As companies become immersed in mergers and acquisitions, and expand their service base both domestically and internationally, the number of employees transferred out of the country to run these operations continues to rise.
Retailers and vendors who transfer employees overseas are faced with a daunting task, and while some companies facilitate relocations in-house, others tap experts to make the move as seamless as possible.
With companies worldwide generating about 43 percent of revenues outside of their home countries, according to a 2005 Global Relocation Trends survey conducted by Weichert Relocation Resources, globalization has increased the demand for skilled employees abroad.
“Retailers need to be present in Europe, the United States and Asia in order to participate in the business, globally,” said Peter Matischak, director of sales and marketing at Arpin International Group, a relocation company. “It has become a global world, and you have to be in these time zones with 24-hour coverage.
“We have seen a trend with retailers, especially those in the fashion industry, having more and more relocations since they are manufacturing overseas and selling more abroad,” he continued.
In recent years major retailers have been vying for prime real estate in the markets of Europe and Asia, looking to translate their success in the States.
Abercrombie & Fitch, for example, is opening a London flagship this week and is also aggressively pursuing real estate in Tokyo, said Michael Kramer, executive vice president and chief financial officer, at a Bear Stearns Retail, Restaurant and Consumer conference recently.
“We see Asia as big territory and in a few years we believe it will play the part Europe does today for company growth,” said Carlos Alberini, president and chief operating officer of Guess, at the conference.
Guess currently has stores in more than 60 countries and is planning on opening their Shanghai flagship in April, and flagships in Beijing, Hong Kong and Macau in 2008.
Gap Inc., which has over 3,100 stores in the United States, United Kingdom, Canada, France, Ireland and Japan, is expanding its international franchise agreements for the Gap and Banana Republic brands in Asia and the Middle East. “The assignment types and lengths are primarily based on the business needs, with an additional focus on talent development,” said Robin Carr, director of media relations.
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Globalization is at the forefront of retail growth, and companies realize they have to get involved in order to compete.
While Urban Outfitters currently does not have many expatriates, within the next three years it is planning on sending more people overseas, particularly to the Far East, to shorten the supply chain, said John Kyees, cfo of the company.
“Currently, most of our sourcing goes through agents. Ultimately it would be more effective if people were there in the factory, because it would strengthen communication,” Kyees said.
Transferees are being used to oversee production or an international start-up program, transfer knowledge and skills to overseas employees, and staff key locations where there may be a talent shortage. Global relocation can also be used to breed future C-level executives, by training them on business units overseas.
“It is hard to manage your company in the United States if you don’t know what France, Mexico and China does. A business trip is short; living there gives employees a sense of the labor laws and culture,” Matischak said.
But relocating employees can be expensive and tedious, costing companies up to three times the base salary of the employee per year.
Many companies are not equipped with the resources or man power to complete a transfer, and instead are opting to outsource the task to relocation services, tax providers or human resource organizations.
Around the world there are innumerable service providers that claim they can handle everything from moving an employee to finding schools for their children, said Jim Simon, chief executive officer at Simon & Associates, a business consulting firm.
Companies such as NEI Global Relocation or Cartus provide full-service domestic and international relocation assistance. They aid in the actual move of the employee by finding a place to live and shipping baggage, as well as expense tracking and planning, assisting an employee’s spouse with job searching, immigration assistance, language training, cultural orientation and repatriation services.
“In an organization they rarely have a team of people who are experts at relocation and understand the industry,” said Lisa Johnson, director at Cartus. “It is hard for human resources to keep policies and practices up-to-date when they have other responsibilities. Relocation companies have people who are trained with knowledge and expertise who provide ease in facilitating a national assignment, can negotiate cost savings and know what questions to ask, because we do it all the time.”
Outsourcing can also be beneficial to companies, because if done properly, it can cut costs and reduce the number of employees the company has to hire to ensure the transfer is a success. But while relocation services can ease a move, there are not many companies who can handle an entire relocation assignment.
“They can find you an apartment in Hong Kong, but they can’t manage the whole operation from start to finish,” Simon said, adding that only about 20 firms in the United States are qualified to do that.
To make the best match, Simon suggests becoming a member of the Employee Relocation Council or hiring a consultant. Membership in the ERC provides companies with the resources necessary to make an educated decision about outsourcing.
But most companies are still choosing to keep relocation duties in-house. Gap said it has internal resources dedicated solely to managing employees on international assignments, given the complexity of an international move.
“They see these ex-pat employees as a valuable talent and they want to preserve the culture of the company. The services out there are not at a level most companies feel comfortable outsourcing yet, especially if they have a lot of ex-pats,” Simon said. “But I think they will get there over time.”