Cutting Costs Through Exception Management
Exception management is an important driver of cost savings for corporate relocation programs. This conclusion is supported by recent corporate surveys. At the same time, cost savings continue to be a critical objective for senior leadership. Paragon Relocation’s Consulting Team has helped companies achieve significant cost savings through better management of exceptions. The following is an example case study.
A Fortune 500 global manufacturer of construction and mining equipment with more than 150,000 employees in 500 locations worldwide.
Paragon Relocation became aware of a rising number of exceptions to policy for this high-volume global client. The rising exceptions resulted in increased overall relocation costs. Exception costs were in fact skyrocketing, having tripled in the previous three years despite the fact that relocation volume only increased slightly. To manage this mounting expense, the client asked Paragon to craft an exception management process that reduced overall exception requests and ultimately cut costs, all while maintaining the client’s desire to “take care of families in need” in an equitable manner.
Paragon designed a comprehensive exception management process to address the growing number of exception requests that cost the client millions of dollars. Working with the client, Paragon determined the exception philosophy of the client was to “take care of families in need” and eliminate unnecessary exception requests, while not eliminating exceptions altogether, since they are a necessary part of the relocation program and ultimately a business decision.
Paragon designed a process that created four levels to the exception process. Each level was defined and had a set dollar limit; each limit had an approval process with the highest level requiring vice president approval. The factors considered when developing these levels included:
- Want vs. need;
- Avoidable hardship vs. hardship because a decision led to the situation;
- Extension of policy or benefit not in the policy (legal & within terms of the contract for relocation assignment services, alternatives);
- Risks, cost and whether an action was precedent setting or not
Next, as part of our Policy and Program Development services, Paragon infused the following specific language into the existing policy:
- A clear statement outlining what is an “unavoidable hardship.”
- Clarification that the exceptions are not intended to cover “personal lifestyle decisions.”
- A direct reference that the miscellaneous relocation allowance is not a bonus, it is intended to be used for items not specifically covered by the relocation policy.
- The policy disclaimer was modified to reserve the right to “interpret’ the intent of the policy, further minimizing policy consulting issues.
An important aspect to this process includes creating centralized administration through the Paragon Relocation consultants, whereby the employee had to request the exception. This served as a natural deterrent for those who may be reluctant to ask for extra assistance due to a personal decision. The relocation consultant plays an integral role in preventing and/or limiting exceptions by proactively counseling the transferee throughout the move. This helps identify and address any areas of potential exceptions up front and allows Paragon to plan for the move in such a way as to avoid exceptions.
All exception data is tracked and approved through our PRISM exception router that provides data for exception reporting, such as: the number of exceptions submitted, approved & denied; the cost of the exceptions and the approver contact information. Exceptions can be forwarded for additional approval through the router if appropriate and all data is tracked by Paragon.
The client’s relocation program is now functioning more cohesively with Paragon Relocation’s exception management process and centralized administration. The change increased transferee satisfaction, reduced policy exceptions and has become a best practice for the client.
Since introducing the program, this high-volume client has saved millions of dollars on unnecessary exception requests. Paragon’s efforts also halted the annual 30% increases in exceptions that the client had been experiencing. Also, exceptions have decreased as a percentage of annual spend, meeting the client’s needs, while service levels continue to increase.
Paragon’s exception management process has become a best practice for all corporations and the program has been presented at Worldwide ERC® conferences around the world.