As mentioned in our previous blog post about cost estimates, many global mobility (GM) teams perceive cost control to be one of their biggest weaknesses (according to ECA’s Global Mobility Organisation survey). One of the major challenges in managing the costs of a global mobility programme is collating all the information required to predict, assess and communicate to all stakeholders the cost of international assignments. Using cost estimates can provide insight into the total costs of the global mobility programme and comparing these estimates to the actual costs incurred can be a first step towards achieving better cost control and ultimately optimising your GM programme.
How do cost estimates fit into GM processes?
While processes will differ from one company to another, there are a number of reasons why companies prepare cost estimates:
Companies will often estimate the costs of their international assignments in advance of them taking place in order to ensure they are correctly budgeted for.
More and more companies require a cost estimate to be prepared as part of the approval process for potential assignments.
If the nature of a company's business requires the submission of bids, assignment cost estimates can be factored into the overall cost of the project and help to ensure that margins are maintained.
The use of cost estimates allows companies to assess the costs of different resourcing scenarios (comparing the outcome of different policy types, for example) and can support the business in the decision-making process.
Optimising the GM programme
By gaining an understanding of the total costs of their population of globally mobile staff, GM teams can identify areas for improvement and demonstrate the value of their programme to the business.
As you can see, the reasons why companies prepare cost estimates are varied, as is the data that goes into them. Depending on the company, cost estimates could be based on a general estimate of the recurring costs only or take into consideration all costs incurred as a direct result of the assignment. Unsurprisingly, the accuracy of the cost estimate will impact on the ability to predict the total costs of the expat population.
Comparing cost estimates with actual costs
When reviewing total programme costs, some GM teams are now looking into ways to collect the actual costs of assignments rather than relying on cost estimates alone. Collating the full assignment costs and demonstrating these to the business can help with future budgeting and improved cost control, as it may lead to the implementation of more stringent approval requirements such as the provision of a clear business rationale for the assignment.
Comparisons of actual costs to the cost estimates may also show that some locations always have exceptions for certain benefits, which would suggest that the policy is not fit for purpose there or that more stringent adherence to the policy needs to be enforced. Based on the comparison, they may also find that certain elements of the policy need to be reviewed to account for changed circumstances. Reports on the itemised costs of the assignment can also help to pinpoint cost savings and potential policy adjustments.
Challenges with collecting actual cost data
While there are sound reasons for wanting to compare cost estimates with the actual costs of assignments, collecting and collating these costs poses significant administrative challenges:
• Different stakeholders: The data required is often held by different parties; for example, local HR might be in charge of providing a car benefit, while housing is organised through the destination services provider. Also, assignment costs are incurred at different stages of the assignment and at different times of year. The GM team charged with collating this data therefore need to gain the commitment of these different parties to provide it at the appropriate times and be organised to co-ordinate the many responses they will receive from them.
• System requirements: Realistically, a software solution will be required to carry out these comparisons for a moderate to large global mobility programme. Such systems will require data to be entered in specific and consistent formats in order to carry out systematic comparisons for all the assignments and polices required. When gathering the data, the GM team need to be very clear about their requirements to ensure that it is returned in the appropriate format for inclusion in the database, so that time is not wasted going back and forth seeking clarification with the data providers.
Producing cost estimates and comparing these to actual costs can help GM teams improve cost control by providing a clear picture of the costs involved in running their company’s global mobility programme and highlighting any differences between the policy and its implementation. This insight into the costs of the global mobility population can inform future policy reviews, business decision making and strategy. Collating the actual cost data, however, is a challenging exercise that requires the GM team to be prepared to commit a significant amount of time to the process of co-ordinating the many parties involved to submit the data required.
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ECAEnterprise is a fully-customisable assignment management solution that includes a comprehensive salary and cost estimate calculator as part of its core functionality. The calculator includes a full suite of data to estimate the annual and one-time costs at every stage of an assignment. Get in touch to request a free personal demo.
Alternatively, our Consultancy and Advisory team can help with preparing detailed cost estimates on your behalf.
To find out more about how cost estimates can support your business, download our free whitepaper, Measuring the Cost of International Assignments.