January 13, 2014:
The Guarantee Home Sale program has played a significant role in North American relocations for over three decades, but its presence in relocation policies is generally accepted to be in decline. All Points Relocation has observed that each year more and more companies remove the Guarantee Home Sale program from their policies or at least from some tiers of their policies. This article is not about the merits of having a Guarantee Home Sale program versus not having one. I have always stated that I am a cautious supporter of this important relocation benefit (in short, it is right for some, not for all). This article is about what to do if your company chooses to remove Guarantee Home sale from its policy or a tier of its policy.
If a company chooses to remove Guarantee Home Sale it is usually because the company has been impacted by the high costs that can occur with this program. Sometimes All Points speaks with corporations that need a Guarantee Home Sale policy due to its locations and the nature of its mobility requirements. However, either due to cost reduction initiatives or senior management directives, as a result of large capital losses and carrying costs on inventory homes, that company will cancel the Guarantee Home Sale policy (however, it should be noted that, in a number of companies outright removal can create more problems than it solves). Whether it is a) a call to remove Guarantee Home Sale outright when that company probably should continue to have the program or; b) a call to remove Guarantee Home Sale outright when that company probably should never have had Guarantee Home Sale in their policy in the first place, removing the offending program is not going to get rid of the basic problem: employees who cannot sell their homes quickly and effectively are a drag on mobility and productivity. Ultimately this leads to increased employee dissatisfaction, and cost increases elsewhere (such as significantly increased temporary accommodation periods with trips home during this time).
All Points recommends that companies in either camp have a strong look at the biggest negatives of Guarantee Home Sale (usually risk of loss), and balance them with its benefits (efficient mobility, employee satisfaction, employee productivity and market competitiveness). Some companies will stay in the business of providing Guarantee Home Sale, while others will not. For those that retain the program, they may wish to proactively alter it to soften some of its risks, in order to better protect the program’s future retention. For those that decide to get rid of it, All Points recommends writing a “Stand-by” Guarantee Home Sale policy.
What is a “Stand-by” Guarantee Home Sale policy?
A “Stand-by” Guarantee Home Sale policy is one that is metaphorically put under lock and key and never used except under exceptional circumstances. The “Stand-by” Guarantee Home Sale Program is a policy created because the company fully anticipates that there may be a time in the future when a senior executive is granted a Guarantee Home Sale program, even though this program had been eliminated in the past, or had never existed at all.
Why would you spend time creating a policy that may never be used, or only used in exceptional instances?
The answer is easy: because your company removed (or never had) this type of policy because its risks and costs were deemed too great. So, if that is the case, then why would you, in an exceptional circumstance, re-institute the only other Guarantee Home Sale policy that you have on file: the one that did not work in the first place or have to create an ad hoc policy in a panic?
All Points has seen ad hoc Guarantee Home Sale programs thrown together for three main reasons:
- The water cooler dies hard: even if a relocation benefit is removed from a policy, the memory of superior benefits can linger. Some senior executives may request and obtain the Guarantee Home Sale benefit that has been removed, and HR cannot stand in the way of this request. The frequency of this request reduces over time, but All Points has seen this scenario come up as long as 10 years after the benefit has been removed;
- A senior executive requests it and is granted it. It is that simple. Perhaps that senior executive worked recently at another company that did have this benefit, and he/she feels that it should be implemented for his/her relocation, or they have heard about it from peers at other companies;
- A senior level recruit requests it and is granted. Much the same as the above reason, except that as a key senior recruit, the possibility of denying the request may be even more difficult.
There are all kinds of ways to re-write Guarantee Home Sale programs to reduce the costs and risks of inventory acquisition. This could be done through delayed appraisal processes, altered appraisal criteria, new restrictions on marketing, discounting of the appraised amounts and many other measures.
Most insurance is intended for the exceptional event
Would your company buy an insurance policy that might only be required every three years if it could save you tens of thousands of dollars, if not hundreds of thousands of dollars? If so, then you should take the few hours to create your very own “Stand-by Guarantee Home Sale Program.”
How easy is it to create this “Standy-by” policy?
It is really easy. Talk to your relocation account manager. Have your old program’s writing available. Freely talk about what was not liked about the previous policy. What were the circumstances that led to its cancellation in the first place? If you were to change that old Guarantee Home Sale program, what compromises would you be willing to make to reduce some of the benefits to the employee? After all, any reduction in the risk and cost to the company is bound to wind up as a reduction of some form of benefit to the employee.
Having this policy ready and under lock and key, but known about by a number in HR, is the safest way to protect the company from the worst risks of a Guarantee Home Sale policy, when that one key recruit or that one senior executive manager asks for, and is promised, a Guarantee Home Sale benefit. The process should really only take a few hours at most, but then you will have a practice that is sanctioned by the company, and one with which you are not reacting in an ad hoc, responsive way, but instead in a planned and proactive manner.
Michael Deane, Co-owner and VP, Client Services and Relogeek.