T H E S T R A T E G I C R O L E O F M O B I L I T Y W I T H I N T H E S I T E S E L E C T I O N P R O C E S S. David Osborne Andrzej Narkiewicz

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1 H E A L T H W E A L T H C A R E E R T H E S T R A T E G I C R O L E O F M O B I L I T Y W I T H I N T H E S I T E S E L E C T I O N P R O C E S S S E P T E M B E R David Osborne Andrzej Narkiewicz

2 H E A L T H W E A L T H C A R E E R T O D A Y S A G E N D A What do we mean by site selection? Exploring the role of mobility throughout the different phases Our Tips & Tricks

3 S P E A K E R S - W H O A R E W E? David Osborne, Europe Site Selection Expert & Practice co-leader david.osborne@mercer.com Andrzej Narkiewicz, Europe Site Selection Expert & Practice co-leader andrzej.narkiewicz@mercer.com MERCER

4 WHAT DO WE MEAN BY SITE SELECTION? MERCER

5 C O M P A N I E S U T I L I S E S I T E S E L E C T I O N P R O C E S S E S F O R M A N Y R E A S O N S S U C H A S Organic growth expanding operations into new markets. Does the new market meet our requirements and enable us to fulfil our future business objectives whilst supporting our business strategy? In-organic growth through Mergers & Acquisitions Does the new company s global footprint strategy and supplier network align with our current and future workforce and client needs? Organisational restructuring e.g. cost reduction exercises Does it make sense to continue operations in all business units where we have a physical presence? Site selection projects are about risk mitigation & taking decisions based on evidence MERCER

6 I L L U S T R A T I V E S I T E S E L E C T I O N F R A M E W O R K THERE ARE 3 DISTINCT PHASES: PRE PROJECT POST THE MOST SUCCESFUL PROJECTS INCLUDE MOBILITY IN ALL OF THEM MERCER

7 Activities and Results S I T E S E L E C T I O N P R O J E C T P H A S E S ( I L L U S T R A T I V E ) Preparation Analysis (external) Implementation Understanding business context of the project Establish decision makers expectations and project governance model Phase 1: Analysis of possible locations through the application of the predefined criteria Employee and company Transfer (communication, administrative and ongoing support etc.) Mobility policies refresh Phase 2: Discussing organizational structure and interconnectivity of the various teams within the new location Strategic workforce planning /transfer planning/establishing success measures Total costs analysis Transfer allowances/col allowance Qol allowance Methodology of site selection Collective brainstorming and recommendation of criteria and measures Phase 3: Transfer scenarios Creating decision model MERCER

8 E X A M P L E S O F S I T E S E L E C T I O N C R I T E R I A Labor Availability Labor supply - IT, engineers, and business / operations Unemployment rate Immigration laws Prevalence of part-time workers Recruiting index Job created / FDI Risk profile FX volatility Average annual days lost Likelihood of greater than 10% property loss Security risk Political stability risk Corruption index Government effectiveness risk Legal & regulatory risk Macroeconomic risk Foreign trade & payments risk Tax policy risk Labor market risk Financial risk Labor Quality College enrollments Number of local institutes of higher education Percent English-speaking Adult literacy rate College degree holders and percent with Bachelors degree Annual patent applications and number granted Output per worker Business Climate Incentives to employers National GDP growth Increases in national price level Household income level Maximum corporate marginal tax rate National highways National internet users National telephone lines National electricity consumption Sector growth rates GDP per capita Country bond rating Intellectual knowledge Pension requirements Infrastructure Office space costs Office space vacancy rate Transportation cost index Utility cost index Quality of public services and transportation index Commute times/distance Infrastructure reliability Community Quality of living Costs of living / purchasing power Access to cultural institutions Population and growth Labor Costs Gross pay Total pay growth rate management, technical / professional, clerical / technician, and operations occupations Gross employer payroll costs per employee Employer costs after corporate tax credit Occupation specific compensation and benefits costs Benefits prevalence and costs Net employee pay after tax Individual marginal tax rate Labor law rigidity MERCER

9 T H E B E S T S I T E S E L E C T I O N P R O J E C T S A R E S TA F F E D B Y H I G H LY S K I L L E D / I N T E R - D I S C E R P L I N A RY T E A M S... Who is involved? L O B L E A D E R ( S ) H U M A N R E S O U R C E S TA X F I N A N C E FA C I L I T I E S / R E A L E S TAT E L E G A L M O B I L I T Y A N D D E P E N D I N G O N H E S I T U AT I O N E X P E R T ( S ) S O U R C I N G M A N A G E R / P R O C U R E M E N T G O V E R N M E N T R E L AT I O N S I N F O R M AT I O N T E C H N O L O G Y C O M M U N I C AT I O N E X P E R T S MERCER

10 E X P L O R I N G T H E R O L E O F M O B I L I T Y T H R O U G H O U T T H E D I F F E R E N T P H A S E S MERCER

11 P R E - P R O J E C T P H A S E : M O B I L I T Y H A S A P I V O T E L R O L E T O P L A Y H E R E What shall we offer at what level and for how long? What do we do when we bring assignees back? How do we ensure/measure that our assignees remain engaged? What are our mobility/assignment success metrics e.g. retention of repatriated assignees/performance scores vs. non assignees etc. Who do we send and why? Strategic workforce planning/retention strategy Developmental qualities/leadership development do we only select top performers? Knowledge/ know-how transfer/ specialist technical capabilities T H E P O O L O F I N T E R N A L C A N D I D A T E S S H O U L D B E Q U A L I F I E D B E F O R E H A N D MERCER

12 Locations current employees would consider A N E M P L O Y E E S W I L L I N G N E S S T O M O V E D E P E N D S O N T H E E M P L O Y E E, T H E O P P O R T U N I T I E S A T T H E O R G A N I S A T I O N A N D E L S E W H E R E, A N D H O W Y O U M A N A G E T H E P R O C E S S Demographic characteristics Motivated to leave the company Motivation to leave the company Redundants Refusniks Open minds Relocators Organization-related characteristics Attachment to present community Alternative job opportunities Not motivated to leave the company Attractiveness of new community Motivation to move to new location Not motivated to move Motivated to move More active relocation strategies might include: Supporting traveling spouses Individual counseling on job opportunity Individual relocation packages Targeted financial incentives Transitioning the move Flexible working arrangements MERCER

13 Locations current employees would consider F A C T O R S T H A T F R E Q U E N T L Y D E T E R M I N E A N E M P L O Y E E S L I K L I H O O D O F R E L O C A T I N G Demographic characteristics Age Gender Education Ethnicity Marital status Children Organization-related characteristics Organizational tenure Prior relocations Career opportunities Organizational commitment Pay Job function Relocation policy Job satisfaction Employee relocation decisions are generally thought to be influenced by demographic characteristics of the employee, organizationrelated characteristics, attachment to the present community, alternative job opportunities in the current community, and the attractiveness of the new community. Attachment to present community Years in neighborhood Relatives in community Home ownership Affective attachment Alternative job opportunities Employee alternatives in present community Spouse alternative in new community Employee s salary relative to market Employee s percentage of household income Attraction to new community Similarity of new city to current city Distance to new city Relative desirability of new city Relative quality of schools Willingness to relocate Decision to accept / reject relocation offer MERCER

14 Locations current employees would consider E V I D E N C E I N D I C A T E S T H A T A T T A C H M E N T T O T H E C O M M U N I T Y A N D D E M O G R A P H I C C H A R A C T E R I S T I C S A R E T H E F A C T O R S M O S T H E A V I L Y I N F L U E N C I N G T H E T Y P I C A L R E L O C A T O R S D E C I S I O N Empirical evidence indicates that the typical assignee:..... has weak community ties or short community tenure Rank Larger Influence... has strong family (especially spousal) support... is younger... is satisfied with career advancement opportunities at the company How a company manages the relocation (e.g., proactively, individually) and portrays future career opportunities with the company, can influence an employee s decision... is male... has strong organizational commitment and intention to stay with the company Smaller Influence The above results are based on research from the academic literature on relocation and represent the most consistent drivers of the relocation decision. MERCER

15 Decision criteria P R O J E C T P H A S E : M O B I L I T Y R E L AT E D D E C I S I O N S S E V E R E LY I M PA C T O R G A N I S AT I O N A L C O S T F R E Q U E N C Y C R I T E R I A A P P E A R I N L O C AT I O N D E C I S I O N - M A K I N G Labour availability Labour costs Labour Quality/Education Labour demand Purchasing power/cost of living Turnover Labour law flexibility Risks Infrastructure Incentives Real estate Quality of living English language capability Business climate Industry experience 33% 31% 30% 28% 27% 24% 22% 21% 21% 20% 18% 62% 60% 83% Actual criteria used from a broad set of 141 location decisions Mobility related criteria 96% Source: Mercer Site Selection Practice % 20% 40% 60% 80% 100% MERCER

16 S A M P L E OF C O S T S A N A L Y S I S C A S E S T U D Y ESTIMATED COSTS CURRENT LOCATION PRAGUE AMSTERDAM BARCELONA SOUTH - WEST LONDON Estimated labor cost Labor costs 67,983,000 52,347,000 74,805,000 63,665,000 69,734,000 Real estate costs 5,917,000 5,998,000 6,427,000 5,531,000 9,379,000 Estimated Additional Costs Mobility and severance costs 0 5,341,000 5,944,000 5,816,000 3,020,000 Estimated labor, real estate costs 73,900,000 58,345,000 81,232,000 69,196,000 79,113,000 Difference with current location (15,555,000) 7,332,000 (4,704,000) 5,213,000 Estimated labor, real estate and additional costs 73,900,000 63,686,000 87,176,000 75,012,000 82,133,000 Difference with current location 0 (10,214,000) 13,276,000 1,112,000 8,233,000 MERCER

17 S O M E O F T H E P O S T P R O J E C T P H A S E C H A L L E N G E S How do we communicate our relocation plans to our employees? How do we incentivize key talent to stay? How can we support assignees and their families? What lessons have we learnt from this process? What statutory obligations must we adhere to when entering this new location? How can we effectively measure assignees engagement? Does our assignees talent pool need to be backfilled? How do we handle exceptions to our policy rules? MERCER

18 OUR TIPS AND TRICKS MERCER

19 T O G E T Y O U S T A R T E D Be proactive - Initiate workforce planning scenarios. E.g. who is in your assignee pool, how do you select eligible employees, etc. Build your own business case - If you want to be at the table, use metrics and data to assist you. E.g. does management understand how many repatriated assignees leave once they return and the cost implications? Does management really understand the cost implications of selected mobility policies? Liaise with HR strategy/leadership teams - Emphasize the importance of incorporating assignments into leadership development plans/ retention strategies etc. before a site selection project is announced. Review your policies - ensure that they are fit for purpose, up to date, and ready to implement when needed. Share this presentation with your leadership most companies underestimate the role of mobility in these processes until its too late. Don t let this happen to your organization. MERCER

20 QUESTIONS? MERCER

21 MERCER