By Kati Rasetti, Mercer
“There is nothing wrong with change … if it is in the right direction.” – Winston Churchill
At many Swiss companies, the global mobility (GM) function has experienced some type of reorganization in the last five to 10 years. In a fast-changing business environment, the GM function is under increasing pressure to justify costs and improve return on investment — requiring changes to processes, scope of services, responsibilities and delivery models. GM transformation refers to a change in any of these areas.
Organizational transformation is often prompted by a corporate leadership initiative. To increase shareholder dividends, many companies are seeking to reduce internal costs by offshoring or outsourcing certain support functions. Since operational and maintenance costs in Switzerland pose a substantial burden for corporations, numerous organizations have reorganized their GM teams in recent years.
Companies that already use a centralized model across multiple business areas may find it easier to offshore and outsource GM than those that operate in a decentralized system.
In addition to responding to financial constraints, organizations may seek to transform their GM functions to achieve best-in-class practices.
The world is facing a new reality that requires rethinking global mobility. The number of traditional international assignments has fallen in recent years. Employees’ changing expectations are also leading companies to reassess and reshape mobility. Traditionally, companies have moved people to jobs, but they are now increasingly moving jobs to people. Employees often initiate moves themselves, preferring to work in alternate locations, and they are also setting the terms for how they want to work. This changing model means flexible working as well as an increase in commuter, short-term and virtual assignments.
According to Mercer’s 2017 Worldwide Survey of International Assignment Policies and Practices, among international moves, the number of short-term assignments saw a particular increase — from 41% in 2016 to 53% in 2018. Commuter assignments increased from 43% to 48%, while permanent, one-way transfers, such as international local hires and country-to-country transfers, rose from 38% to 48%.
The increasing willingness of younger generations to move abroad goes hand in hand with higher expectations for their lifestyles, career opportunities and flexibility. (See “New Trends Reshaping Expatriate Compensation and Mobility Policies.”)
Diversity and inclusion efforts have also played a crucial role in the evolution of international assignment (IA) programs, with companies providing more support for women, racial and ethnic or religious minorities, LGBTQ+ candidates and disabled employees. In addition, we define family more broadly today than a decade ago. It may include same-sex partners, elderly parents or non-biological children.
Global mobility policies have begun to reflect these changes.
2. Drivers of GM transformation
2.1. Revising the HR function
Cost reduction and integration of new HR trends are trigger points for transforming GM.
An organizational shift in the HR function is often a first step toward reshaping GM. HR transformation frequently stems from the desire to create cost-efficient operations, follow new trends and meet stakeholders’ changing expectations. Stakeholders now expect a greater focus on the customer, with HR products and services designed to meet their needs and processes becoming more customer-driven. In recent years, there has also been a shift toward strategic talent management, and GM is becoming more closely linked with this agenda.
Automation of administrative activities and core HR processes allows center of excellence teams and HR business partners in key locations to focus on strategic duties.
Centralizing and offshoring operational HR tasks into regional hubs and shared services is another common trend with numerous cost-saving and job-quality benefits. Centralization reduces costs in three main ways:
- Through reductions in staff as a result of achieving economies of scale
- Through the elimination of indirect costs associated with office rental by exiting expensive locations and using more cost-effective ones
- By streamlining and simplifying HR services, adhering to consistent standards and combining purchasing decisions through economies of scale
Using regional hubs or shared service centers so that HR can focus on employees also allows companies to improve quality by:
- Delivering on time and within budget
- Achieving greater consistency and accuracy
- Being more aware of internal and external best practice
- Using standardized processes
- Discovering what the customer wants rather than deciding what suits the supplier
- Becoming more accessible by operating user-friendly services (longer opening hours or easier means of contact)
- Improving communication with customers on both process and content
Such HR transformation activities generally include revising and reorganizing the GM function as well.
When we asked GM professionals about the dilemmas they face in our 2018 survey, How Mobility Is Responding to the New Dilemmas, the top challenges reported were the increasing complexity of mobility tasks and the difficulty of implementing mobility metrics, predictive analytics and ROI tracking.
Mobility experts expect to see a higher demand for skills relating to these challenges, with cost and metrics cited as the top skill. Mastering compliance issues (as part of coping with increasing complexity) was second, and technological literacy and digital skills came in third.
The GM function is becoming more strategic, aligning itself with business needs and HR programs. This alignment means all parties understand the challenges and are working together to find better solutions outside their silos. As a function, GM is also continuously realigning with strategic business goals to better advise the business and anticipate risks and compliance issues. To do so successfully, GM professionals must strive for greater efficiency in consulting tasks, obtain an interdisciplinary knowledge and become subject matter experts in the following areas:
- Align the GM function’s priorities with broader HR and business strategies.
- Support talent-driven programs, fitting GM into the talent management agenda.
- Participate in candidate selection.
- Participate in compensation setting and review.
- Design cost-effective programs.
- Fulfill legal and financial responsibilities associated with international moves.
- Optimize the organization’s ability to deploy cross-border resources while complying with rules and legal expectations.
- Mitigate enterprise and employee risk related to tax and social security, immigration, and insurance.
- Manage expectations about what it means to be a mobile employee and how to manage a mobile workforce.
- Mobilize employees more quickly, without excessive ad hoc negotiation and exceptions.
- Develop more flexible deployment models.
- Design GM programs that support business strategy and can be adapted based on policy requirements in various divisions.
3. Types of organizational GM transformation
There are four main operational categories of GM and international assignment (IA) management. GM functions may operate in decentralized, centralized, offshored and outsourced structures — or in combination, as hybrid models.
The starting point for transformation is often decentralization, which may then lead to conversion to one or more of the other models. Each of these models has unique characteristics as well as operational and financial advantages and disadvantages.
Total and partial centralization
With centralization, a GM administration team manages activities in a central location. According to Mercer’s 2019 Mobility Organization and Transformation Survey, 55.6% of the participating companies have a centralized GM management function.
In a decentralized system (8.5% of participants), all GM operations are coordinated and carried out by local HR or other local job functions in the individual countries without standardized governance. Processes, maintenance and tracking of globally mobile employees are often inconsistent, which can result in a lack of visibility. Services may be provided on a case-by-case basis in the majority of noncentralized operations, and local managing teams may have different interpretations of policies and guidelines (if they exist). These differences may determine which benefits transferees receive. The lack of global expertise also makes it difficult to manage operations holistically.
Designing a blueprint for the GM model — along with clearly defined and consistent communication guidelines — is critical for any partial or total centralization exercise.
Reasons for centralizing
According to respondents with a central operation model, a global framework works better under a centralized mobility function than a locally managed one. Centralization ensures a consistent experience for all mobility employees and a standard approach to conducting assignments. It also helps control the cost of the mobility program. Furthermore, survey participants say centralization ensures a “high level of professionalism and compliant operation,” which can be crucial for a positive assignee experience.
Cost is also a key reason for a centralization exercise. Several respondents see it as the least expensive option for running a GM operation in-house.
Companies whose IA movements are primarily into and out of their headquarters say they prefer to have their centralized GM teams based there too so they can connect with globally mobile employees face-to-face.
Which activities can be centralized?
When an organization begins a centralization exercise, the first step is usually designing, standardizing and consolidating international mobility frameworks, followed by integrating IA processes with centralized governance. These steps might accompany or precede a digital enhancement to reduce or even eliminate administrative and manual tasks.
Centralizing service provider management and engaging global vendors may follow. These measures can take place simultaneously or as part of a gradual process until achieving full centralization.
A partly centralized operational model refers to shared responsibilities between the central GM team and local HR offices. This delivery model is employed by 35.9% of companies surveyed.
Two-thirds of survey respondents operate an entirely centralized IA administration.
Mercer point of view
There are both benefits and challenges to centralizing GM tasks, depending on an organization’s business strategy, cultural values and the size of the company and GM team.
- Consistent processes — overall control of IA processes allows for internal equity across the organization
- Visibility of globally mobile employees
- Concentrated headcount, eliminating the need for local HR to engage in activities outside their original scope
- Additional enhancements, such as policy review, standardized processes and digitalization of the mobility experience
- Possible loss of knowledge in individual countries
- Potential loss of relationships with vendors — along with any discounts — established by local practices
- Lack of awareness of the local situation of individual employees
- Difficulty in ensuring compliance with global policies and processes
- Challenges in managing assignments across different time zones and cultures
- Deviations from the global framework due to policy exceptions created by local regulations
Automation as an enhancement to centralization
Overall, the GM function seems to lag behind other HR functions in technological and automated solutions. One explanation may be that the tasks that would benefit from digitalization are also those most likely to be performed by external vendors, whereas activities typically kept in-house may be more people-related and more challenging to automate.
More than half of survey participants evaluate their level of digitalization as limited or even poor. But they also indicate an eagerness to use the latest technology if given the opportunity. Only 8.6% of organizations say they use automation to a considerable extent.
As companies begin to place employees at the center of their mobility strategies, the right technology can help them manage the challenges — from immigration and cost tracking to optimizing workflow and streamlining communication.
GM management platforms connect all parts of the process, facilitating policy planning and compliance risk management, creation
of assignment contracts, balance sheets, cost projections, process flows, and possibly even expat payroll and reporting. For internal HR and GM teams, such platforms deliver increased program visibility, allowing mobility professionals to focus on strategic activities and consulting. For assignees, an interactive relocation tool can help take the stress out of moving — ultimately improving engagement and retention.
|Areas managed digitally among survey respondents
|Creation of assignment documents
|Generation of recurring reports
|Immigration: initiation, tracking, monitoring, and compliance
|Payroll instructions (including gross ups and assignment allowance calculations)
|Tax: initiation, tracking, monitoring, and compliance
Total and partial offshoring
Offshoring (sometimes referred to as “in-house offshore”)is the relocation of GM activities from one geographic location to another, usually to regional hubs or shared service centers. As part of a gradual process, technical and administrative services are often the first to move to remote locations.
Offshoring and outsourcing are not mutually exclusive. They can exist as combined offshore outsourcing models or even be partially or completely reversed, as in reshoring and in-shoring.
Offshoring often takes place following centralization, but a decentralized model can also work if an organization first establishes standard policies and processes. Offshoring has been a common practice since the early 2000s, starting at large multinational companies.
Reasons for offshoring
According to 75% of our survey participants, reducing administrative tasks is one of the main reasons for carrying out an offshoring activity, followed by managing and handling payroll instructions (52.5%). And half of respondents specifically cite the preparation of IA contracts as a key reason for having shared service centers or regional hubs.
Other companies have moved to an offshore practice to coordinate relocation-related activities (47.5% of companies) or conduct cross-country finance and expense recharges (40%).
In addition, 35% of respondents cite calculating IA packages (balance sheets) as a reason for offshoring, and 27.5% say their shared service centers or regional hubs calculate IA cost projections.
Which activities can be offshored?
When an organization conducts an offshoring exercise, the process usually begins with displacing activities like administration and IA package creation (for example, cost projections and balance sheets). Offshoring of other IA operational duties, such as assignee briefings and global immigration, tax, healthcare provider and relocation services, may follow. Strategic business partnering, policy creation and advice, and exception management might remain with headquarters or the center of excellence team, but these tasks could also be relocated at a later time.
The transfer of all assignment processes to a new location constitutes a full offshoring operation model.
Total, partial, and hybrid models
“Do what you do best and outsource the rest.” – Peter Drucker, management consultant
Outsourcing is an agreement in which one company hires another company to take responsibility for a planned or existing GM activity typically done internally. This model sometimes involves transferring employees and assets from one firm to another and sometimes includes offshoring.
Outsourcing is the most common scenario after centralization, but it can also be performed directly from a decentralized operation. The primary reasons for outsourcing GM functions are often cost-related. Lower operational and labor costs can deliver significant savings.
Seventy-one percent of our surveyparticipants typically use a partially outsourced or co-sourced approach to GM programs, keeping certain functions in-house and outsourcing others to external providers. Outsourcing often starts with activities that require subject matter experts. These activities are mainly compliance related: tax equalization, social security assessments, running an IA payroll or a shadow payroll, and relocation and destination services.
Reasons for outsourcing
Gaining access to global resources and expertise (77%), reducing administrative tasks to enable GM to concentrate on core activities (54.3%) and improving overall compliance (51.1%) are the top three reasons cited for outsourcing in our survey.
Additional reasons include improving service quality and efficiency (43.5%), reducing costs and decreasing internal headcount (21.7%), and gaining insight into the technology supported by third-party service providers.
Which activities can be outsourced?
Outsourcing exercises can be limited to just one activity or a few activities. Tasks that require expertise in certain professional fields, such as tax, immigration, payroll implementation or compensation accumulation, are the most commonly outsourced. These might be accompanied by core internal IA activities, primarily operational delivery tasks, followed by more strategic elements, such as IA process and policy design and review, and escalation and exception handling. When an external provider manages the entire GM function, the structure is a fully outsourced model.
Mercer point of view
In our experience, there are various benefits and drawbacks to outsourcing GM activities depending on the business environment, company culture, strategic direction and organizational structure. Below, we outline the main pros and cons of outsourcing.
- Elimination of the need to keep knowledge within the organization since training, hiring and knowledge transfer are now the responsibility of the outsourced provider
- Not having to invest in HR technology
- Allocation of internal resources, allowing the company to focus on the business aspects of an assignment, strategic needs and quality consultation as partners to the business
- Risk of losing company culture to an impersonal delivery approach
- Lack of in-house expertise
- Dependency on third-party providers, which can slow decision-making
- Risk of confidentiality breaches
- High costs
4. Mercer support with GM transformation
By leveraging our data-driven insights, we assist clients with benchmarking, transformation and strategy. Our comprehensive GM transformation services include the following areas:
- GM service delivery design — centralization, offshoring, outsourcing — aligned with business strategy and implementation
- Review and optimization of the current GM model
- GM process improvement
- Benchmarking against best-in-class GM practices
- GM integration with talent management programs
- Technology implementation, including business case and outsourcing strategy as well as selection support