle Sandlin, CRP, John Daugherty Realtors, will serve as Board Member in charge of communications. Lana Bergeron, GMS, Transocean, and Charles Ameno, CRP, Chevron, were named corporate liaisons. Carrie Ousley, Hub International Personal Insurance, was named board member in charge of membership. Brian Smith, CRP, Chase, was named board member in charge of the website. Mike Larson, Anadarko Petroleum Corporation, was named board member in charge of charities. Santa Fe Relocation Services, Kuala Lumpur, Malaysia, has named June Mok group immigration manager. A-1 Freeman Moving Group, Dallas, TX, has hired Paul M. Seymour, CRP, GMS, to manage its national accounts and employee relocation business.
rac_report_member profile07 5/6/10 1:34 PM Page 3
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Industry Spotlight
Survey Reports Renewed Growth in Global Workforce Mobility s the global economy is slowly beginning to emerge from the worldwide economic downturn of the past three years, a new survey has been released that offers a picture of the new global workforce that has emerged in the downturn’s wake. The survey, “2010 Global Policy & Practices Survey: Navigating a Challenging Landscape,” from Cartus Corporation, Danbury, CT, and co-sponsored by the U.S. National Foreign Trade Council (NFTC), queried 196 HR professionals in the Americas, EMEA, and Asia Pacific representing manufacturing, technology, financial services, chemicals, and computer/ telecommunication industries. The study revealed that organizations are replacing traditional assignments with approaches that contain increased flexibility, and that more companies reported a drop in longterm assignments than those that reported gains during the past three years. In addition, almost twice as many companies reported gains in short-term assignments. “Given the stiff economic headwinds that companies have faced, a decrease in overall assignment activity since 2007 is understandable,” said John Arcario, executive vice president of Cartus. “The news is the broad expansion in approaches that companies are taking by deploying talent globally to achieve their corporate objectives.” According to the study, it appears that short-term assignments increasingly are being used for career and talent development. “The greater use of short-term and other assignment types offers a way to navigate between the need for globalization and the ability to pay for it,” said William Sheridan, vice president of NFTC.
A
Another key finding is that more employers are localizing their assignments. Increasingly, employees who take jobs elsewhere in the world are doing so with the knowledge that the jobs will be permenant and that compensation and benefits will be more reflective of the scales used at the destination location, according to the study. “While companies still need to ensure they have the right talent in the right places, they are employing workforce strategies that move away from traditional, long-term expatriate packages and trend toward modified
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benefits and pay scales,” said Arcario. More than 50 percent of respondents said they expect localization and permanent transfers to increase during the next two years. “Companies are dealing with myriad of challenges and opportunities, such as new demographics that demand new types of support, emerging markets, and rapid global expansion,” said Arcario, adding, “No one single solution answers all those needs, and companies are implementing a broad array of approaches to continue their global business expansion goals.”
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Innovative solutions. Concrete results. MOBILITY/JUNE 2010 15
Industry Spotlight
FYI Hayden Moore LLC, Chagrin Falls, OH, has announced the launch of Property Risk Analysis, a product to assist recruiters and job candidates in getting a realistic assessment of home value and property risk factors. RW3 CultureWizard, New York, NY, has announced the launch of an online cultural learning platform, CultureWizard 3.0. United Van Lines, St. Louis, MO, has announced a new residential delivery service that will allow businesses to rely on United to deliver products directly to customers. Graebel Companies, Inc., Aurora, CO, has announced its three websites, Graebel.com, MoveMyHouse.com, and MoveManagementInc.com, now are certified to Display TRUSTe® EU Safe Harbor Seal. Prudential Real Estate and Relocation Services, Inc., Irvine, CA, and RealtyTrac™, Irvine, announced they are expanding their business relationship to more powerfully integrate RealtyTrac’s comprehensive national foreclosure data into Prudential’s national property listing website, www.prudential realestate.com. Prudential also announced its affiliation with Realty Group, Indianapolis, IN, which will operate as Prudential Indiana Realty Group. The company also announced the affiliation of Joyce Realty, Pearl River, NY, which will operate as Prudential Joyce Realty . Prudential also announced the merger of Affiliated Realty Group with Prudential Utah Elite Real Estate. Coldwell Banker Residential Brokerage, Westport, CT, has announced the acquisition of assets of Fine Homes Connecticut/USA, Westport. Cartus Corporation, Danbury, CT, has named CENTURY 21 Scheetz, Indianapolis, IN, as the sole principal broker responsible for providing real estate services for the Cartus Broker Network in the greater Indianapolis market. Michael Saunders & Company, Punta Gorda, FL, has announced a new full-service real estate office to serve Punta Gorda and the Charlotte Harbor region. RealtySouth, Orange Beach, AL, has announced that it has expanded office space at SanRoc Cay in Orange Beach, AL. American Relocation Connections (ARC), Fairfax, VA, has announced an exclusive agreement for relocation services with Brickman Group, Gaithersburg, MD. ARC also announced it has been selected to provide relocation services to Defense Nuclear Facilities Safety Board (DNFSB) an independent federal agency established by Congress in 1988. ARC also announced two recently made modifications to its offering for relocation services under Section 48 of the GSA Schedule. ARC added the Shipment of Household Goods (SIN 653-7) to the list of relocation services, and received approval from the General Services Administration to expand the list of services under SIN 653-4 (Relocation Services: Other,) adding “Property Management.” Atlas Van Lines, Evansville, IN, has launched a new consumer website, www.atlasvanlines.com, allowing visitors to find a local Atlas mover, obtain an instant moving quote, track shipments, and access moving information and tips. Arpin Group, West Warwick, RI, has announced the acquisition of the stock of Affiliated Transportation Systems (ATSI), Lawton, OK, and eight related companies. one-group, Basel, Switzerland, has announced that EuroMove, Budapest, Hungary, has been added as a partner. OneSource Relocation, Marietta, GA, has announced the release of Policy Builder, a web-based, interactive tool for building relocation policies. 16 MOBILITY/JUNE 2010
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orld page we have a fan announce that .dj/ (http://facebook on Facebook have a don’t have to ou Y ! /) C R eE but, if Worldwid e our fan page se to t un co ac e “Like” Facebook -in and click th gn si to re su to be able you do, be official fan and an e m co be k fan page button to . Our Faceboo l” al w r ou on ts, trainings, to “write dated on even up u yo ep ke and much, will help our meetings, om fr s ht lig y news, high one of man ® acebook is just You . C R E e much more. F id Worldw of s et tl ou ia (Worldwide social med kedIn groups in L r ou in jo also can obility and ® l Workforce M ERC —Globa ® U.S. Domestic Relocation) C— Worldwide ER s and blogs m ru fo and our ideERC.org/ (www.Worldw px). pages/web2.0.as ected! s and stay conn nd ie fr be Let’s
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Attention GMS™ Designees ou should have received an important e-mail from the Worldwide ERC® Professional Development department during the week of 24 May 2010, with regard to some exciting changes taking place. Effective 1 June 2010, the GMS recertification renewal requirements have changed. In addition, Worldwide ERC® has introduced a new level to the program: a Senior Global Mobility Specialist (SGMS) designation. Check your e-mail for additional information or visit the GMS section of the Worldwide ERC® website, www.WorldwideERC.org/ Education/GMS/Pages/gms.aspx. And stay tuned for more details in next month’s issue of MOBILITY.
Y
JUNE 1
Communities
W
orldwide ERC® members are exchanging questions, answers, and ideas in our online discussion Forums. Current discussions include: U.S. Domestic All Members Forum: “For those of you who gross-up relocation benefits, do you provide this for all relocating employees/levels—new hires and transferees? And, if you do not gross-up for all levels, at what level do you begin? The Green Forum: “A household that invested $90 in changing 30 fixtures to compact fluorescent lamps (CFLs) would save $440 to $1,500 over the five-year life of the bulbs, depending on your cost of electricity— which is location-specific within the United States and the world. To get a good example of what you would be able to save, just look at your utility bill and imagine a 12 percent discount to estimate the savings.” eDiscussions—Corporate HR Only Forums: “We are revamping our global mobility policy and have encountered a few challenges, one of which is lump-sum payments in the APAC region. Do you use lump sums in lieu of providing relo benefits? If so, how is this calculated? As a percentage of salary? One month’s salary? U.S. dollar guideline converted to local currency? Other? If you do use lump sums, do you differentiate between intra-regional moves (e.g., Singapore to Indonesia) and global moves (e.g., United States/United Kingdom to Singapore).” The China Blog: “China’s new Labor Contract Law—That now two-year-old law became effective to much gnashing of multinational corporate teeth, but it’s been in place for a bit, the world hasn’t ended, the Chinese economy is still growing,” writes Mark Giorgini, GMS, as he begins to discuss “what’s happened since implementation and what this means for businesses here [in China].” Read the replies and discussion that these posts solicited. Log-in to the Communities and post your comments and questions today. Visit www.WorldwideERC.org/Pages/Web2.0.aspx or click on the white “Communities” text hyperlink at the top of every page of www.WorldwideERC.org. Note that access to the forums is an exclusive benefit of Worldwide ERC® membership.
18 MOBILITY/JUNE 2010
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dean1_MOBILITY 5/10/10 1:53 PM Page 2
THE EUROPEAN
UNION
E V E RY T H I N G YO U E V E R W A N T E D TO K N O W B U T W E R E A F R A I D TO A S K
20 MOBILITY/JUNE 2010
dean1_MOBILITY 5/10/10 1:53 PM Page 3
BY ANNE DEAN, GMS Dean presents a brief history of the European Union (EU), and explains its organization, progress, and future.
A
s I started my research for this article, I realized how much I did not know about the European Union (EU). Yes, I knew how many countries were involved, how it started, and its basic purpose. What I did not understand was the complexity of its structure. Europe has undergone turmoil and warfare for hundreds of years. It only has been as recent as the 1900s that European countries have put aside feuds that tore them apart for so long. Because of this, they have been able to focus on improving their economies and stabilizing their governments. From these diplomatic agreements, the EU was established. Post-World War II destruction left Europe with the daunting task of rebuilding its crushed economies. The European Coal and Steel Community (ECSC), the organization that has become known as the European Union, was established by the Treaty of Paris (1952). The treaty also is known as the Schuman Plan after the French Foreign Minister Robert Schuman, who proposed it in 1950. Six countries banded together to form the ECSC to strengthen political and economic influence. These countries were Belgium, West Germany, Luxembourg, France, Italy, and the Netherlands. During the next 50 plus years, the ECSC grew into the European Economic Community and, eventually, the European Union (EU). The
EU currently has 27 members, with Turkey, Croatia, and the former Yugoslav Republic of Macedonia awaiting membership. In July 2009, Iceland applied for membership and is hoping to join by 2012. The application process for joining the EU is normally about three to six years. Keep in mind that membership is not measured by the amount of time a country has waited, but revolves entirely around when they have met certain stringent criteria, including: Geography. The applicant nation should be close to Europe, but not necessarily be a part of Europe. For example, it could be argued that Turkey is part of the Middle East, yet it is being considered for membership. Democracy. All members must have a democratic government. Their citizens must all participate in an equal manner (one person equals one vote); they must have free elections, secret ballots, and political parties; and a country’s constitution and laws are not subject to change to suit the political party that is in power. Human rights. Human rights must be observed for all people; there can be no slavery or torture, and the government must have respect for human beings. Economy. Members must have a functioning market economy that can compete with other markets in the EU, as well as globally. In other words, new member nations cannot be a financial burden on the rest of the EU members.
The early concentration of the ECSC was on economic policies dealing with steel, coal, and agriculture. By combining their resources, member nations could rebuild their economies at a faster rate. As membership grew, the EU developed policies for currency, foreign competition, and the environment, to name a few. Members have learned to compromise and work together to compete in the global marketplace.
Understanding the EU The EU can be called the world’s newest superpower, becoming the world’s biggest marketplace and trading power—one day could it be referred to as “The United States of Europe?” Among its other benefits, the EU has allowed Europe to enjoy the longest spell of wide-ranging peace that it has seen in centuries. The EU has helped promote democracy and economic development throughout Europe, and it has helped nearly 490 million Europeans rise above political, economic, and social differences. With 16 out of 27 member states using the euro, it has made that currency one of the world’s most important monies (along with the U.S. dollar and Japanese yen). Knowledge of the EU is a mystery to most Americans, and even Europeans are bewildered by it. Most citizens of the member states support the idea of the EU in principle, but will readily admit that they know little about how the EU actually works, who makes the decisions, or how the MOBILITY/JUNE 2010 21
dean1_MOBILITY 5/10/10 1:54 PM Page 4
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22 MOBILITY/JUNE 2010
EU has or will change their lives. Great passion for the EU is harder to find than a lack of interest. Everyone knows how, when, and why the United States exists, but the European Union has yet to establish a clear profile on the international political and economic scene, leaving people unsure about what to think. Several reasons for the confusion are: The EU is unique. What is it exactly‌ an international organization? New European superstate? Something in between? How much authority does it really have over the member states? How does its power and structure differ from a traditional government‌ is it a government at all? It sounds confusing. Books, articles, websites, blogs, and the like on the EU have been a growth industry during the past 10 years, but much of it has been dedicated to treaty articles or what is referred to as “Eurojargon.â€? The entire organization is full of colorful characters and motivated by conflict, conspiracy, successes, and failure, yet much of what is written makes it sound dull and definitely full of legalese! The EU is constantly changing. When you think you are finally grasping its complexities, a new treaty is signed with a new set of powers, its leaders agree to new goals that give it a different “face,â€? or its complexion is changed by the admission of new member countries.
Who, What, When, and Where Because of the EU there is virtually unlimited free movement of people, money, goods, and services among most of its member states. It has its own flag (a circle of 12 gold stars on a blue background, which symbolize the ideals of solidarity,
harmony, and unity among the member nations), and uses Beethoven’s “Ode to Joy� as its anthem (just music, no words), national passports have been replaced with a uniform EU passport and, in many ways, Brussels has become the new capital of Europe. “The decision, 50 years ago, to base the European Institutions in Brussels has had an enormous impact,� said Eileen Money, general manager of MAP Relocations, Overijse, Belgium. “Because of the EU, Brussels has the world’s largest number of foreign journalists; the world’s largest number of foreign diplomats; 26 international schools for expats; 2,000 foreign companies headquartered in Brussels employing some 80,000 multilingual locals; and 300 representations of European regions and cities. “There has also been a significant impact on the real estate market in Brussels and surrounding areas with the presence of the EU. It is limited to certain areas, often related to the location of international schools, but over time has had a cumulative effect as the housing stock in the EU district is used up and the prices rise, so people move further out from the center and again, cause prices to rise. Thirty percent of the population of Brussels is from outside Belgium; half of these from other EU states,� she said. There are five main organizations in the EU. Their powers and authority have grown steadily since the 1950s. The five are: The European Commission (EC). This is the executive and administrative branch, responsible for proposing new EU legislation, implementing decisions, upholding treaties, and the general running of
dean1_MOBILITY 5/10/10 1:55 PM Page 5
the body. The EC is based in Brussels, consists of 27 commissioners, one of whom is appointed as the president. The responsibility of the commissioners is to the EU and its best interests, rather than their home country. The Council of Ministers, also known as the Council of the European Union. Also based in Brussels, this is the major decisionmaking body of the EU, made up of government ministers from each of the member states. Although it does not have the power to propose new legislation, for any EU law to be passed or budget to be agreed on, this body along with the European Parliament must vote in favor of it. The European Parliament. Divided among Strasbourg, Luxem-
24 MOBILITY/JUNE 2010
bourg, and Brussels, the European Parliament is elected to five-year terms by the voters of the member states. It cannot introduce proposals for new legislation; only accept, reject, or amend laws. The present parliament, elected in June 2009, has 736 members of the European Parliament (MEPs). The number of MEPs a member nation can have is representative of its population. The European Court of Justice. Based in Luxembourg, “the court” as it is often referred to, interprets and enforces EU law while helping to build a common body of law that is applied throughout the member states. It is the highest court in the EU (established in 1951 under the Treaty of Paris), having more clout than national supreme courts. The
court is made up of one judge from each member state, plus eight advocates-general, whose job is to deliver legal opinions on each case. Members of the court serve a six-year term and are nominated by their home governments. The European Council (not to be confused with the Council of the European Union). The European Council establishes the EU’s basic political guidelines. It consists of the political leaders of the member states (and their foreign ministers), the president of the European Commission, and an elected president who serves a two-and-ahalf-year term. They meet at least twice a year at which time they make
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broad decisions on policy, the details of which are worked out by the Commission and the Council of Ministers.
What’s Next? European integration is like an unfinished history book—a work in progress—the balance of power among national governments and EU institutions is constantly evolving. A balance that will change as more countries join the EU and as integration reaches further into the lives of Europeans. What effect will the EU’s progress have on the United States and Canada?
26 MOBILITY/JUNE 2010
The most obvious implications are economic. The United States made it through the Cold War relatively unscathed; however, much has changed in recent decades with the rise of competition from Japan, then from Europe, and now from China and India. The United States still is the world’s largest national economy, but the combined European market is nearly 10 percent larger and its population is nearly two-thirds bigger. The euro is slowly nipping away at the position of the U.S. dollar in the world market; European corporations are becoming bigger, more numerous, and more competitive. The EU already has replaced the United States as the world’s biggest exporter and importer of goods.
The progression of global political and economic change is moving at a fairly rapid pace, and the outcome of the EU basically has changed the way in which the world functions, as well as altered the place of the United States in the worldwide system. Going forth into the 21st century, it will be interesting to watch the direction the EU takes. With its high standard of living and well-educated workforce, the EU is poised and ready to become a world superpower. For much more information on the EU, visit its official site, http://europa.eu/. Anne Dean, GMS, is the director of editorial services for Living Abroad, LLC, Norwalk, CT, and a member of the MOBILITY Global Editorial Advisory Committee. She can be reached by email at +1 203 221 1997 or e-mail anne.dean@livingabroad.com.
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The Global Economy:
Closer Than You Think B Y T O M W O R T H A M , C R P, G M S The global economy touches all aspects of life. From our clothes to our cars to the food we eat, a day rarely goes by when something from abroad does not pass through our hands. This is especially true in workforce mobility, as employees are moved globally and are influenced by the economy and its far reach. Wortham examines how the worldwide economy affects the employee mobility industry.
W
e are closer to the global economy than you think. Just look in your closet— you might find business suits made in China, India, Guatemala, Korea, Mexico, and United States; shirts and ties made in Canada, China, France, and the United States; and shoes made in China, Italy, and Spain. Just as our wardrobe does, the global economy touches each of us every day: it’s in our closet, the mode of transportation we take to work, the type of technology we use for communication, even the paper on which this article is printed. The same is true for the employee mobility industry.
The ‘Big Shift’ “Looking beyond the current economic crisis, a ‘big shift’ is occurring, driven by digital technology infrastructure and connectivity,” said John Hagel, co-chairman, Deloitte LLP Center for the Edge in a Podcast titled, “Public-private Intersection: The Big Shift” on the Deloitte website. “As a result, governments are encouraged to develop policies that foster investments in technology, retain in-country creative talent and encourage mobility, thereby intensifying local economic growth and global competition.” The “shift” has occurred in many countries across the globe, with some
moving at a more rapid pace than others. For example, in Australia, the Internet is offered to all citizens at no cost. New Zealand is identified as one of the top places in the world to start a new business. China is the number one country for access/usage of social media tools, with more citizens using technological equipment than in any other country in the world. This digital push will continue as the younger generation climbs up the corporate ladder and as we become more aware of and comfortable using new products. Corporations must have broad types of these social media attractions to compete in any market. MOBILITY/JUNE 2010 27
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As a reality check, do you remember when cell phones first became available? Handsets were so large they had to be mounted in the trunks of cars, and the cost was close to $1,000. Now they can be carried in your pocket and serve as a phone, texting device, Internet tool, and camera. So we see, the big shift comes in the tiniest of packages.
Global Talent Retention Strategy A focus on technology is paramount, but some might say it will be more important to focus on staff and growing talent in coming years. We all know employee turnover can be costly to organizations. Once you attract, obtain, and possibly move an employee, retaining and developing their skills can be a significant challenge. It also is important to keep your talent pool satisfied to avoid turnover to other business units or competitors. Although immigration policies keep a tight hold on the movement of employees, movement among the younger staff/talent has increased for opportunities outside their home country. Fresh ideas that create value will be the key drivers as companies review, retain, and build the skillsets of their staff. Employers should be careful not to assume that this sluggish economy serves as a shield from employee turnover. Instead, organizations must be aware that top performers can find another job, and those team members remaining with the organization cannot absorb the workload of employees who have been lost through attrition or reductions in force. Last, 28 MOBILITY/JUNE 2010
organizations must focus on retaining talent with the highest knowledge of the business/industry served. Information is a key component in retaining talent. In its absence, people will create their own stories/facts, which usually are driven on an emotional level. Upfront communication will help avoid this situation, and all the potential woes that go hand-inhand with misinformation. Within that communication also needs to be a clear value-proposition to ensure team members with varying skills will not only join your organization, but also entice current team members to remain. Recent findings from Cartus Corporation’s 2010 “Global Mobility Policy and Practices Survey,” which queried nearly 200 HR practitioners worldwide, indicate that a new global workforce is emerging from the economic doldrums of the past three years. In addition, assignment types have evolved from the traditional long-term-with-family-in-tow type to the more prevalent short-term stint fulfilled by a young, single assignee. In addition, short-term assignments increasingly appear to be used for career and talent development—a goal historically associated with longterm assignments.
Global Expansion of Smaller Businesses Small businesses also are spreading across oceans to obtain new market share. As recently as 2008, the U.S. demand for their services was ample enough to keep these organizations at full staffing and profitable. How-
ever, as these businesses now work through the limitations presented in gaining additional market share in the U.S., expansion overseas seems to make good business sense. “For a year, I have seen a significant increase in attendance at export services seminars and trade shows,” said George Tastard, director of U.S. Export Assistance Center, in the article “Going Global” published in the Sacramento (CA) Business Journal. “In fact, in 2009, there were more requests for this assistance than during any other time in the past five years.” An important reality to keep in mind with decisions regarding global expansion is the “face time” that is required based on the culture of the new location. For example, in Asia, a businessperson often will require the building of a relationship prior to doing business or entering into a contract. Therefore, having local talent that knows the culture will assist in reducing this time cycle.
Global Business Adventure Running a team can be a challenge. Running a virtual team? Even more so. Now imagine running a virtual team with people all around the globe, with all of the language and cultural barriers that can arise. Done properly, it can be great; done wrong, it can be a very expensive mistake. Christine Mason McCaull, cofounder of ClickMarkets, describes her experience of global expansion/ outsourcing in the article, “When the World is Your Friend,” on portfolio.com. Her firm has been
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working with development teams and outsourced service providers from all over the world. They started in their own backyard and then expanded to India and the Philippines. Much like McCaull’s successful global growth with ClickMarkets, many other companies as small as 10 to 15 employees are looking at the global economy, and expanding accordingly. However, knowing what to outsource can be challenging. Technology, development, or process tasks that are easy to document can be easier to outsource than products, for example. One other important factor to con-
sider are tasks that would be considered “culture heavy” such as language, copywriting, branding, usability, and visual standards.
Change is Constant One thing is certain: our wardrobe in our closet, the transportation we drive or ride, and the technology we use will all continue to change and evolve. This, too, is the ongoing challenge of our global economy. Most experts predict the global economy is on the way to recovery, but consumers are still cautious. Be careful, seek advice from global profes-
sionals, and ensure that you understand what you are getting into when you begin your journey of global expansion. If you have well-defined tasks and can communicate all requirements clearly, the global expansion can be a huge success. Staying educated in critical areas such as retention, expansion, and awareness of our surroundings will help us become more comfortable in the decisions we make in the future. Tom Wortham, CRP, GMS, is director, business development for Primacy Relocation, Irving, TX. He can be reached at +1 972 870 3164 or e-mail tom.wortham@primacy.com.
MOBILITY/JUNE 2010 29
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THE BASICS OF SPLIT PAYROLLS FOR EXPATRIATES:
Splits and Shadows
30 MOBILITY/JUNE 2010
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B Y A M Y P A R R E N T , G M S , C B P, C C P Split payrolls are complex strategies for compensating employees that require extensive coordination between international HR professionals, payroll teams, services providers, and assignees. Parrent discusses the advantages and disadvantages of split payrolls, as well as the four primary approaches.
S
ay the words “split payroll” in the presence of any global mobility or payroll manager, and you likely are to get a very unfavorable response. Split payrolls, or the broader term, “dual payrolls,” are often the bane of global mobility managers because of their complexity and need for extensive coordination. The term “split payroll” can be used in many contexts. This article highlights several of the primary reasons companies use split payrolls (or in a broader context, dual payrolls), as well as the four primary approaches for structuring these arrangements. Before delving into this topic, though, it is important to note the difference between “split payroll”—an arrangement under which funds are paid to an employee from both home- and host-country payrolls—and “split delivery,” an arrangement under which funds are delivered to the assignee in the host country, but not necessarily from the host payroll. Under a split-delivery approach, funds could be wired from the home payroll. If you have international assignees, you most likely have a least one assignee on some sort of dual-payroll arrangement, even if your stated practice is that 100 percent of your assignees are paid by home (or host) payroll. According to Deloitte’s GlobalAdvantage Policy Forum (Chart 1), participants report a wide variety of practices in response to the question, “In what currency/currencies do you generally deliver the assignee remuneration?”
CHART 1
1%
5% 6% 9%
38% 32%
9% Total in home currency Goods/services element in host currency and rest in home currency Split per assignee request between home and host currency Total in host currency Total or part paid in third currency Pay split based on advice from external advisers Other
MOBILITY/JUNE 2010 31
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Advantages and Disadvantages There are several reasons why companies implement dual-payroll arrangements: • exchange-rate protection for the assignee; • assignee convenience and personal cash-flow management; • legal/labor law requirements, as in the case of foreign nationals working in Russia or Brazil; • tax withholding requirements; and • determination of pensionable earnings in home-country pension plans. On the other hand, there can be some limiting factors. For one, dualpayroll arrangements can be complex and expensive to administer, particularly when the home and host countries are not on the same pay frequency; for example, when one pays biweekly while the other pays monthly. In addition, they may not completely avoid exchange rate risks for which they were established in the first place.
Four Primary Approaches There are four primary approaches for dual payroll, each with a specific purpose. Many companies use a combination of these approaches.
The “recommended” split. This type of split is based on the traditional balance sheet. Under this approach (see Exhibit A), homerelated spendable items, such as goods and services, housing norm, and hypothetical tax are deducted from the base salary at home, while corresponding host goods and services spendable and housing allowance are delivered to the assignee in the host country in host currency. The amounts are pre-determined by the company based on information received from remuneration data providers. Companies that use this type of split primarily do so to protect the assignee from exchange-rate fluctuations and to deliver funds in the currency in which the assignee is most likely to need them. This type of split does require participant education so that employees understand how to use their payroll to support their spending patterns and derive optimal exchange-rate protection. According to Sheri Gaster, a manager for ORC Worldwide, Dallas, TX, “to ensure the advantage of split pay is achieved, companies need to make sure the cash flow management
1.
Exhibit A – Recommended Split (balance sheet approach) Name: Joe Expat Home: United States Host: Italy FX USD 1: EUR 1.36 PAY DELIVERY REPORT Base Home spendable Host spendable Housing norm Housing allowance Hypo tax Net pay 32 MOBILITY/JUNE 2010
Home (USD) 10,000 (2,000)
Host (EUR)
5,000 (1,800) 6,500 (2,000) $ 4,200
€ 11,500
issue is addressed by educating employees about what components are to be paid in home versus assignment country currency and why, and then stick with that split.” The “flexible” split. Similar to the recommended split approach described above, the flexible-split approach seeks to protect the employee from exchange rate fluctuations to the extent possible and to deliver funds in the host currency where the assignee needs them most. A significant difference, however, is that this approach leaves it up to the employee, rather than the company, to determine the amount he or she wants delivered via host payroll— in effect, giving the employee control over his or her own funds (see Exhibit B). This same approach can be used for employees who are on the host payroll, but who want funds delivered by their home payroll to meet any home-country obligations. In practice, this approach can cause a number of headaches for international HR and payroll departments. One consideration is whether to allow the employee to select a percentage of his or her net pay or to use a fixed amount. In general, fixed amounts usually are easier to implement and administer. Another set of considerations involves whether the amount will be stated in home or host currency, the exchange that rate will be used (e.g., spot rate, average rate, source), and how frequently the exchange rate will be updated. The third key consideration is the frequency with which employees may change their splits. In general, companies should consider setting limits on the number of times an employee may change his or her split; accordingly, many have quarterly or semiannual limits for making changes.
2.
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Exhibit B – Flexible Split Name: Joe Expat Home: United States Host: Italy FX USD 1: EUR 1.36 Split selection: EUR 5000 per month DELIVERY REPORT Base (REG) Home spendable (HMS) Host spendable (HSS) Housing norm (HSN) Housing allowance (HSA) Hypo tax (HYPO) Less local draw Net pay As an example, one large oil company offers assignees not remaining on their home payroll the option to specify an amount to be paid in the home location. Furthermore, assignees may change this amount quarterly. The amount is paid in the home location through payroll, deducted from the assignment payroll, and reconciled on a monthly basis. While the main objective of the recommended split and the flexible split is to protect employees as much as possible from exchange-rate fluctuations by delivering a portion of their pay in the currency they need most, there are other ways of accomplishing this goal without going through the additional complexity of setting up a dual payroll or splitting pay delivery. These include: • using global banking services— essentially an arrangement for outsourcing split-pay delivery. Often, the cost of these services is small in comparison to the administrative time saved. In addition, employees also can take advantage of the many other features that typically come with global banking services; • increasing the frequency of costof-living updates. Exchange rate fluc-
Home (USD) 10,000 (2,000) 3,676 (1,800) 4,780 (2,000) (3676) $ 8,980
Host (EUR)
5,000 € 5,000
tuations are built into cost-of-living differentials. Companies that historically have updated these differentials only on an annual or semi-annual basis could choose a more frequent schedule, such as quarterly, and by doing so provide better protection for employees; and • offering exchange rate protection. If employees truly perceive they are disadvantaged (or the company perceives they are overly advantaged) by exchange rate fluctuations, the organization could create protection in the form of reconciliation. Some employers offer this only on request, while others mandate regular reconciliation to prevent employees from only taking advantage of reconciliation when the exchange rate works in their favor. The enforced split. Some countries have strict payroll requirements that must be followed, even for expatriates working temporarily in those locations. Brazil and Russia are two such examples. Brazil has a highly “employeefriendly” labor market. As a result, foreign nationals working in Brazil must have a minimum amount of wages delivered locally, commensu-
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rate with local company categories and salary scales. The amount is determined by the Brazilian National Immigration Council or the Ministry of Labor. Russia’s salary requirements are even more stringent. An employee’s monthly salary may not be set below the minimum wage established by federal law. Furthermore, the salary must be paid in monetary form, in rubles, and in no less than two monthly installments on the dates established by the employer’s internal policies and in the employment contract. Other countries have similar requirements; therefore, you should always consult with your tax or immigration provider to understand these requirements before sending an employee to a new country. The “shadow payroll” (also known as “mirror payroll” or “ghost payroll”). This arrangement is necessary when the employee receives 100 percent of his or her pay in the home country, but that payroll must be “shadowed” or “mirrored” in the host country for the calculating, re-
4.
mitting, and reporting host country taxes. There typically is little effect on the assignee because nothing actually is delivered to the employee. In fact, he or she may not even know there is a shadow in place. Companies with foreign nationals working in the United States who remain on their home country payroll must have a shadow payroll in the United States so that the company can perform appropriate tax reporting and make remittances for federal, state, FICA (if there is no totalization agreement), and FUTA/SUTA purposes. Exceptions to this rule exist for certain tax treaties and visa types. Shadows also may be set up in home countries for employees who receive host payroll to allow them to remain in certain home country pension or social plans, or in the case of expatriates from the United States, to report taxable wages for W2 purposes. The only evidence of this the employee may see are deductions from his or her host payroll to cover costs of maintaining participation in certain home-country plans (e.g., social tax contributions, pension contributions).
Final Considerations In addition to considering the administrative complexities of each of these approaches, you also will need to define clearly which business unit is bearing the cost of compensation and ensure that the expenses are charged to the appropriate cost center. Careful coordination is necessary to make sure that cost centers are not inadvertently double charged where dual payrolls are in effect. In conclusion, there is no predominant best practice or one-size-fits-all approach when it comes to dual payrolls. Companies should evaluate their payroll needs based on their policy, payroll practices (including payroll frequencies), technology capabilities, locations, and available resources. In any scenario, the critical success factors will be open communication among international HR and payroll teams, service providers, and assignees. Amy Parrent, GMS, CCP, CBP, is a global mobility director at Deloitte Tax LLP. She can be reached at +1 214 840 1476 or e-mail aparrent@deloitte.com.
R E L O C A T I O N
34 MOBILITY/JUNE 2010
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36 MOBILITY/JUNE 2010
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The Expatriate Experience in South Africa BY MICHELLE COLONA AND DANIELLE TURNER South Africa is a culturally diverse region that provides several notable advantages for businesses to add operations in the country. With its strategic geographic location and export capabilities, the market for expatriates continues to increase. As with any foreign assignment, there are certain risks that can be avoided. Colona and Turner write that receiving proper inoculations, being cautious of the surrounding environments, and understanding the difference in health care practices are important to preparation for a successful assignment to South Africa.
W
hile driving down the streets of Johannesburg, locally known as “Joburg,” it is easy to forget that you are in the subtropical highland climate of South Africa. High rises and skyscrapers cast shadows over a financial district booming with activity that you would expect in a European nation. That is until you notice a flange of baboons on the side of the street. South Africa—a Growing Expatriate Destination South Africa is nicknamed the “rainbow nation,” an acknowledgement of the country’s diverse cultural environment. With one of the most complex populations in the world, South Africa is comprised of approximately 40 million citizens ranging in race and religion, and speaking 11 official languages.
MOBILITY/JUNE 2010 37
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Malaria Awareness
A
lthough malaria continues to be a potential health threat to more than 90 countries in the world, the greatest risk occurs in sub-Saharan Africa. And while the malaria parasite is transmitted through the bite of an infected female mosquito, expatriates in South Africa can take certain precautions toward protecting themselves. The Department of Health in South Africa suggests the following preventative measures: • remain indoors between dusk and dawn; • wear long-sleeved clothing, long trousers, and socks when going out at night; • cover doorways and windows with screens and, if unavailable, close windows and doors at night; • apply a DEET-containing insect repellent to exposed skin and repeat as recommended on the container label; and • use a mosquito-proof bed net over the bed, with edges tucked in.
The cultural diversity of South Africa is a contributing factor to the heavy investments of numerous wellknown international companies during the past 20 years, such as BMW, General Electric, and Levi Strauss. There are several advantages for companies to host operations in South Africa, including lower labor costs and the ability to export the products to an international market. 38 MOBILITY/JUNE 2010
According to the American Chamber of Commerce in South Africa, nearly 50 percent of the chamber’s members are Fortune 500 companies, and that more than 90 percent operate beyond South Africa’s borders into southern Africa, sub-Saharan Africa, and across the continent. South Africa’s strategic geographic location provides access to the expansive African coast lines,
the Middle East, Asia, Australia, Europe, and the Americas along well-established maritime trade routes. The businesses that make up the American Chamber of Commerce in South Africa are, in part, strengthening the Johannesburg Stock Exchange (JSE), which operates as the 18th-largest stock exchange in the world. The JSE supports the cycle of raising capital and filtering it through cash resources, which continues to strengthen South Africa’s economic status while simultaneously creating opportunities for jobs and wealth.
Preparing for Assignment Before leaving for assignment, expatriates should receive specific vaccines for preventable diseases and other diseases that present higher risks of contraction in South Africa including hepatitis A, hepatitis B, typhoid, rabies, malaria, as well as routine vaccines. For the most beneficial treatment, the Center for Disease Control and Prevention (CDC) recommends visiting a doctor who specializes in travel medicine at least four to six weeks before leaving on assignment. This allows time for
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the vaccines to take effect. This also is the time to start taking preventive medicine against malaria. If you or any family members who may be traveling on assignment with you take prescription medication, it is important to make sure you have enough to last the duration of the trip. The CDC recommends keeping the medication in its original packaging or bottle and storing it in your carry-on luggage. It is important to note that some prescription drugs in
the home country are considered illegal in other countries. For this reason, it may be beneficial to ask your physician to write a letter specifying your medical need for the prescription on office stationary and print the original prescription on office stationery.
Available Health Care to Expatriates and Standards As an expatriate or business traveler working in South Africa, a big
question may concern the health care system. The health care system in South Africa primarily consists of a larger public sector and a quickly growing private sector that offer a combined range of services. “The health care available in the private sector of the urban centers in South Africa is excellent and on a par with developed countries; however, expatriates should be aware that access to specialists and expectations for payment may be different from
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The Expatriate Pre-departure Checklist • obtain all inoculations required for assignment in South Africa such as hepatitis A, hepatitis B, typhoid, rabies, malaria, and all other routine vaccinations. • Assess and plan for potential environmental risks. • Arrange for a 12-month supply of all prescription medications. • Locate and become familiar with a family physician and the closest hospital while on assignment. • Ensure all visas and work permits are valid.
home countries,” says Lyndon Lamicack, M.D., senior medical director at CIGNA International Expatriate Benefits, Claymont, DE. “To ensure that expatriates receive proper care, it’s important for them to have guidance from a knowledgeable source, such as an international medical insurer.”
The growth of the private sector is attributed to several factors, including the exhaustion of resources in the public sector, a higher quality of doctors and hospitals, and an influx of international organizations and expatriates assigned to the region. A high number of travelers also are visiting South Africa for “health safaris,”
commonly known as medical tourism, from North America and Europe for comparable services at a cheaper price. The number of private hospitals and clinics continues to grow. There were 161 private hospitals four years ago. Now there are 200. Netcare operates the largest private hospital network in South Africa and also is
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b. Return the bow
b. Long-term relationships
a. True
c. Slightly nod your head
c. Feelings and needs
b. False
d. Wink
d. All of the above
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the biggest private trainer of emergency personnel and health care workers. Among all of the hospitals in the Netcare network, Milpark Hospital and Sunninghill Hospital stand out for exceptional care in specific situations. Aside from having a worldrenowned Level 1 Accredited
Trauma Unit with highly specialized cardiology and cardio-thoracic services, Milpark uses the whole-body x-ray technology to assess trauma. This technology was first developed by DebTech, the research and development arm of De Beers. The company says that these machines produce images of such high resolution
that tiny diamonds can be detected on or inside the human body. When used in a hospital environment, the digital x-ray system can produce clear, diagnostic whole-body pictures in just 13 seconds. The use of wholebody x-ray machines allows emergency room doctors and nurses, also referred to as “sisters,� to continue
MOBILITY/JUNE 2010 41
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providing critical care in urgent situations.
Travel Risks as an Expatriate Expatriates should take precautions to protect themselves from
42 MOBILITY/JUNE 2010
infectious diseases. The number one infectious disease in South Africa currently is AIDS, and it continues to kill 1,000 people a day in South Africa. Expatriates also need to be cautious of general crime and scams during their assignment in South Africa. The U.S. Department of State reports that criminal activity, such as assault, armed robbery, and theft, is particularly high in areas surrounding certain hotels and public transportation centers, especially in major cities such as Johannesburg. ATM scams account for most of the petty crimes in South Africa involving either the machine “swallowing” your ATM card or a person offering to “help” you at the machine. As an expatriate, it is advised to use only
ATM machines in well-lit public places, those attached to banks, or machines that are attended by a security guard. This material is provided for informational purposes only. It is believed accurate as of the date of publication and is subject to change. Such material should not be relied on as legal, medical, or tax advice. As always, we recommend that you consult with your independent legal, medical, and/or tax advisors. Michelle Colona is vice president of new business, west region, for CIGNA International Expatriate Benefits, Houston, TX. She can be reached at +1 713 576 4330 or e-mail michelle.colona@cigna.com. Danielle Turner is senior new business manager for CIGNA International Expatriate Benefits, Houston, TX. She can be reached at +1 713 576 4467 or e-mail danielle.turner@cigna.com.
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THE NEW WORLDWIDE ERC® SUMMARY APPRAISAL REPORT BY JAN HATFIELD-GOLDMAN To best meet evolving industry needs, the Worldwide ERC® Appraisal Task Force recently revised the Worldwide ERC® Summary Appraisal Report. Hatfield-Goldman reviews the significant changes.
n response to the changing economy and real estate markets over the years, industry practices and employer mobility policies have continued to evolve—particularly in relation to home purchase programs. This evolution of the industry, along with recent changes to the Uniform Standards of Professional Appraisal Practice (USPAP), required that the Worldwide ERC® Appraisal Task Force undertake a thorough review and revision of the Worldwide ERC® Summary Appraisal Report to ensure that the form continued to be a valuable tool under all market conditions. And, because USPAP standards set forth the minimum requirements to be met by all state-licensed and certified appraisers, a revision to the Worldwide ERC® form was necessary to ensure that appraisers properly completing it would be in compliance with the standards. Comprised of representatives from the appraiser community, the 2009/ 2010 Appraisal Task Force was led by Jeffrey M. Barta, SCRP, Jeff Barta Valuations, Inc., Waukesha, WI, and Jay K. Delich, SCRP, SRA, IFA, Arizona Appraisal Team, LLC, Scottsdale, AZ. Members included Craig Gilbert, CRP, SRA, Craig Gilbert Appraisals, Huntington Beach, CA; Arnold M. Schwartz,
I
SCRP, SRA, Arnold M. Schwartz & Associates, Inc., Atlanta, GA; and Alvin (Chip) L. Wagner, III, SCRP, SRA, A. L. Wagner Appraisal Group, Inc., Naperville, IL. In undertaking the form revision, the Appraisal Task Force focused on both client and appraiser needs. The goals for the new form were to clarify and ease review and interpretation of the report by clients, as well as to provide appraisers with a more directed approach to facilitate understanding and increase reporting accuracy. Feedback from both clients and appraisers regarding recommended changes was collected electronically during the spring and summer of 2009, and through focus groups. All data were reviewed and carefully considered before the group embarked on the form revision. Form revision began in September 2009, during a series of conference calls and continued in October and November during two, two-day meetings. The form was then betatested with both appraisers and clients during January 2010. Feedback from the beta-test was reviewed and further changes to the form were made during late winter. At the same time, the group undertook the revision of the
Worldwide ERC® Relocation Appraisal Guide to reflect all the modifications made to the new Worldwide ERC® Summary Appraisal Report. This article covers only the most significant changes to the form. The reader is advised to review the new Worldwide ERC® Relocation Appraisal Guide for a thorough explanation of the form, as well as step-by-step instructions for its completion.
Page 1 Page 1 of the new report outlines the intended use and purpose of the relocation appraisal, the scope of work, definitions of anticipated sales price and forecasting, and the procedural guidelines in which appraisers completing the report should adhere. In addition, this page includes: * Assignment Information; * Salient Facts and Conclusions; and * Extraordinary Assumption. This page requires the appraiser to report information about the assignment, as well as identify information about the subject property. In addition, page 1 includes a section that summarizes the salient facts and conclusions of the report. As in the past, this section is completed only after MOBILITY/JUNE 2010 47
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the entire report is finished. It is intended to provide the client with a quick overview of the appraiser’s findings, as well as the value estimate. The Salient Facts and Conclusions synopsis has been expanded to incorporate more summary information. However, there is one new and important element that has been added: the “assignment marketing period.” The “assignment marketing period” is the time period on which the appraiser is to base his or her opinion of value. Within the Definition of Anticipated Sales Price under Point 4 (also found on page 1 under the Definitions and Guidelines section) this time period is identified as, “an assignment marketing period, not to exceed 120 days (or as instructed by the client) commencing on the Date of Value Opinion…” This is a change from the 2003 report. Users will note the change from the use of the term “reasonable marketing time” to “assignment marketing period.” In addition, the “as instructed by the client” verbiage was added to clarify a practice (defining a time period other than “not to exceed 120 days,” such as “not to exceed 90 days” or “not to exceed 180 days”) that always has been acceptable according to instructions in the 2001 Relocation Appraisal Guide. This line item is first reported on page 5 under the Forecasting Analysis sub-section of the Market Trends Analysis and is repeated on page 6 within the Anticipated Sales Price section. Within the Definition of Anticipated Sales Price sub-section on page 1, two more significant changes have been made (see Figure 1). 48 MOBILITY/JUNE 2010
FIGURE 1 Definition of Anticipated Sales Price*: The price at which a property is anticipated to sell in a competitive and open market, assuming an arm's length transaction whereby: 1. The analysis reflects the subject property’s appearance "as is” (or as instructed by the client) and is based on its present use as a residential dwelling. (For new construction not completed see Guideline 1d.) 2. Both buyer and seller are typically motivated; both parties are well-informed or welladvised and acting in what they consider their best interests. 3. Payment is made in cash or its equivalent. 4. An assignment marketing period, not to exceed 120 days (or as instructed by the client) and commencing on the Date of Value Opinion, is allowed for exposure in the open market. The analysis assumes an adequate effort to market the subject property. 5. Forecasting must be applied to reflect the anticipated trend of market conditions and prices during the subject property's prospective marketing period. D fi iti
fF
ti
F
ti
i th
Point #1 refers to the subject property’s appearance. The Definition of Anticipated Sales Price requires that the analysis for developing the anticipated sales price, “…reflect the subject property’s appearance “as is” (or as instructed by the client) and is based on its present use as a residential dwelling.” In the previous version of the form, the “or as instructed by the client” aspect of the definition was excluded. Why has it now been added? Clients often ask appraisers to evaluate homes “as if vacant” versus “as is” for an upcoming assignment marketing period even though the homes usually are occupied at the time of inspection. This change allows for clarification and confirmation that such a practice is acceptable within the Definition of Anticipated Sales Price and that it presents no violation to the Uniformed Standards of Professional Appraisal Practice (USPAP). This line item is first reported on page 3 of the form within the Description of Improvements and also included in the Salient Facts and Conclusions summary on page 1. One other change is found within the Definition of Anticipated Sales Price under Point 4. This item reads,
f
l i
hi t i l t
d
is ge and bath to th repo 6. Rate ''goo to th desig prop defin Ex fo Go fo Av
“an assignment marketing period, not to exceed 120 days (or as instructed by the client) and commencing on the Date of Value Opinion, is allowed for exposure to in the open market. The analysis assumes an adequate time to market the subject property.” In the past, the “date of appraisal inspection” had been used as the effective date of the appraisal. In the new form, the “date of value opinion” is now the effective date of the appraisal and may or may not be the same as the “date of appraisal inspection.” This change allows the appraiser to consider any pertinent information that becomes available between the “date of appraisal inspection” and “date of value opinion” such as changes to the property’s listing price, the closing of a pending sale, changes to the listing prices of competing properties, and/or changes in market or economic conditions. It is important to note, however, that physical changes in the subject property are not to be considered for this purpose. In fact, this point is addressed within the Extraordinary Assumption, which also is new to the Worldwide ERC® Summary Appraisal Report. The “date of value opinion” is reported
FIGURE 2 Extraordinary Assumption: The Anticipated Sales Price assumes that no physical changes have occurred to the subject property between the Date of Appraisal Inspection and the Date of Value Opinion. The use of this assumption may affect the assignment results.
Excellent: the amenity or characteristic is s found in competing properties and neighborhoods; Good: the amenity or characteristic is b found in competing properties and neighborhoods; Average: the amenity or characteristic is c characteristic found in competing properties and neighborhoods; Fair: the amenity or characteristic is n sures. This was added make clientsand found in competing properties andtoneighborhoods; Poor: the amenity or modification(s) characteristic is c that aware of any characteristic found in competing properties and neighborhoods. have required 7. Includemay the following exhibits: a permit or that a) photos of the front, rear,implications. street, and interior of the subject property; financing have b) photosThe of thesecond subject property depicting any adverse addition is found in conditions an
the Recommended Repairs and/or marketability either favorably or unfavorably; Improvements section. As in the
L
on pages 6 and 7 of the form while sion of information regarding conthe “date of appraisal inspection” is dominiums and cooperatives under past, if the preparer indicates that only found on page 7. the Subject Information section. there to are recommended necessary determine gross living repairs area. Sketch should also show The new Extraordinary AssumpThis information frequently is and/or improvements, they are tion located within the Definitions requested by clients so the report asked to list them and provide a total comparable sales. and Guidelines section on page 1 revision presented the perfect opporestimated cost to cure. In addition, 8 (see Figure 2) states, “The Anticitunity to add it to the form (see they now are asked to also indicate Figure 3). It includes information on the priority of those repairs and/or pated Sales Price assumes that no physical changes have occurred to the the complex (i.e., name, number and improvements (i.e., low, high, or appeal for work in progress or suspects physical conditions (notify theunits, percent of owner-occupied subject property between the Date of adverse critical) and comment regarding client immediately); and number of floors, whether the comAppraisal Inspection and the Date of their effect on the marketability of plex is complete, marketability Value Opinion.” The inclusion of the subject property. The addition is Anticipated Sales Price on the assumption that improvements will be completed in a workmanlike manner according to the Description of Improvements on Page issues, and whether the builder/ this extraordinary assumption is a intended to help the client evaluate 3 and any construction documentation provided to the appraiser). developer is in control of the HOA). not only the costs USPAP requirement because the of the recom*Source: The Relocation Appraisal Guide by Worldwide ERC® The second big change is an eleeffective date of the appraisal (“date mended repairs and improvements, ment within the Neighborhood secof value opinion”) may be different but also what the effect would be of tion that asks the appraiser to define from the “date of appraisal inspecchoosing to either do or not do the tion.” It is referred to on pages 6 and the neighborhood boundaries. The repairs and/or improvements. “neighborhood boundaries” define 7 of the form as well. For instance, if the repair and/or the physical area surrounding the Appraisers and clients should note improvement is minor and unlikely subject property, which has similar that no deviations from the definito significantly affect the marketabilitions or the extraordinary assumption characteristics, influences, and comty of the subject property, then the plimentary land uses. found on page 1 of the report are rating should be “low.” Examples of allowed. this type of situation might include Page 3 some minor exterior trim that needs Page 2 Page 3 contains the Description of painting or a room with a slightly The next page of the report asks Improvements. Other than minor stained carpet. the appraiser to provide information changes, there are two important If, on the other hand, the repair on the subject property itself along additions to bring to your attention. and/or improvement being recomClient File #: Transferee Vacant with information about the subject The first is a new itemOccupant: that asks the mended isTenant essential to the :successful Unit: property’s neighborhood and site. appraiser to note if there is evidence marketing of the subject property, State: Zip Code: There are two significant changes of any apparent modifications to the then a rating of “critical” should be on this page. The first is the includwelling, such as additions or encloselected. Examples of this type of sitFIGURE 3
Map Reference: Property Rights Appraised: Fee Simple Leasehold Subtype: PUD Condominium Cooperative If condominium or cooperative, indicate complex name: Total No. of Units: No. of Owner-occupied Units: % of Owner-occupied Units: Total No. of Floors: Subject Floor #: Is the complex complete? Yes No Is market rate financing available? Yes No Is the developer/builder in control of the homeowners association? Yes No Are there any marketability issues? Yes No Comments:
MOBILITY/JUNE 2010 49
Tax Year:
Data Source:
hatfield_goldman2_MOBILITY 5/12/10 3:34 PM Page 4
uation might include water damage or extensive deferred maintenance.
Pages 4 and 5 Pages 4 and 5 contain the Market Trends Analysis. It is on these two pages that the most significant changes to the form have been made. Although the forecasting adjustment is the final step in the Sales Comparison Analysis grid on page 6 of the report, the basis for this adjustment is developed as an extension of the entire market analysis. The Market Trends Analysis is the foundation for developing a credible opinion of anticipated sales price. This expanded analysis (now being reported on two pages instead of one) focuses on historic, current, and forecasted market trends. It is on these two pages that the appraiser will report his or her analysis of closed sales, current listings, and pending sales that will set the stage
for both the “market change” and “forecasting adjustments” asked for on page 6 of the form in the Sales Comparison Analysis grid. Client and appraiser experience with the form indicated a need for a more guided approach for reporting the analysis; hence, the new form has broken down the Market Trends Analysis into three distinct sections: Historic Trends, Current Factors, and Forecasted Trends. Page 4 contains the Historic Trends section along with the first half of the Current Factors section, which continues onto the first half of page 5. The last half of page 5 contains the Forecasted Trends. Historic Trends. This section begins by asking the appraiser to define the Market Segment being used in the Market Trends Analysis. The defined market segment details the search parameters used for collecting the data to be analyzed and
requires the appraiser to describe the criteria being employed such as geographic, municipal, price range, zip code, subdivision, housing type, school district, and the like. In this section, the appraiser selects the most appropriate market segment based on the buyer profile for the subject market. The market segment may be different from the subject neighborhood addressed on page 2 of the form in that it could include other areas beyond the subject property’s neighborhood in which the potential buyer may look for substitute properties. Within this Historic Trends subsection is another new component where the appraiser is asked to complete a Closed Sales Analysis (see Figure 4). This is an important new item and will provide the historical analysis of price trends relevant to developing the “market change adjustment” in the Sales Comparison
FIGURE 4 Market Segment – Historic Price Trends: Provide a historical analysis of price trends relevant to developing the Market Change Adjustment in the Sales Comparison Analysis grid on page 6. Define each specific time period considered relevant to the analysis. Appropriate defined time periods may be expressed in monthly, quarterly, semi-annual, or annual increments. They also may be based on seasonal or year-over-year comparisons. For each time period calculate the equivalent No. of Months (e.g., January 1 – March 31 = 3 months). The Monthly Absorption Rate equals the Total No. of Closed Sales divided by the No. of Months, and represents the monthly average of closed sales during the Appraiser Defined Time Period. “Other” columns may be used at the appraiser’s discretion to provide additional data deemed relevant to the analysis (e.g., gross living area, price per square foot of living area, expired listings, etc.). Any other factors or analysis used in determining historic price trends should be discussed below. An unstable trend exists when irregular fluctuations in the marketplace are evident.
KET TRENDS ANALYSIS
Appraiser Defined Time Period
CLOSED SALES ANALYSIS Total No. of Monthly No. of Sales Price Days on Market Months Closed Sales Absorption Rate Mean Median Mean Median
Other:
Other:
_________ _________
_________ _________
$ $ $ $ $ $ $ $ Historic Trends
Increasing Decreasing Stable Unstable
Increasing Decreasing Stable Unstable
Increasing Decreasing Stable Unstable
Increasing Decreasing Stable Unstable
Increasing Decreasing Stable Unstable
Increasing Decreasing Stable Unstable
Analyze and discuss the above trends relevant to developing the Market Change Adjustment in the Sales Comparison Analysis grid on page 6. Discuss the relevance and reliability of the data and any other factors used to determine historic price trends – e.g., sale and resale data. 50 MOBILITY/JUNE 2010
hatfield_goldman2_MOBILITY 5/12/10 3:35 PM Page 5
FIGURE 5 g
g
CURRENT FACTORS Market Segment – Current Listing Data: Report data regarding current active listings and pending sales for the defined market segment. CURRENT LISTINGS
PENDING SALES
Other: Total No. of List Price Days on Market Active Listings Mean Median Mean Median _____________ $
Total No. of Pending Sales
List Price Mean Median
Days on Market
Mean Median
Other: ______________
$
Market Segment – Absorption Rate/Inventory Analysis: Based on the Closed Sales Analysis above, identify the time period which produces the most credible Absorption Rate. Divide the Total No. of Active Listings by the Monthly Absorption Rate to determine the estimated No. of Months Supply of Inventory. Appraiser Defined Time Period
No. of Months
Total No. of Closed Sales
Monthly Absorption Rate
Total No. of Active Listings (exclude pending sales)
No. of Months Supply of Inventory
Analyze and discuss the above data (consider seasonal influences, pending sales, expired/withdrawn listings, relevance and reliability of data, etc.) that pertains to current supply/demand in the subject property’s market segment.
Analysis on page 6 of the form. In the past, this type of analysis often ended up in an addendum to the form. By incorporating a reporting format for it within the form itself, appraisers and clients are provided a uniform way of developing and reviewing the data. However, this format is not intended to limit the appraiser’s ability to use additional analyses. Along with this Closed Sales Analysis a narrative section has been added for the appraiser to discuss the historic price trends along with the relevancy and reliability of the reported data and any other factors used to determine historic price trends. Current Factors. Within the Current Factors sub-section on page 4 of the 2010 form, the appraiser also has been provided a new format for reporting data regarding current active listings and pending sales for the defined market segment. In addition, another section was added for reporting the absorption rate and inventory analysis for the market segment. Again, by incorporating a reporting format for these elements within the form itself, appraisers and clients are now presented with a consistent way of developing and reviewing the data. This part of the form also includes a narrative section that
asks the appraiser to analyze and discuss the data relevant to the current supply/demand in the subject property’s market segment (see Figure 5). The Current Factors sub-section of the Market Trends Analysis continues onto the first half of page 5 of the form. The appraiser will find an abbreviated Competing Properties grid for the market segment on this page. Users of the form will note that the first change to the grid is the combination of the “sale price” and “closing date” line items into one line item called, “last sale date/ price.” Another change users will note is that the former “room count” line item is now simply called “rooms” and includes only bedroom and bath counts; total room count has been removed. A new addition to the grid is “GLA data source,” which is located directly below the “gross living area” line item. This new item asks the appraiser to report the data source for determining the GLA such as appraiser measurements, public records, assessor records, MLS, and the like. Another new line item added to this grid is the “comparative rating to subject.” It is on this line that the
appraiser summarizes the overall comparison of each competing property to the subject (i.e., superior, similar, inferior). These ratings should demonstrate how a potential buyer would view the competitive listings in relation to the subject property (see Figure 6). As in the past, directly below the Competing Properties grid are narrative sections the appraiser can use to discuss relevant information related to the competing listings. However, the appraiser also now is asked to answer a couple of questions for each of the competing properties within their discussions: 1. Why was the property selected? 2. What are the major differences between the competing property and the subject? The answers to these questions are key in helping the client evaluate the subject property’s competitive position within the marketplace. The responses to these questions also should support the ratings in the grid comparing each property to the subject. At the end of the Current Factors sub-section on Page 5, the appraiser is to provide a competitive list price range for the subject property necessary to achieve a sale of that property MOBILITY/JUNE 2010 51
hatfield_goldman2_MOBILITY 5/12/10 3:35 PM Page 6
FIGURE 6
y pp
p
Appraiser File #:
Client File #:
CURRENT FACTORS Continued Market Segment – Competing Properties: The Competing Properties Analysis is a key component to the relocation appraisal. Select properties that offer the strongest competition to the subject and would compete for the same potential purchaser. In selecting Competing Properties, emphasis should be placed on those properties with list prices that are most reflective of current market conditions.
Item
Subject Property
Competing Property #1
Competing Property #2
Competing Property #3
Address Proximity to Subject Original List Price Current List Price Last Price Revision Date Days on Market Last Sale Date/Price Site Area Site Appeal Actual Age (Years) Condition Rooms Gross Living Area GLA Data Source Basement Area Car Storage
$ $
$ $
/$
Bdrms.
$ $
/$
Baths
Bdrms. sq. ft.
$ $
/$
Baths
Bdrms.
/$
Baths
sq. ft.
Bdrms. sq. ft.
Baths sq. ft.
Significant Features Comparative Rating to Subject Superior Similar Inferior Superior Similar Inferior Superior Similar Inferior For each Competing Property, specifically discuss the following: 1) Why was the property selected? 2) What are the major differences between the property and the subject? Comments should support the Comparative Rating to Subject above. Competing Property #1:
MARKET TRENDS ANALYSIS
Competing Property #2:
Competing Property #3:
Is the subject property realistically priced to sell within the assignment marketing period? Yes No Not listed Identify which competing property is positioned to sell first and why. Include the subject property, if listed. Provide support for the competitive list price range below.
Competitive List Price Range for Subject Property (to achieve a sale within the Assignment Marketing Period):$
to $
FORECASTED TRENDS
within the assignment marketing period. However, the subject property is sometimes already listed for sale. To evaluate the pricing of the subject, a new question was added directly above the competitive list price range field that asks the appraiser to evaluate whether the subject is 52 MOBILITY/JUNE 2010
“realistically” priced to sell within the assignment marketing period. In addition, the appraiser is asked to indicate which of the properties (including the subject if listed) is positioned to sell first and why. This additional information should support the competitive list price range
and provide the client with additional insight regarding the properties. Forecasted Trends. In the Forecasted Trends sub-section of the Market Trends Analysis, one will find the marketing time information including the “market segment normal marketing time,” the “subject
property’s estimated normal marketing time,” and the “assignment marketing period” line items (already discussed under page 1). There also is a forecasted trends and analysis section that includes line items for “forecasted sales activity” and “forecasted price trend.” What is new in this section is an additional line item for identifying the “pace” of the forecasted price trend—if it is increasing or decreasing, the appraiser is asked to indicate if the trend will continue at the current pace, a decelerated pace, or an accelerated pace. The appraiser then is asked to discuss in a narrative the overall historic trends and the current factors analyses from pages 4 and 5 of the form along with any additional pertinent data relevant to developing the forecasting adjustment on page 6. They then are to analyze the anticipated trend of market conditions and prices during the subject’s upcoming assignment marketing period considering factors such as the mood of the market, seasonal market trends, economic and employment shifts, demographic
trends, buyer profile, and the like. This is similar to the previous form. What is new is that the appraiser then is asked to indicate, based on this analysis, the type of forecasting adjustment that will be required on page 6 of the form: positive, negative, or zero.* This then translates to a specific dollar adjustment on page 6.
Page 6 Page 6 of the form contains the Sales Comparison Analysis and the Anticipated Sales Price sections. The major objective of this page continues to be to report an analysis of comparable sales in relation to the subject property. This analysis includes making adjustments to the comparables’ sales prices based on the contributory value of features different from the subject property. New and modified line items in the marketing history portion of the grid include the “original list price,” “original sales-to-list price ratio,” “current and final list price,” “final sales-to-list price ratio,” and “last sale date/price” (see Figure 7).
By providing the original and current/final list price of the subject property (if applicable) and comparables, the appraiser will be able to indicate each one’s sales-to-list-price ratio. A low sales-to-list price ratio indicates that a buyer’s market may exist and that sellers are accepting lower offers. A high sales-to-list price ratio generally reflects a seller’s market and is a key indicator that sellers are negotiating less and buyers are willing to pay closer to full asking price. The original sales-to-list price ratio may indicate whether a property was initially over priced. “Financing type” is a new line item. To complete this line item, appraisers are asked to enter the type of financing (conventional, FHA, VA, cash, seller, etc.). In addition, “data verification sources” and “concessions” are line items that were modified from the 2003 form and replace the “data source” and “sales and/or financing concessions” line items. These items either were added or modified to allow for enhanced data reporting. Client File #:
* The Appraisal Task Force has made improvements to the Summary Appraisal Report since the publication of this article in the print edition of MOBILITY. To reflect this final version, wording in this article has been updated.
FIGURE 7
Item
Subject Property
Comparable Sale #1
Comparable Sale #2
Comparable Sale #3
Address Proximity to Subject Original List Price Orig. Sales-to-list Price Ratio Current & Final List Price Final Sales-to-list Price Ratio Sales Price Closing Date Days on Market Last Sale Date/Price Data Verification Sources
$
$ %
$
Description
%
$
/$ Description
$ %
$
/$
%
$ %
SCA:8
$ %
$
/$ +(-)$ Adjustment
Description
/$ +(-)$ Adjustment
Description
Financing Type Concessions Market Change Adjustment*
Date of Value Opinion
Contract Date
Contract Date
Contract Date
Neighborhood Appeal MOBILITY/JUNE 2010 53
+(-)$ Adjustment
hatfield_goldman2_MOBILITY 5/12/10 3:37 PM Page 8
ANTICIPATED SALES PRICE
FIGURE 8
Is the Subject Property currently listed? Yes No Current List Price: $ Competitive List Price Range for Subject Property (to achieve a sale within the Assignment Marketing Period): $ Assignment Marketing Period: Not to exceed 120 days Client instruction: Not to exceed days Subject Property’s Appearance: “as is” Client instruction: Opinion of Anticipated Sales Price as of
is $ (Based on the Extraordinary Assumption on page 1 of this report.)
(Date of Value Opinion) Transferee:
As in the Competing Properties section on page 5, the “rooms” line item has been changed on page 6 as well to include only bedroom and bath counts; total room count has been removed. Instructional footnotes for the preparer also have been added to the grid regarding the “market change adjustment” and the “forecasting adjustment.” Finally, the Anticipated Sales Price section has been revised and includes not only the “anticipated sales price” and “date of value opinion,” but also repeats pertinent information pulled from other sections of the report. Most importantly, information about the subject property’s current list price and competitive list price range are repeated and allow the appraiser a
to $
Appraiser:
final opportunity to review his or her value opinion in comparison to the subject property’s actual list price and competitive list price range (see Figure 8).
Page 7 This page also has changed and has been retitled: Statement of Limiting Conditions, Extraordinary Assumption, and Appraiser Certification. Three significant changes/ additions have been made to this page. The first is a modification to Point #10 under the Contingent and Limiting Conditions sub-section. On the previous version of the form, this point used to indicate that the effective date of the appraisal was contemporaneous with the date of
the appraisal. Now that the “date of value opinion” is the effective date and may differ from the “date of appraisal inspection,” Point #10 has been revised to say, “for the purpose of this appraisal, the effective date of the appraisal is the Date of Value Opinion. This allows the appraiser to consider pertinent information available between the Date of Appraisal Inspection and the Date of Value Opinion.” The second change is that the extraordinary assumption found on page 1 of the report has been repeated on page 7 to emphasize that the anticipated sales price assumes no physical changes have occurred between the “date of value opinion” and the “date of appraisal inspection.” It should be noted again that
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no deviation from the extraordinary assumption is allowed on the Worldwide ERC® Summary Appraisal Report. Last, a new sub-section has been added, called “Additional Contingent and Limiting Conditions, Certifications and Comments.” This new narrative field allows the appraiser to list any additional limiting conditions, additional certifications required by state licensing, and/or membership in professional appraisal organizations. It also allows the appraiser to address any other USPAP requirements.
Conclusion
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The 2010 redesign of the form reflects both client and appraiser recommendations and an intense year’s worth of work by the Appraisal Task Force. There were items suggested that the Appraisal Task Force considered but determined did not warrant inclusion in the form revision. Most important, the following two items were not included: 1. the option of an opinion of value that excluded forecasting; and 2. the inclusion of adjustments in the Competing Properties grid. Regarding the first item, based on the Definition of Anticipated Sales Price, the value opinion generated by the Worldwide ERC® Summary Appraisal Report (anticipated sales price) requires forecasting. It is not an option. This forecasting component is one of the defining features of anticipated sales price and the relocation appraisal. Through years of use and development, anticipated sales price has been established as the appropriate opinion of value for relocation appraisals. In addition, the Worldwide ERC® definition of
anticipated sales price is recognized by the Appraisal Foundation (USPAP Advisory Opinion 22). A value opinion developed in the Worldwide ERC® Summary Appraisal Report that does not include forecasting is, by definition, not anticipated sales price and, therefore, inappropriate to use within the context of a relocation appraisal. The Appraisal Task Force also discussed whether to add adjustments to the listings in the Competing Properties grid on page 5 of the report. Similar to the previous task force that completed the 2001 revision, the group reconfirmed its position that including adjustments in the Competing Properties grid continues to be inappropriate. The reason is that while sometimes useful in demonstrating the principle of substitution (meaning that a typical potential buyer of the subject property would pay no more than the cost of acquiring and equally desirable substitute property), the adjustment of listings often produces inconclusive results because of the difficulties in determining whether the listings are properly priced. As such, adjustments to the competing properties do not produce credible results in a consistent enough manner to warrant inclusion in the report. To learn more about the Worldwide ERC® Summary Appraisal Report and to purchase your own copy of the 2010 edition of the Worldwide ERC® Relocation Appraisal Guide, visit our website at www.WorldwideERC.org. Jan Hatfield-Goldman is vice president, research and education for Worldwide ERC®, Arlington, VA. She can be reached at +1 703 842 3415 or e-mail jhatfield-goldman@worldwideerc.org.
reed21_MOBILITY 5/10/10 1:37 PM Page 2
Analyzing the Perfect Storm: the Present State of the Moving and Storage Industry B Y E R I C R E E D , C R P, G M S
The moving and storage industry is experiencing a number of unfavorable circumstances that have converged to create “the perfect storm� from a business perspective. Reed analyzes the issues that have lead to the current situation by drawing on views from economic and demographic experts as well as notable industry leaders.
58 MOBILITY/JUNE 2010
reed21_MOBILITY 5/10/10 1:38 PM Page 3
“The Perfect Storm” is “an expression that describes an event where a rare combination of circumstances will aggravate a situation drastically.” When most people hear the expression, they think of the popular movie by the same name that was released in June 2000. The movie was based on the true story of a swordfishing boat called the Andrea Gail and its crew of six who were lost at sea during a massive storm that hit the East Coast in October 1991. David Valle of The National Weather Service described the storm as the result of three separate weather systems coming together with deadly consequences. The storm created sustained winds of up to 60 miles per hour and waves of up to 75 feet in height, leaving “extensive and widespread” damage along the Atlantic seaboard.
Analyzing the Perfect Storm The moving and storage industry is experiencing a number of unfavorable circumstances that have converged to create “the perfect storm.” Based on the most recent mobility statistics from the United States Census Bureau, only 11.9 percent of the U.S. population relocated from March 2007 to March 2008. This was the lowest rate recorded since the government began tracking this trend in the late 1940s. The historically low trend report-
edly continued during 2008 and 2009, when long distance moving in particular remained stagnant. What caused this significant decline in the U.S. mobility rate?
A Significant Decline On January 10, 2010, the New York Times posted a blog on its website, “A Nation of Hunkered-down Homebodies.” Several noted experts participated in the blog and provided their opinions (based on research and experience) as to what factors led to the U.S. decline in mobility rates. The blog provides interesting insight into what became “the perfect storm” for the moving and storage industry. Lawrence F. Katz, a professor of economics at Harvard University, attributes the decline in mobility during the last two decades to four converging factors. The first is “the natural consequences of the aging of baby boomers.” Mobility rates tend to decline as individuals grow older. Baby boomers make up a significant portion of the population and now are between the ages of 46 and 64. Therefore, Katz’ says the aging of this segment of the population has reduced, and will continue to reduce, overall mobility rates. Katz also attributes the decline in mobility rates to falling home prices where homeowners are “locked in” to their homes because of negative equity
MOBILITY/JUNE 2010 59
reed21_MOBILITY 5/10/10 1:39 PM Page 4
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that reduces mobility rates, particularly in distressed regions of the country. The third reason he gives for the decline is the subprime crisis, which created “economic distress in typically fast-growing areas such as Florida, California, and Nevada, further slowing labor mobility to expanding regions that ordinarily drive U.S. job recoveries.” And fourth, the lingering credit market that affects the creation of jobs in “economically vibrant locales” resulting in slower labor mobility. Peter Francese, founder of American Demographics magazine and a demographic trend analyst, says there are two “structural reasons” why fewer people move: an aging population and the growth of dual-career families. He states, “people in those groups are in their prime working years, they have kids in local schools, and have for the most part put down roots in their communities.” It is noted that dual-career couples and families make up approximately one-half of all marriages, which makes it “next to impossible” to move when one spouse is offered a better job out-of-area. Francese believes that individuals in their 20s or early 30s are less likely to have formed community bonds and are more likely to relocate. The good news is that Generations X and Y, who now are roughly between 15 and 34 years old, outnumber the Baby Boomer generation. Francese predicts that when the recession is over, “…millions of them will move anywhere there’s a hot job market.” Richard Florida is director of the Martin Prosperity Institute at the University of Toronto. Like Katz and many of the other experts, Florida says the housing market is a big fac-
tor in the country’s reduced mobility: “the popping of the housing bubble has left millions of Americans unable to sell their houses, underwater on their mortgages, and stuck in their homes.” He also notes the effect of reduced workforce mobility on the economy: “the mobility slowdown clearly hurts both individuals by limiting their ability to pursue economic opportunities and the economy as a whole by limiting its flexibility in matching workers to jobs.” While many of these factors have converged to create the current slowdown in relocation activity, it is useful to explore what effect these issues are having on the moving and storage industry from the perspective of various industry leaders.
Views From Industry Leaders To gain insight on the present state of the moving and storage industry, I interviewed five industry leaders. My goal was to take a crosssection of individuals from different organizations of different sizes and interests to gain a balanced, industrywide perspective. The following is a summary of what each of these leaders had to say: Linda Bauer Darr is president and CEO of the American Moving & Storage Association (AMSA), based in Alexandria, VA. AMSA is the national trade association for the professional moving industry. Bauer Darr says one of the primary challenges facing the industry today is the loss of business because of the downturn in the housing market. She states that, “…there are a lot of distressed sales, a glut of unsold homes, and very few new home sales… until more people are in their jobs and feeling secure about their own per-
reed21_MOBILITY 5/10/10 1:39 PM Page 5
WH HAT’S HA AT T’S A ALL LL “…there are a lot of distressed sales, a glut of unsold homes, and very few new home sales… until more people are in their jobs and feeling secure about their own personal futures, they’re not going to buy homes or move as often.” Linda Bauer Darr, president and CEO of the American Moving & Storage Association (AMSA)
sonal futures, they’re not going to buy homes or move as often.” Her other concern is a loss of market share within the industry to what is often referred to as “rogue movers.” Rogue movers are unethical movers who come into the industry without the appropriate moving authorities, insurance, and moving experience. Bauer Darr states that, “they cheat consumers, raise expectations, and then deliver very little. Sometimes they even hold the customer’s household goods hostage!” Bauer Darr’s concern is that they are taking business away from professional movers and giving a “black eye” to the moving and storage industry. To overcome this challenge, AMSA has developed a professional mover certification program called ProMover. To receive the ProMover certification, a moving company must pass a background check, meet several rigid requirements, and complete a signatory agreement stating they will uphold the AMSA code of ethics. As
Bauer Darr sees it, “we hope that the ProMover certification will become the future standard for consumers who are choosing a mover. Before anyone chooses a mover they have to feel safe.” She equates the ProMover certification to that of the REALTOR® certification in the real estate industry where consumers can feel comfortable they are dealing with a true industry professional. Bauer Darr says that opportunities still exist for professional movers willing to diversify in today’s economic environment. “Companies need to decide how they are going to offer more choices to the consumer. Consumers don’t always want to go with the top-of-the-line ‘soup to nuts’ move. Sometimes they want a mix of services that, in the past, have not even been considered part of a professional move.” She offered examples of these “mix of services” as: containerized moving, labor to help load and unload containers, and renting a self-moving rental truck. She admitted that integrating these services may not be easy, saying, “…I think that the challenge for movers will be to fit those options into their traditional business model and make it successful.” Mike Wolfe is president of Allied Van Lines and northAmerican Van Lines based in Westmont, IL. He says the two primary economic challenges in the industry today are the difficult economy and the housing market. According to Wolfe, “the drastic fall in home prices is a unique storm that the industry does not have significant experience in weathering. Transferees that are in a loss position on their homes have a significant barrier to moving.” Wolfe says the industry needs to stay in touch with consumer’s changing needs. He also
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says that the industry’s current overcapacity of driver’s and trucks has resulted in additional pricing pressures. However, “this dynamic has the potential of ‘whip-sawing’ in the opposite direction as the market returns to normal, and the industry could be faced with a significant shortage of drivers.” Wolfe states that in today’s environment, “companies that have unique ways to help customers manage through the new pitfalls that corporations face during the relocation process will be able to differentiate themselves. Service providers that can bring innovative solutions to control costs will be able to improve their position in the marketplace.” Glen E. Dunkerson is chairman and CEO of Atlas Worldwide and Atlas Van Lines based in Evansville, IN. Dunkerson believes that the economic recession really has caused the industry to be in a “depression” for longer than a year because of various factors like housing and labor. He went on to state that some consumers are asking moving companies to succumb to unrealistic expectations to do business with them, while moving companies continue to reduce their costs and price to survive, adding, “we are such a servicefocused industry. We don’t manufacture anything, you can’t modernize a process in terms of getting a new machine to improve efficiency—it’s all about people… you can only cut so far before you start impacting your customers. That’s the fine line our industry has to recognize. How far do you cut until you have ultimately impacted the level of your service?” Dunkerson also is concerned that “non asset” based moving brokers that promote themselves through the Internet are affecting the industry’s 62 MOBILITY/JUNE 2010
“buying a service is not like buying a book. When you buy a book there are 10 million books just like it out there. Unfortunately many consumers have lost sight of that.” Kirk Jensen, president of Jensen Relocation
market share, saying, “these (moving brokers) are coming in and re-selling our services with slick websites and nice marketing campaigns… I’m not talking about relocation companies… I believe the ‘ true broker’ of our service is a concern to me and I know to some of my peers.” When asked if new opportunities exist in the market today for professional moving companies, Dunkerson says there is a huge untapped market in the “do-it-yourself segment.” He explains that the current perception is that the self-move option is much cheaper than the fullservice move option. However, he points out that, “the consumer needs to start comparing the ‘true’ cost of these two moving methods. If they do, I think they’ll be surprised.” Dunkerson suggests that the “true cost” of self moving should include: truck rental, equipment rental, fuel, time, and potential problems. “When you compare the two services ‘apples-to-apples,’ they are pretty darn close in cost and you get so much more in the full-service move,” he says.
Donald Hill is president and COO for Alexander’s Mobility Services based in Tustin, CA. Alexander’s is a multi-location agent with Atlas Van Lines. Hill says the industry is seeing a “shrinking market” because of the economic downturn, a declining job market, the sluggish housing market, and changes in employee relocation. Hill explains that, “fewer corporations are offering home buy-out options, which makes it more difficult for employees to sell their homes and move to their next job. As a result, we’re seeing smaller, nonhomeowner moves.” Hill has seen the average size of a move drop from approximately 14,000 pounds to 9,000 pounds. At the same time, he also is seeing an increase in the popularity of “lump-sum” moving benefits among corporations, which has had an effect on his company: “for a company like ours, who doesn’t deal in the ‘C.O.D. world’ (individual consumer private moves), that brings on new economic challenges. We need to know how to sell and be more competitive in that market, adopting more of an ‘inside sales’ approach rather than the way we have always sold in the past. That leads to additional costs at a time that we really can’t afford additional costs,” he said. In addition to the industry’s current overcapacity, which has resulted in a “downward pressure on pricing,” Hill also sees a trend toward the “commoditization” of professional moving services. As he explains it, “we’re no longer seen as a specialty-type service, but rather something you can buy on any street corner… we have continued to lower our prices and allowed RFP auctions and competitive ‘bid boards’ to treat our service like a commodity
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rather then the specialty service that it truly is.” Like other industry leaders, Hill believes that opportunities exist in today’s market for those companies willing to diversify. He suggests diversifying into areas such as, “…product distribution, logistics, or
FF&E (furniture, fixtures, and equipment) business as well as project management in these fields.” Hill went on to say that companies also could expand their opportunities by investing in technology that enhances the efficiency of their service delivery.
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Kirk Jensen is president of Jensen Relocation based in Lawndale, CA. Jensen is a single-location agent with Allied Van Lines. Jensen said that one challenge in today’s environment is overcoming the perception that full-service moving is “too costly.” Jensen states that, “buyers see a large dollar amount for a large move and they’re surprised by it. But once you divide up that ‘pie,’ there’s not a lot of money left over for profit.” While profitability continues to fall, the cost of doing business continues to rise. Jensen said another challenge is the buying behavior of younger consumers. He explains that these consumers tend to select moving companies over the Internet based only on the lowest price without considering the differences in the quality of service. Like Hill, Jensen says that professional moving services are being “commoditized” by this type of buying behavior. Jensen went on to say, “buying a service is not like buying a book. When you buy a book there are 10 million books just like it out there. Unfortunately many consumers have lost sight of that.” Jensen has seen the decline in corporate employee relocations affect his business. He says that larger moving agents attract corporate business by promoting multiple locations and larger fleets, “that makes it difficult for smaller players like us to compete. To survive, I think smaller companies will need to find areas they can specialize in.”
Summarizing the Issues It is clear, through these leader interviews and expert opinions, that the industry was hit hard by the economic recession and the depressed housing market. Corporations have pulled back on their employee relo64 MOBILITY/JUNE 2010
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cation benefits, reducing both the number of moves as well as the size of their shipments. Overcapacity in the industry is driving prices and profitability down while industry expenses continue to rise. Mobility has decreased and should continue to decrease among the “baby-boomer” generation. Further competitive challenges also have taken their toll on the industry from Internet brokers to alternative moving services. Unscrupulous movers are finding it easier to “dupe” unsuspecting consumers through the Internet, taking market share from legitimate movers and giving the industry a poor image. Professional moving services are increasingly viewed as a commodity by corporations and consumers as a result of Internet buying habits, RFP auctions, and competitive “bid boards.”
Moving Forward New opportunities still exist in the industry for those companies willing to diversify their service offerings. Companies may choose to adapt rather than compete with alternative moving services that have eroded their market share in the past. Perhaps professional movers can reclaim a portion of the “self-move” market by educating consumers on the “total cost of ownership” when comparing a self-move to a professional move. Professional movers also should continue to search and develop technological enhancements that improve efficiency and service delivery. Smaller moving agents may find new opportunities through specialization of service.
ing companies no longer can operate as if it were “business as usual.” As the industry begins to emerge from “the perfect storm,” those companies that are willing to change and adapt will survive and thrive. Perhaps the lessons learned from the present experience will lead to industry-wide
improvements that will secure a brighter future for the moving and storage industry. Eric Reed, CRP, GMS, is director of business development for Berger/Allied, Fullerton, CA. He can be reached at +1 714 449 6671 or e-mail ericr@bergerallied.com. Full interviews with industry leaders can be viewed at www.ericreed-online.com.
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Clearing Skies The only thing that is certain in this present environment is that movMOBILITY/JUNE 2010 65
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Afghanistan 66 MOBILITY/JUNE 2010
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BY ELLEN HARRIS, GMS, AND GREG FORGRAVE Afghanistan is sure to conjure images in any individual who hears the name, but what is really known about this Asian country? Harris and Forgrave take a closer look.
A
fghanistan is a large, landlocked country located in the southeastern section of the Asian continent. It is bordered by six countries: Iran to the west, Turkmenistan to the northwest, Uzbekistan to the north, China and Tajikistan to the northeast, and Pakistan to the east and south. This country of almost 29 million is populated by distinct peoples, the largest group of which is the Pashtun. Tajiks, Hazaris, and Uzbeks are the other main ethnic groups. An ancient land, the capital city of Kabul is believed to be nearly 4,000 years old, although independence came to the country only in 1747.
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Slightly smaller than Texas and extremely mountainous, Afghanistan’s highest point (7,500 m) is in the Hindu Kush, a northeastern range. Kabul, the capital, is located in the northeast. Other major cities include Kandahar, Jalalabad, Herat, and Mazar-i-Sharif. Its strategic location between Asia and the Middle East affords Afghanistan an importance that can be either beneficial or destructive. Outside forces have influenced Afghanistan throughout its history. These include Alexander the Great, Persians, Genghis Khan, and, in a more recent millennium, Britain and the Soviet Union, whose invasion in 1979 launched a 10-year war that left much damage in its wake. The results of this and other wars are what bring many foreigners to Afghanistan in the present day: reconstruction and humanitarian efforts. International aid has been critical to the country’s reconstruction efforts, which so far include restoration of about 2,350 km of circular roads. But many challenges face the country as it struggles to achieve reliable lifeand health-sustaining staples for its people on which a stronger and more promising future can be built. Currently, there are foreigners working on reconstruction projects in the country, as well as those from humanitarian aid organizations. Strict security procedures do not always guarantee safety for newcomers, as terrorist forces seek to derail the goals of peace and stability and the Taliban flexes its muscles again. Newcomers should be cautious, and stay in contact with their employers and homecountry embassy or consulates for the latest security news and procedures. Afghanistan’s years of war have placed a heavy burden on its econo68 MOBILITY/JUNE 2010
my. Major sectors are services (43 percent) and agriculture (31 percent), although the climate is semiarid and little more than 12 percent of the land is arable. Nevertheless, 80 percent of the workforce is engaged in agrarian pursuits. Current unemployment figures are difficult to secure; it was about 35 percent in 2008. Insurgency and an unstable government plagued by corruption have posed challenges to an already struggling economy. The billions of dollars of international aid pledged to the country have yet to bring much improvement to the lives of most Afghans. Another issue is the very lucrative opium trade, which generates an estimated US$3 billion from local poppy fields. Afghanistan’s official languages are Pashto and Dari. The latter is used most frequently in business and government. Reconstruction workers and international aid organizations typically find themselves working among groups that speak other languages. English and German are the Western languages most often spoken by Afghans, though these still are not widely spoken.
Kabul Afghanistan’s capital, Kabul, is home base for most international assignees. The city’s 5th century inhabitants built a protective wall, parts of which still stand today. Most of the city lies northwest of the river, in a basin formed by the Hindu Kush mountain range on three sides. Many of Kabul’s structures—both public and private buildings—have been destroyed by war; some sources estimate up to 40 percent of the city
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has sustained damage. The cityscape is low-rise, with a concentrated grid of streets centered around Shahr-iNaw Park. Strands of the country’s rich ethnic fabric are evident throughout Kabul; Pashtuns, Hazaras, Tajiks, Uzbeks make up the city’s population of roughly five million. A development project called “City of Light” has been outlined and presented to the president. It would include a mix of residential and commercial properties, medical facilities, and recreational venues.
Climate, Banking, and Housing Afghanistan’s climate is dry. Temperatures vary significantly between the mountains and lowlands. January is the coldest month
in Kabul, averaging -8°C and 5°C. Temperatures can reach 40°C in July and August. Afghanistan’s currency is called the Afghani (AFN). A new (second) Afghani has been in circulation since January 2003. U.S. dollars and Pakistani rupees also are used in daily transactions. The central bank, Da Afghanistan Bank, is based in Kabul and has nearly 20 branches there and in other locations. Services offered locally include current accounts and savings accounts (in various currencies), Internet banking, debit cards, credit cards, loans, and fund transfers. Some banks offer accounts that follow the principles of Sharia (Islamic law). ATMs can be found in Afghanistan’s major cities. Afghanistan International Bank
accepts international credit cards at its ATMs. Local banks do issue credit and debit cards, but their use is very limited in Afghanistan. Given the tenuous state of security in Afghanistan, employees relocating there rely on support in finding secure housing accommodations, as well as company-recommended or supplied transport to and from the work site. Some assignees in Afghanistan will live in housing that employs staff to handle cooking and cleaning, in addition to—in many cases—a full security detail. With the majority of relocations to Afghanistan originating from companies with military and development contracts, these assignees tend to
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reside on large military bases or in sizable Afghan mansions.
Health Care, Security, and Communication
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Health care facilities favored by foreigners in Kabul include the DK German Medical Diagnostic Center, ACOMET Family Hospital, and CURE International Hospital. Public health facilities should be avoided. In Kandahar, the International Committee of the Red Cross (ICRC) operates the Mirwais Hospital, a government hospital renovated to accept war-wounded individuals for treatment. Foreigners working in Afghanistan require a heightened level of alertness at all times. Keep a low profile. Do not adhere to a predictable schedule; rather, vary your departure and arrival times and routes. Know the addresses for police stations and hospitals, and emergency telephone numbers. Any vehicles parked at the residence should be locked and no valuables should be kept inside. Avoid public transportation and areas where demonstrations take place. Always carry a phone or other communication device with you. Monitor local conditions closely, and
watch for update messages from your embassy. Travel through areas outside of cities can be dangerous, with isolated roads and poor cell phone coverage enhancing that danger. The Afghan National Police (ANP) has grown greatly in size and sophistication since 2001. Checkpoints are scattered randomly throughout Kabul and foreigners should carry their passports (or a copy) and a valid ID that confirms their employer and the reason for being in the country. Foreign visitors and expatriates should expect a certain amount of disruption to their daily travel schedules and routines, as checkpoint locations change daily, and the amount of time one spends passing through a checkpoint also will vary. Some basic ability in Dari and/or Pashto is useful when communicating with the ANP and local security forces. In places like Afghanistan where daily life can be unpredictable and connections to family friends outside the country are important, Internet can be a life-saver—or at least serve as a vital tool. VSAT satellite provides reliable Internet service in Afghanistan.
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Land lines are highly unreliable because of war damage and instability. Mobile phones are the norm in Afghanistan. They are very important, as it is vital to have a method of communication when traveling anywhere within the city, or in and out of the country. Mobile phone service is reliable in Kabul, with four networks in operation: Roshan, Afghan Wireless Communications Company, MTN, and Etisalat.
Doing Business Local business partners can help newcomers navigate Afghan government rules and regulations, which are constantly changing and developing. As Afghanistan is a Muslim country, care should be taken to observe the local laws and customs governed by religion. Activities and fasting during Ramadan may affect business schedules. When gathering socially or for business, note that alcohol is prohibited (although available in Kabul), as is eating pork. The work week is Sunday to Thursday. Afghans favor an indirect style of communication. In the interest of respect and honor, they will avoid a direct “no;� you will need to read contextual elements like body language and phrases that represent a circuitous route to the core meaning. Handshakes are appropriate at meetings. Business cards may be exchanged, although they are not as common for Afghans as for other cultures. For ease, foreign businesspeople might have their cards translated into Pashto or Dari on one side. Relationships are very important, and time should be invested in building rapport and trust. Meetings do
not tend to be strictly scheduled and, despite an agenda, may veer from these items in tangential directions. It is all part of building the relationship necessary to accomplish business goals. With that in mind, newcomers should keep the concepts of honor and respect in mind, and avoid any behavior that could be construed as impatient, demanding, or condescending. Given the security issues in the country, and the need for care in travel to meetings and elsewhere, allow plenty of time to arrive. Afghans have a more relaxed attitude toward time than some other cultures, but you should plan to be punctual and get in touch if you are delayed.
There have been some positive developments in both municipal and commercial infrastructure in Kabul since 2001: well-run, comfortable five-star hotels, Western restaurants, health clubs, and coffeehouses all suited to, and frequented by, the international community. Kabul has a very large international community, and expatriates generally will find that expanding their social and professional networks will happen quickly and with minimal effort. Ellen Harris, GMS, is the international product director for Living Abroad, LLC, Norwalk, CT. She can be reached at +1 203 221 1997 ext. 113, or e-mail ellen.harris@livingabroad.com. Greg Forgrave is a regional manager for Move One Logistics and is based in Kabul, Afghanistan, and Dubai, United Arab Emirates. He can be reached at +971 4 299 3006 or e-mail gregory.forgrave@moveonelog.com.
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Israel W H E R E C U LT U R E S C O L L I D E
Israel is a complicated society, a modern state set against the backdrop of Biblical history. Bar-Pereg examines the country’s cultural underpinnings, and offers some strategies for success for inbound expatriates.
I
BY MICHELE BAR-PEREG srael certainly is unique. The sea, sun, sand, international atmosphere, and hip gathering places are juxtapositioned against ancient cultures, religions, and holy places. Multi-lingual and multifaceted Israel is a melting pot of ideas that makes it a complicated place in which to move. Many start-up companies, especially in the fields of scientific research and development, medical instruments, and computer science, are purchased each year by venture capitalists to be developed further within Israel or by Israeli nationals abroad. More than 82 percent of the population is Jewish, and the remaining 18 percent consists of Arabs, the majority of whom are Muslim. Most Israelis live in metropolitan areas, concentrated around Jerusalem, Tel-Aviv-Yafo, and Haifa.
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It is estimated that Jews from more than 100 different countries have made their home in modern Israel. This extraordinary success has come at a high political price. Israeli society can be viewed as a knot at the center of many tangled ropes: each rope attempts to pull the knot (and all the other ropes) in some direction, causing all the others to move from side to side. Such is Israeli society: constantly moving, changing, and developing. Many of the world’s major international companies have major branches in Israel. I recently spoke at a workforce mobility conference in Israel that had more than 120 HR managers in attendance. I noted representation from companies such as Intel, Microsoft, Siemens, and Ericsson. I found the HR culture tended toward U.S-centric with a touch of Middle Eastern philosophy and character.
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A Closer Look at Group Moves Intel Israel has developed a special brand of caring for the spiritual, physical, and practical aspects of managing mobility, becoming standard practice for them and influencing other global companies. Galia Ellinsky, senior HR, ISR Work Force Mobility, for Intel Corporation, Israel, recently told me of Intel Israel’s group move of 900 to four locations in Ireland and the United States. “When we started to prepare for this effort of moving so many individuals and families abroad, we realized that we needed to focus on the personal needs of the people in order to guarantee success of their assignments,” she said. “We knew (per past experience) that if people are happy with their houses, children’s education, and child care solutions and have happy spouses, they will be able to integrate to their new positions fast, and that their chance to succeed increases accordingly. “One example is the religious needs of the Israeli population. We learned that one-third of our [assignees] would like to live near a synagogue and close to a Jewish community. One of the locations was most challenging since we planned to locate most of the families at the Intel site area, as there were a lot of houses and complexes close to the site, and many education options for the children. We also consider safety and security when we choose accommodations, and there wasn’t a synagogue at that area. “At that time, we were contacted by a rabbi from New York who expressed his willingness to support us by opening a synagogue and establish a Jewish community near our Intel site. This enabled us to accommodate our employees and 74 MOBILITY/JUNE 2010
their families at the desired location while they did not have to give up on their personal needs and way of life. By doing that, we achieved not only a great solution for our population, but also saved money, saved commuting time, supported our safety and security aspects and, as a byproduct, created the foundation for a Jewish community in that area.”
Understanding Israeli Culture For inbound assignees coming to Israel, one of the difficulties is to forget past prejudices and begin the assignment with an open attitude. People who relocate to Israel do not want to leave. They realize that Israel is far from what they see in the news, and that there are a lot of aspects that they like—the people, weather, variety of places to visit, and beautiful landscape. Israel culturally, economically, and politically sits in an intersection of diverse opinions. For executives entering Israel, they surely have been
confronted with various opinions on the danger, politics, and sheer cultural see-saw of nationalities who live there. Many incoming personnel will have been bombarded with family concerns and worries about moving to the region; most without ever having visited Israel before but haunted by the news reports and media opinions. Such varied views on daily news and politics are equally rife and discussed within Israel itself on the bus, in taxis, and supermarkets. Politics is daily fare for all the population, and opinions and ideas can divide families and friends equally. However, being a democracy, at least all opinions are out in the open! A discussion with Marion Burgheimer, a cross-cultural trainer in Israel, illustrated the true meaning of adaptation, mentioning that intercultural differences affect work processes as well as daily life and, nowadays, greater attention needs to be focused in this direction. She gave an example of cultures concerned with time. Attitudes regarding time in Israel are more flexible then in other countries; one could easily wait several hours for a technician, or go and have lunch between 12:00 and 17:00, the hours of a business lunch. In the workshops she has been leading, she had noticed that people were constantly talking about the change they were going through. “It was clear that one has to be well prepared for the hectic way of life Israelis tend to lead,” she said. “Change is not a slogan in Israel: political events, the constant improvisation, and the desire to move forward or at least the fastest you can from one place to another, be it on the road or in the supermarket, or in
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a conversation, influences the way people behave. This fast-forward way of life is in contrast when people relocate to places where the pace of life is different, mainly more ordinary and calm. In Israel, the fast pace and constant movement hits you hard.”
Integration I asked Mark Kedem, GMS, client relations director of Ocean Global Relocation Solutions, Israel, what he finds is the most difficult part of the relocation process for transferees on assignment in Israel, and how they acclimate themselves to their new environment. “The truth is that in the final analysis, Israel is one of the most popular destinations for relocation and, if one asks an assignee who has been to numerous destinations, he will highlight Israel as the most enjoyable relocation,” he said. “I know it’s a hard concept to swallow, but look at the raw data—it is the country of the Bible and there is a magnetic pull for all [religions]. It is a beautiful country with endless opportunities of touring and discovering the biblical sites, awesome nature, and some wonders of the world (the Dead Sea). And do not forget the weather—at least nine months of sunshine and warmth (sometimes excessive), beautiful beaches, modern cities, awesome food, and easily accessible to other destinations in the Middle East, Turkey, and Europe. Tel Aviv is comparable to New York and is a city that never sleeps—thriving and exciting, great restaurants and pubs, music and culture.” He adds, “one simply has to get over the initial hesitation based on sometimes non-factual and exaggerated news reports on Israel. No one is saying that there is no security
threat in Israel and that there are no dangers but, at the same time, this is not all the time and not in all places in Israel. One has to actually visit Israel in order to see this, and my recommendation to all assignees contemplating an assignment to Israel is come on a ‘look and see’ trip and your perspective will change. The best way to deal with a concerned family member is to bring him or her to Israel, as well.”
Further Analysis John Hall, compensation and benefits partner with Mercer Consultants, an American living in Paris, was speaking at the same HR conference with me in Israel. He explained, “whilst I had some natural concerns about security on my first trip to Israel, I was pleasantly surprised at how safe it was without being overtly secure to the point of hostile. On this, my third trip, the question didn’t really cross my mind as I rented a car and moved freely about the
country. While I have no natural ties to Israel, I arrived a few days early to take advantage of the rich history and natural beauty that the country has to offer. “I worked with the chairman of the organizing committee, Professor Moshe Zviran, in identifying potential clients and he provided me not just with names of companies, but then proceeded to call them on my behalf and set up meetings with the appropriate persons for me to discuss with. The meetings themselves were very useful and established that Israeli-headquartered multinationals faced the same challenges the U.S.or European-based multinationals were facing and they were addressing those challenges in a logical and progressive manner. I was impressed by the level of engagement they had in not only looking for ways to market their services, and whilst there are unique aspects to working with new cultures—Israel being no exception—it has been a positively disarming experience working there and I found the people I met both warm and sophisticated.”
My Own Experience In my own career moving personnel around the world, I have uncovered some distinctive traits of Israeli business culture. The Israeli’s somewhat collective culture of being obsessed with survival pervades daily life. This gives them highly opinionated views and perhaps an overbearing energy when dealing with daily matters. Therefore, relocating Israelis need a particular understanding, as no two Israelis are likely to be the same or have similar requirements. There is a distinct lack of uniformity in the population. MOBILITY/JUNE 2010 75
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The Israelis I have met certainly make full use of technology, and the country has an exceptionally high proportion of innovation in the IT sector. Their talent is well known and is in demand abroad; however, their direct approach and tireless idealism makes them occasionally difficult relocation clients. Added to that is the strong attachment to home and family. Family is a high priority for Israelis and conflict is visible when jobs are offered to potentially “difficult” locations, where an Israeli often proves he or she has the ability to work quite successfully. It is in conflict with home life whereby children and spouse considerations can supersede their need for career improvement. I have talked to many Israelis far away from home and family and they do get depressed and dispirited. Especially as family events and Jewish holidays are so important in the yearly calendar. Missing such events is hard for them. A high proportion of Israeli women are well-educated and many of them work. In fact, Israeli society is built around working spouses, making relocation a tough family decision. The difficulty of choosing between home life and keeping the family together, as opposed to maintaining work and study positions, is especially apparent among the Israeli diaspora. When assisting with Israeli expatriates, it helps to remember that the spouse may have given up an excellent job or career in return for outside opportunities. Being able to work outside the sometimesclaustrophobic Israel is a big bonus if one can get it. However, as with most relocation offers, it comes at a high price, particularly for Israeli marriages. 76 MOBILITY/JUNE 2010
Assaf Eitan, an Israeli relocation manager who recently returned from Europe, observes, “some Israeli clients that relocate to a new country try to use their personal contacts, contacts within the company, and the local Jewish community before actually taking advice from the relocation company!” This makes it particularly frustrating for any relocation consultant. Israelis outside their own country, in general, are a collective society tending to interact as much as possible with other Israelis, feeling more comfortable around other Israeli expatriates and finding Jewish bakeries, places of worship, and newspapers connecting with Israeli news as a top priority. However, Assaf, who has been working for the past six years within the relocation industry, adds that this is not so different from the French or British who show the same kind of collective behavior when abroad. Israel is a complicated and fastdriven society, home to an occasionally argumentative and opinionated people who usually back up conflict with logic and education. Emotional on political matters and informal in their attitudes, they enjoy having a good time, seeing the world, and keeping their heart close to their country. They adapt well and can be seen in senior positions across the globe. And, if you relocate to Israel, you can expect a fast-paced ride in a country full of enthusiasm, easy contacts, and cultural opportunities, all while being surrounded by biblical history within a modern state. Michele Bar-Pereg is managing director of the Bar-Pereg Group, Amsterdam, the Netherlands, and a member of the MOBILITY Global Editorial Advisory Committee. She can be reached at +20 6722657 or e-mail michele@bar-pereg.com.
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Locating Suitable Housing
in Amsterdam
BY ILONA EICHLER Amsterdam, with its long history as an international business hub, exists as a top European destination for international expatriates. But where to live? Eichler offers an overview of the Dutch real estate market, as well as tips on how to secure suitable housing.
W
e are moving to Amsterdam! Where do we want to live? That is when the questions begin. Where are the international schools located? What neighborhoods are safe? What kind of houses does our new country offer? These days, we first turn to the Internet to start our search for information about our host country—its cities, neighborhoods, type of houses offered, furnished or unfurnished accommodations, and whether to use a real estate agent, a relocation company, or conduct the search ourselves. Questions and more questions! When I started to write this article about moving to the Netherlands and the Dutch housing market, I
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thought this would be easy. Having dealt with expatriate housing in the Netherlands for more than nine years and having lived abroad, as well, I am familiar with the feelings that expatriates experience when learning they will move abroad and must begin to search for a home in their new host country. But where does one start? It is not as easy as it sometimes looks.
Beginning to Search Almost all real estate agencies in the Netherlands that specialize in rental property have good websites, most in English, as well. Many present a considerable variety of properties from which to choose, although
a lot depends on the area in which you want to live, desired living space, and amount budgeted. You can do a lot of searching on your own, but it is advisable to contact a real estate agent for the actual house search and the negotiation phase. Consider that most expatriates have never lived in the Netherlands and are, therefore, not familiar with the price ranges, laws, and customs. An agent, although more expensive, will help you to get a good impression of the area in which you would like to live, expedite the search, and get a better deal on the property. Also, the agent has the advantage of having access to a multiple-listing system with other agents, which
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keeps them up-to-date on properties’ availability. It is advisable to find an agent in the city or town in which you would like to live; they know the local market much better than an agent from another area. It is important that you can trust your agent. They will select the available properties based on your list of wishes and budget and will make appointments for you to view these properties. Employers sometimes make use of relocation management companies, which will aid you in your search. They will accompany you during your viewing and will advise on the positives and negatives of the properties. A relocation agent is not a real estate agent; a relocation agent is there to help the expatriate and to help them find the best possible property. Rental agents are dependent on each other—they often share commissions in the market and may not always have a transparent agenda. A relocation agent can assist in getting the best deal in the interest of the expatriate. The relocation agent has an open mind and is independent as he or she is not paid by any real estate agent or landlord. During my career, I have learned that most of the transfering families with children search for schools first and then decide where they will live. Many companies provide a preassignment trip for the expatriate and his or her partner to visit the possible schools and start the search for hous80 MOBILITY/JUNE 2010
ing. A real estate agent or relocation company is offered in many cases, but sometimes people do need to do the search themselves. And, if you find a house on the Internet and the real estate agent is helpful, you still do not know if you get a good deal and, maybe more important, whether the house in good condition or contains hidden issues. A good real estate agent will work in your interest and will help get the best deal possible, but know, as in every country, that they all would like to earn money.
Property Types and Rental Agreements Different combinations for properties are possible: • unfurnished, which means empty, no carpeting, curtains, or appliances; • semi-furnished, contains some furnishings like kitchen appliances, carpeting, and curtains; and • furnished, which means everything has been taken care of and the property is move-in ready. Many rental agreements have been constructed to meet the needs of expatriates and have an English translation, as well. It is always advised to have a diplomatic clause included in the rental agreement, which gives the expatriate or the company the opportunity to cancel the lease if the expatriate will be transferred before the end of his or her assignment with a two month’s notice period.
A word of warning: a verbal agreement is binding under Dutch law. Therefore, unless you are absolutely sure you will rent the property, do not make any verbal or written commitment. After agreement and payment, the keys will be handed over by the landlord or his or her representative and a check-in will be conducted, assisted by your agent. A checklist will be completed regarding the condition of the property. The inventory list will be checked and signed, as well. This is to protect you against any damages that might occur in the coming years while living in the house. For expatriates who do not have the luxury of a real estate agent or relocation company and have to do the search themselves, it is advised to be aware of the “puntensysteem.” This puntensysteem, or “point system,” counts for most rental properties, but does not qualify for the higher budget rental houses. For example, it could be that a property of €1,250 on the free market does not have the appropriate amount of points necessary to be at the free rental market and, in this case, the tenant pays too much. The tenant can turn to the Huurcommissie to have the rental amount checked. The Huurcommissie is an independent organization that mediates in disputes between lessee and lessor. Most expatriates are not aware of what the Huurcommissie can do and
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it has to be said that most landlords will not be content if their tenant resorts to using the Huurcommissie to resolve disputes. Every rental apartment gets a certain number of points for space, location, heating system, kitchen and bathroom/toilet appliances, shops in neighborhood, and availability of public transportation. If the property qualifies for the maximum amount of points (142), the property is allowed at the free market and the landlord can determine the rental price. The Huurcommissie will determine if the calculation of the point system is correct. You can only turn to the Huurcommissie within six months after signing the rental agreement.
In the End Do the best possible research before you relocate, search the Internet for information on your new host country, its habits, the housing provided, the dos and don’ts, and try to speak to local colleagues to get information on cities, areas, and schools. Find a real estate agent or relocation company (or preferably both) that you feel comfortable with and you trust to help you find the best possible house that would fit your and your family’s needs. The adventure will truly be a life experience! Ilona Eichler is a relocation consultant with Dutch Living Services BV, Amsterdam, the Netherlands. She can be reached at +31 20 2065860 or e-mail ieichler@dutchliv.nl. MOBILITY/JUNE 2010 81
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Moving Abroad? Don’t Forget to Pack Your Brain BY MAUREEN BRIDGET RABOTIN, GMS What is it that makes expatriates feel like fish out of water, and what are the best ways to acclimate to new cultures and ways of life? Rabotin says that when the time comes to go on international assignment, prepare yourself physically and mentally with realistic expectations by understanding how your brain functions. This preparation, beginning with self-awareness, will put the adventure into a more positive light and put you on the path to success.
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he international assignment has been confirmed. The family has agreed to join you in this new adventure. And an adventure it certainly will be. As defined by MerriamWebster’s Dictionary, an adventure is an exciting or remarkable experience that also can include some risk-taking or danger. I listened to one of my clients as he described the family’s arrival in southern France and how leaving their small hometown in the Midwest turned out to include not only remarkable experiences, but some serious reflections on what was at risk for their two teenage boys. Our discussions focused on how best to prepare each and every family member for an expatriate assignment. This family participated in post-arrival cross-cultural training with follow-up 82 MOBILITY/JUNE 2010
expatriate coaching that equipped them with the support and structure to air what could have sent them packing their suitcase, heading home, and incurring an immense expense both to the company and to themselves as they would have had to deal with a failed assignment. What turned this family’s adventure into a successful international assignment?
Moving Causes Upheaval Arriving in a foreign country entails more than just learning the foreign language. For anyone who has moved, even to another house in the same neighborhood, you know the upheaval created by deciding what goes, what stays, and what gets thrown away. That is the physical side to moving. Then there is the emotional side to going through this pro-
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cess. A nostalgic journey of trying to understand why we accumulate belongings and what they mean to us. Their monetary value often is minimal compared to their sentimental value. When this trip down memory lane is completed, the boxes filled, labeled, and piled high for the movers, a personal journey of preparation starts a new upheaval, this time emotional. From the practical side of how to set the stage for goodbye events, closure for projects suddenly interrupted by an overseas opportunity, and family reunions with unending questions and comments—“lucky you,” “why are you leaving?” and “when can we come and visit?”—to the intangible side of
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why you may experience an emotional roller coaster. If this is the first international assignment, the honeymoon stage tends to be prolonged with unrealistic expectations that everything will be like it has been back home. Good intentions by family and friends have a role in your successful transition, which should not be underestimated, starting with the importance of having family and friends visit after you have settled in. As you get your bearings, you subconsciously prepare the arrival of guests as you plan for their visit. The opportunity to play tourist once again in your new hometown increases your attention of where you are and what you would like to share
with loved ones. With that as a first step in your action plan, let us take a look at what is driving the emotional tides. Emotions are influenced by a mental state that arises in response to how one appraises a situation, the actions taken, and the reactions produced, rather than through any consciously focused effort. This continuous processing of information is accompanied by physiological changes in the brain. Returning back to our family from the Midwestern United States, their arrival in a small town in the south of France seemed to be the ideal opportunity for growth, both professionally and personally. For the assignee, his role of turning the local site around meant restructuring the company. For his wife, her dream of pursuing her earlier studies of the French language and a passion for French cuisine were definite motivators in accepting the assignment. Their sons did not necessarily share this enthusiasm as their entry into adolescence already had begun. Their life in the Midwest had everything they could hope for: the younger son, a star player on the junior high basketball team; a new girlfriend for the older son. After much persuading, the boys were convinced that the family would try it for a year, and if they were not happy after that, repatriation was always possible. Arriving in early August and not having had a preview trip to choose housing, they had agreed to stay in a hotel until they could find appropriate accommodations. The first day at the hotel pool had the mother spinning in circles. Topless young women lounged around the pool as her teenage sons gaped in awe. For her husband, his introduction to the
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company structure lacked exactly that. After agreeing to attend a presentation with a new client, he was astonished to find that the executives were still writing the script to their presentation 10 minutes after the meeting should have begun. During our cross-cultural training, the recounting of these and other episodes led us down an interesting path on how they had prepared for this journey.
Burrowing deep into our brain systems, they carve out new pathways to execute, stabilize, and provide for familiar patterns. This contributes to the feeling of fatigue. During this transition period, our brain actively needs our attention. When we are jolted into seeing what surprises or shocks us, researchers in neuroscience are now teaching us that we can train ourselves to choose our reaction.
A Fish Out of Water
Developing Mindfulness
Recent research in neuroscience amazingly is proving the true meaning of the expression, “to feel like a fish out of water.” Years of experience engrave memories in our brain of how, why, and when we do what we do. With repeated practice, constant familiar environments, and unending habits of daily life, we tend to arrive at a mindless state of existence. “Mindless” as in the opposite of mindful—that state where we execute everyday obligations without much thought as to the how, why, or when of it all. Then suddenly we find ourselves uprooted, much like this family from the Midwest. Our brain is on alert as it tries to retrieve a sense of tranquility. A feeling of stability escapes us. What is different becomes more pronounced as we try to understand its implications in comparison to our expectations. What we believed to be acceptable ways of behaving become questionable. What we accepted as truths seems to turn out to be misled convictions. Who are we? Our identity appears to have vanished as no one recognizes who we are, where we have been, and why we seem so confused. This state can be explained by an erratic meandering of neurons building new information highways.
By developing mindfulness, the ability to focus our attention and be extremely aware of our environment with all our senses: what we are feeling, seeing, hearing, thinking, and smelling, we increase our neuroplasticity, the adaptability of the brain neurons. From this point on, we can then choose how to regulate our emotions. One of the best strategies first described by Victor Frankl in his book, “Man’s Search for Meaning,” is today referred to as “cognitive reappraisal”—our capability to change how we think about what is happening to us. When we learn how to recognize and label the emotions surging through our body in speeds of milliseconds, “we can reinterpret the meaning of the event in a way that changes in emotional impact,” according to Dr. Kevin Ochsner in his article “Staying Cool Under Pressure: Insights from Social Cognitive Neuroscience and Their Implications for Self and Society,” published in the February 2008 issue of the NeuroLeadership Journal.” In this article, the process described enables us to understand the different stages that occur when we generate an emotion. This particular cognitive strategy—reappraisal— involves reframing or reinterpreting,
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adopting or accepting, normalizing, reordering, and repositioning, which can be simplified in laymen’s terms as a 4-A command process of analyzing, adjusting, aligning, and adapting. Trying to avoid or suppress initial emotions through distraction has been shown to make things worse in the long run. When we analyze the situation, we can adjust our response, align it with what is culturally and personally acceptable, and adapt our reactions accordingly. By redirecting our initial shock of what is different through mindfulness, we modify the process, thus changing a negative judgment into a positive curiosity. How is it that this is acceptable behavior? What shocks me and why? What do these people value that seems to contradict my subconscious values? How can I develop a perspective that is more acceptable of this situation? Can I simply choose to avoid this situation in the future? By redirecting our emotional stress and culturally calibrating our reaction, we avoid an emotional outburst known as an “amygdala hijacking” or a reaction labeled as “going limbic” in “Your Brain at Work,” by David Rock. When the time comes to go on that international assignment, prepare yourself physically and mentally with realistic expectations by understanding how your brain functions. This preparation, starting with selfawareness, will put the adventure into a more positive, bright light as you speed ahead on the road to success, for everyone’s benefit; the company’s and the assignee’s. Maureen Bridget Rabotin, GMS, is a certified global executive coach, founder of Effective Global Leadership, Paris, France, and a member of the MOBILITY Global Editorial Advisory Committee. She can be reached at +33 6 6354 1225 or e-mail mrabotin@egleadership.com.
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Responding to Change in the Business World Through Industry-specific Quality Standards BY BORIS A. POPULOH One of the overwhelming challenges in selecting an international household goods moving and storage provider is that it is so difficult to compare the level of service and quality among all potential suppliers. Populoh addresses these challenges and how they apply to the new FIDI certification. t is well known that moving is considered one of the most stressful undertakings in an individual’s life. For many, just the thought of relocating can elicit dread and trepidation. While the challenges that are involved in relocating any international assignee cannot be eliminated, they can be managed by employing best practice methodologies throughout the process. One of the main challenges for corporate accounts and/or customers of the international household goods moving and storage industry is trying to compare the level of service and quality offered by various service providers. In lay terms, the customer should be able to compare apples to apples when making the educated decision that accounts for the price of the service offered, as well as the service quality and reliability. On a fundamental level, the removal and transportation of the
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assignee’s physical belongings is the most visible part of that process. Applying sound quality-oriented parameters to the service provider selection process will go a long way toward affecting a quality move and a positive experience for the transferee and his or her family.
Improving on a Global Standard FAIM Certification (see sidebar on page 90) sought to develop a measurable means by which to elevate the level of service that FIDI’s members were providing to their corporate clients. To improve on the standard, FIDI embarked on a top to bottom review, as well as collected feedback from corporate customers and clients concerning what they said were the most critical aspects in delivering this service to their international assignees. The result, FAIM 2.0, incorporated the advanced requirements of today’s mobility policies, while simultaneously strengthening the FAIM
Certification operational and service quality best practice methodology. The new FAIM standard is the culmination of multi-year processes that drew on the knowledge and expertise of some of the industries most experienced and innovative executives, as well as the extensive experiences of the consumers of those services. In addition to addressing environmental, as well as corporate social responsibility policies, one of the trends driving the re-evaluation of certification, especially for FIDI, is the need to incorporate additional customer-focused policies and requirements. While feedback from customers and recommendations for improvements were incorporated throughout the new FAIM standard, two modules in particular have incorporated customer-focused requirements that have a direct affect on a FIDI member’s FAIM certification. Quality moving services require timely and prompt delivery of services. Timely reaction to any contact
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The FAIM Standard he FIDI Accredited International Mover (FAIM) standard was developed in conjunction with one of the world’s leading management consultants. FAIM requires every member company of the FIDI Global Alliance to undergo a physical onsite compliance procedure administered by an independent third-party management consultant. These compliance procedures and associated operational audits are not just performed as a company qualifies for FIDI membership, but are an ongoing process that includes follow-up compliance procedures every two years. FAIM goes beyond a physical inspection of a member company’s operational faculties. Every FAIM-certified member company of FIDI undergoes a rigorous managerial and operational review that covers a broad spectrum of best practice parameters for the industry, including audited financial security and stability; facilities, equipment, and materials requirements; staff knowledge and core competencies; quality of management processes; documentation; insurance and risk management; legal compliance; and proactive customer feedback management.
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or inquiry from a customer will ensure professionalism and customer satisfaction. Furthermore, customer feedback is the ultimate measurement of customer satisfaction and, therefore, the success of a quality service system. FAIM 2.0 has devoted an entire module to this aspect of the mobility process and the policies and procedures associated with collecting and monitoring customer feedback are an integral part of the FAIM certification process. While the advancements of the new FAIM standard extend beyond what can be outlined here, its key 90 MOBILITY/JUNE 2010
features will provide a glimpse into the restructured methodology of some of its strategic components.
New Key Changes Issues of financial security and stability have been on the front page of every global newspaper for the last few years. Therefore, incorporating more rigorous financial requirements with more frequent review of member companies’ financial condition has been a main focus of FAIM 2.0. Financial concerns are closely followed by those regarding security, which are addressed by the incorpo-
ration of new operational security requirements in conjunction with business continuity elements into the new standard. The last thing a corporate account and/or customer wants to have to worry about is whether his or her service provider will be around to complete the job for which they have been hired. FAIM 2.0 addresses these concerns through strict financial monitoring of its global member companies. With FAIM 2.0, the continual annual monitoring of the financial health of FIDI member companies has become one of the most integral requirements of FIDI membership. FIDI member companies must meet and maintain specific financial ratios for liquidity and gearing to order. Another significant aspect of selecting a qualified transportation service provider is to be aware of the provider’s policies regarding the physical security of the goods being transported, as well as the security of the data that is associated with that and every other move. All FIDI member companies must have specific policies that protect employees and the public, the customer’s goods and data, as well as the assets of the business against risks and hazards. FIDI affiliates, as part of their FAIM certification procedures, must demonstrate awareness of potential risks and detail their risk management procedures and preventative action to ensure safety and security of their services and operations. Evolving business practices and customer requirements also have brought environmental and corporate social responsibility concerns to the forefront of decision-making processes. Consequently, ways to measure and ultimately reduce environ-
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mental effects have been made an integral part of the standard, as have considerations for good corporate citizenship. One of the main points that came out of FIDI’s working sessions with customers was the importance that more corporate accounts and individual customers are placing on sound environmental practices as well as corporate social responsibility. To address these important issues, FIDI incorporated specific requirements and guidelines into FAIM 2.0. On the environmental front, FIDI member companies are expected to show leadership in managing the effect of their operations on the environment. Each certified member company is required to have a documented environmental policy that outlines its
individual procedures concerning the recycling of packing materials, as well as waste produced by office and fleet operations. In addition, the policies must outline steps taken to conserve energy and reduce emissions in its operations, warehouse, and office activities. The issue of corporate social responsibility is important to FIDI and its global membership. Therefore, ensuring that services to customers are provided through conditions that respect basic human rights and that follow an ethical conduct is essential. FIDI member companies must demonstrate commitment to ensure their company and service providers deliver services while following a social compliance policy and code of conduct.
Beyond these key issues, the new standard encompasses an increased focus on qualified staff with an emphasis on training and continuous education. In addition, improved requirements for responsiveness and communication, coupled with the introduction of quality metrics for operational self-assessment, also have been added. The functional focus of the new FAIM 2.0 standard will remain the progressive monitoring of evolving requirements of both the customers’ and service providers’ needs to respond to the changing needs of the ultimate consumer: the international assignee and his or her family. Boris A. Populoh is managing director of FIDI Global Alliance, Brussels, Belgium. He can be reached at +32 2 421 4751 or e-mail boris.populoh@fidi.com
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RAC Report
Regional Market Summary: Seattle, WA, Metropolitan Area
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ollowing the announcement of sub-prime lending practices in August 2007, the housing industry in the Seattle, WA, metropolitan area transitioned from a seller’s to buyer’s market and absorption rates fell below 20 percent for 30 straight months in a market where stability is measured at 25 percent. With the collapse of the financial markets in September 2008, absorption rates fell to 10 percent in December 2008, the lowest level since I started tracking the statistics in 1985. Absorption rates measure the strength of the market. A shift toward stability was experienced in 2009; however, the supply of inventory pumped with short sales, foreclosures, and a buyer pool that sought below-market purchases continued to deflate the housing industry, and property values declined at a rate of up to 2 percent monthly (average 1 percent) during the twoyear period between January 2008 and December 2009. The absorption rate was reported at 28 percent for March 2010, the first sign of market stability in two and a half years. March absorption rates typically outperform any month each year as noted in four of the past five years. One month does not make a market; however, statistics indicate the housing industry is moving toward stability. Housing markets closer in to the urban core and employment centers have measurably lower declines in home values, while those farther from employment and services that experience an over-supply of new construction and short-sale competition have felt the declines more significantly. The low-end markets have performed better than higher priced homes in most neighborhoods driven by low-interest rates, tax incentives, and the anticipation that homeownership never again will be 92 MOBILITY/JUNE 2010
STATISTICAL SNAPSHOT Unemployment Months of Supply Annualized Sales Volume Annualized Average Sales Price Average Days on Market
Today
One Year Ago
9.6% 5.46 16,022 $455,950 78
8.5% 9.97 15,991 $527,322 73
Change
+12.9% -45.2% +0.2% -13.5% +6.8%
this affordable. The high-end MARKET AT A GLANCE market is driven by investment portfolios and business growth. Slow Improving Business activity is slowly grow- Economic Climate: ing in the region. UnemployNew Construction: Positive Growth at Low End ment, reported at 9.6 percent High at Low End for February 2010 in the Puget REO Activity: Sound region, is double its low Supply: Oversupply (Lowest Level in 3 Years) in 2007 and a point above Demand: Increasing Since 2nd Quarter February 2009. Although the Dow is reported at more than Market Direction: Improving Close to Urban Core 11,000—4,000 points above its Optimism Toward Affordability low in 2007—buyers of higher Market Mood: priced housing are unsure that this market is at its bottom. Highket is considered as high-risk investend sellers have the capability to ments and, as the housing stock is carry these homes for a longer periabsorbed, it will experience a shortod of time and have been reluctant age of inventory within some 12 to to lower asking prices. Accordingly, 24 months assuming investors/ the two are at odds and few sales developers do not respond to anticioccur. pated demand. It is evident from the graph the Seattle is poised for economic housing market is gaining momengrowth. Concerning housing, the tum. Most say that the bottom is real issues are affordability and jobs. behind us, the economy will stabilize As interest rates rise, fewer prospecduring 2010, and home values may tive buyers will qualify for new houskeep pace with inflation assuming ing, forcing sellers to offer greater interest rates remain relatively stable. concessions in a thin profit market or There is pent-up demand in highbuyers to settle for less. Wages have end homes and buyers will enter the declined and unemployment continmarketplace as more sellers become ues to rise. Job creation will stimurealistic in their asking prices and late all areas of the economy. The show a willingness to negotiate price federal tax credit, an incentive to based on demand rather than sales first-time buyers, expired at the end recorded three years ago. of April. The sense of urgency it creDevelopers and builders are posiated for many buyers no longer is tioning themselves in the new housavailable. With the incentive gone, ing market, which has transitioned market activity is anticipated to slow from “bigger is better” to affordable. in the short term. They are acquiring lots at prices not Alan L. Pope, SRA, CRP, of Alan L. Pope seen in 10 years, offering affordable & Associates, Inc., Redmond, WA, can be housing to the community. The mid- reached at +1 425 882 0608 ext. 101 or to upper-level new construction mar- e-mail alanpope@rac.net.
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An Afghan Lesson in Supply and Demand Los Angeles Times (04/22/10) Fleishman, Jeffrey There is a strong demand in Afghanistan for private schools as underfunded public schools cannot meet the country’s need, and while many entrepreneurs are rushing to fill the gap, there are problems with fraud and poor teaching standards. The Ministry of Education is only five months old, and is trying to crack down on fraudulent schools. “The number of opportunists is declining,” says Najeeba Nooristani, who oversees private schools. There have been more than 280 schools opened in the past three years, indicating the country’s desire to move beyond the repressive Taliban era but also highlighting the current government’s inability to fuel that change. At the Zarghona public school, many of the students do not have chairs, textbooks are dated, and new students are being turned away because there are not enough desks. The streets are crowded with signs advertising private schools, but Safia Jan, principal of Zarghona, says most of them are empty facades. Many do not teach proper Afghan history, and often are influenced by outsiders who offer to fund the school if certain curriculum is taught. (http://www.latimes.com/news/nationworld/world/l a-fg-0422-afghan-schools20100422,0,2927158.story) House Hunting in ... Macao New York Times (04/28/10) Vandam, Jeff Property prices in the Macao region of China have been rising since 2002, when the government busted up the gambling monopoly of Stanley Ho and allowed foreign companies to build casinos. Prices dropped about 30 percent after the financial crisis, but have been steadily climbing since then and are now as much as 20 percent beyond their pre-crisis level. New infrastructure, including a proposed light-rail system, is likely to send prices even higher, experts say. There are no restrictions on foreign buyers in Macao, and about 15 percent of buyers are foreign, most of which come from Australia, Canada, and Britain. All purchases require a 3.15 percent stamp duty and about one percent of the value in notary fees and deed registration. A five-bedroom three-bath luxury apartment is going for $1.42 million, and property tax is waived for new buildings. (http://www.nytimes.com/ 2010/04/28/greathomesanddestinations/28ghhousehunting.html?pagewanted=print)
High Expatriate Satisfaction Could Encourage Move to Finance Jobs in Hong Kong AstburyMarsden (04/23/2010) A new survey of British expatriates living in Hong Kong finds that they believe their quality of life is better than their U.K. counterparts. The NatWest International Personal Banking Quality of Life Report found that 89 percent of respondents said their life was better in Hong Kong and the number planning to return home fell to 19 percent from 26 percent in 2008. Salaries in Hong Kong were about 20 percent higher than in Britain, and 90 percent of respondents said they were financially secure. The average salary increase in Hong Kong was 19 percent, highest of all countries studied in the report. (http://www.astburymarsden.com/news/832/Hi gh-expatriate-satisfaction-could-encouragemove-to-finance-jobs-in-Hong-Kong/) Nigeria: As Jonathan Signs Local Content Bill Into Law allAfrica.com (04/26/10) Shosanya, Mohammed Nigeria’s Acting President Goodluck Jonathan signed a local content bill into law last week, a law which aims to bring more local oil and gas companies into the country’s $300 billion industry. The goal is to grow local content to 70 percent by requiring that Nigerian companies be given first consideration in the award of oil blocks, oil filed licenses, oil lifting licenses, and all other contracts in the industry. During the bidding process all companies must submit a Nigerian content plan to show compliance with the new law. Any multinational company in the industry must keep at least 10 percent of its profit in Nigerian banks, and only Nigerian insurance companies may insure oil and gas companies unless the Nigerian insurance commission says there is insufficient capacity. When there are not enough qualified Nigerians to fill certain positions, the company must supply training, and for any job held by a nonNigerian, the operator must provide a succession plan that allows Nigerians to understudy an expatriate for no more than four years, after which the Nigerian will take the position. (http://allafrica.com)
May 5, 2010 This issue is sponsored by:
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Employee Mobility Issues in Frankfurt, Germany rankfurt is the Rhine-Main region’s largest city and boasts a commanding skyline, a large international airport, a busy main railway station (ICE trains throughout Europe), and a diverse culture. All this helps to make Frankfurt an increasingly popular and accessible destination for expatriates and their families. In fact, Frankfurt is one of Germany’s most cosmopolitan cities where people from approximately 180 different countries make up more than one-quarter of the population. Frankfurt also is Germany’s leading city for international professionals—with 144 foreign banks, 127 international airlines, 85 foreign consulates, and 59 foreign chambers of commerce. More than 3,000 foreign companies are located in the Frankfurt area, and Frankfurt is home to the European Central Bank and the German Stock Exchange. Frankfurt has emerged as a leading center of finance and commerce and, as such, there is a high volume of mobility in and around this area. Frankfurt is one of the smallest metropolitan cities in Europe and has a huge number of expatriates all competing for the same desired locations, property types, and schools,.
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Housing The housing market in Frankfurt is competitive. This is not only a result of the large number of expatriates looking for rental properties, but also because of the tendency for locals to rent. Seven out of 10 “Frankfurters” rent, and this results in high demand for quality properties, which far exceeds the availability on the market. The most popular residential areas are Westend, the Diplomatenviertel, the Holzhausenviertel, parts of Sachsenhousen, and the Dichterviertel. There are other areas worth considering, such as Bornheim and Bokenheim, which offer good value for money but are slightly further away from the center. Regarding cost of living, Frankfurt and the Rhine-Main region rank in the middle of the international scale. The amount of rent charged reflects the location and condition of the property—age, standard of the building, and the surrounding infrastructure all affect the rental price. In central Frankfurt, where the commute to work is generally short and access to schools, shops, and transportation are good, the average apartment will cost between 13 to 18 euros per square meter for an unfurnished apartment. Bearing in mind the average two-bedroom apartment would be 70 square meters, the monthly rental for a good standard property would be €1,200 a month. Most rental properties are apartments as opposed to houses and are rented without furniture and without appliances, light fixtures, built-in wardrobes or washing machines, and the like. This could pose problems for people on short-term assignments who do not want to go to 96 MOBILITY/JUNE 2010
the expense or effort of fully furnishing an apartment. Occasionally, apartments can be found with built-inkitchens and bathroom accessories, but these are rare and command a higher rental price. We would recommend organizing furniture rental for assignees who are moving to Frankfurt and rent an unfurnished apartment for six months or more.
Schooling Frankfurt is well equipped with international schools but, like housing, the demand for schools is high. International schools are expensive, with tuition fees costing well over €18,000 per year. It is crucial to think about this especially if the mobility package does not include school fees. The other choice is to enroll in a local German school. This can facilitate the integration process in a positive way, but also can cause problems if the German language is not understood or spoken, Another challenge worth considering is that the German school day is short and consists mostly of morning lessons with children going home in the early afternoon. This can be difficult if both parents are working because they will need to make extra child care arrangements.
Understanding German Culture Because of Frankfurt’s geographical situation in the center of Germany, as well as its historical developments, “Frankfurters” are used to non-residents and are mostly very welcoming! Still, it is polite (and useful) to be familiar with some of the customs, etiquette, and German language. It is important to determine if the mobility package includes an intercultural training program because this small element could be the difference between a successful transfer and a failed one. We would also recommend taking German lessons because many local people will have only limited English ability. In the workplace, however, English is widely spoken. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Pricoa Relocation Ltd, its members, employees, and agents do not accept you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it without obtaining specific professional advice. Anna Barker is communication and information manager for for Pricoa Real Estate and Relocation Services, London, United Kingdom. She can be reached at +44 (0) 208 9961200 or e-mail anna.barker@pricoa.com. Oliver Clapham is managing director for Clapham GmbH Relocation Service, Frankfurt, Germany. He can be reached at +49 (0) 6198 585 280 or e-mail oc@clapham.de.
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Brandenburg Gate – Berlin, Germany Constructed in 1791
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