The Lump Sum Challenge

On the surface, a lump sum program seems to be an easy way for corporations to manage the relocation process, especially for lower grade non-homeowning employees. Handing over a big wad of cash and pretty much being done with it, except for maybe grossing it up, makes perfect sense. The challenge is that what is easy for the corporation, may not be so simple for the person who is expected to execute a relocation with cash and no guidance on how to make the best use of the funds.

One of the key challenges is that people often become dazzled by the large sum of money presented to them with the only strings attached being that they need to end up in the destination city by an agreed-upon date. Therefore, the money is often mismanaged.

Survey says…

Surveys have shown that vacations and plastic surgery are being funded by employees using the money destined to facilitate their move. Leaving them with the scraps to cobble together a relocation. This means they often try and do things on the cheap. As we know, there are providers out there who advertise certain services for one price on the internet, but in reality, they end up costing much more or being substandard service. This practice can lead to enormous employee dissatisfaction that has nothing to do with the employer.

It’s odd that we should expect people who may have never moved, to know the faintest thing about all of the elements (hidden or obvious) of a cross-country or inter-country move. Even if they are presented with guidelines or recommendations or counseling, they are still pretty much left to their own devices. Even if they are given recommendations about the services they should pay for with their funds and the providers they should use, they often think they can do it better and cheaper on their own.

So if a relocation company is partially responsible for assisting with elements of a lump sum move, and if part of it goes sideways, they are often lumped into the negative feelings about the move, even if they had no involvement. This can have long-term effects on the corporate/relocation provider relationship.

Resources have emerged that companies are tapping into to allow them to track how the money is spent and doing online transfers directly to providers or the transferee so they are engaged with the process and have oversight. In the past, a transferee may have had to wait weeks to get their lump sum when they are expected to being the process immediately which means they often have to come out of pocket to get the ball rolling.

How the local broker can help

Some brokers are wisely targeting this lump sum group by offering affinity cash back rebates on real estate commissions and even offering iBuying options for those with homes to sell. The local broker is perfectly positioned to guide the buying newcomer to the best resources in the area since they are already doing that for their local clients. And they can also introduce them to past clients who have also made a move.

When brokers create a partnership with local corporations that have lump sum programs, it can be a win-win by helping all parties immerse in the local expertise the broker and their relocation division has to offer. The relocation management companies or corporate benefits managers should consider immediately doing a warm hand-off to a local broker and former transferees to set a tone for where they should be getting reliable information about relocating to or from an area. By allowing the broker to offer a cashback rebate to the lump sum client, they can reduce their expenses around the home sale or purchase helping to stretch their money further. 

Create a safe space

But even with guidance from a broker, their employer, or designated provider, for some reason, there seems to be a level of suspicion about whether their best interest is in mind. There is a very low level of engagement of lump sum transferees who use the recommended services and providers. According to Benivo, the adoption rate is as low as 10%. It’s odd that a transferee would trust a random person on the internet versus vendors who have been vetted by their employer. But the general sentiment is, they can get the same thing for free or cheaper because surely their employer is making money on the move somehow through these providers. And maybe they are to help offset the cost of the move.

The truth is, the untethered process of providing a lump sum really needs to change. There has to be more duty of care. It needs to have more structure, more counseling, and more involvement and advice from people who have come before them. Other transferees are the best resource companies have to crowdsource information about what works and what doesn’t. And it doesn’t even need to be the same company’s transferees. Anyone who has moved with a lump sum package to a certain area has the knowledge to share. How much should a service actually cost in various cities from a reputable provider? Who are they to trust to get the right answer? If the company ends up too involved, then it seems to defeat the purpose of a lump sum move. But if ultimately the employee satisfaction is at stake, then maybe it needs to happen.

Corporations, RMC’s and brokers should begin sharing and benchmarking information and resources offered up by people who have moved to specific areas through discussion boards and ambassador programs. If social media has taught us anything, it is people prefer to align with people they believe to have like minds and beliefs. Offering a safe place for legitimate information to be shared keeps them from stumbling into a dangerous area that could create high employee dissatisfaction.  We need to ask more questions and listen more to those that chose to blaze their own trail but ended up unhappy. What could we have done to prevent it? How could we have earned their trust?

As an industry, we can’t let social media and unvetted internet information from strangers lure the transferee into what seems to be a better solution for them. We have a duty of care to provide the most rewarding path to their new city for these valuable employees.

“What is cheap is always the most costly.” ~German Proverb