Larry Kruger from Customized Moving in Canada asks if the RMC model is no longer right for the moving industry.
There is a multimillion if not billion-dollar industry called relocation management that many may not have heard of. It is a niche industry targeting employee mobility. Relocating human resources to various locations around the country or around the world, referred to by some as talent management. Like most consulting services the Relocation Management Companies (RMCs) paint situations and scenarios that are presented as bewildering problems, that only these experts can address. Resulting in outsourcing of the services involved in relocating employees to an intermediary, third party or middleman model.
Many of the RMCs sell the service as a ‘free’ solution for the management of all the variables in the relocation. As most are paid a referral fee or a commission from the suppliers they use for the various relocation services. This model has been very attractive to corporations, with the bonus of some Relocation Management Companies also offering a form of a cash-back program to the corporation, based on their referral fees.
As per The Miller Heiman Group, the RMC model ticks all the sales boxes. HR, aka the ‘user’ buying decision, is based on ease of use. They have no real concern for the price, they are concerned about how easy the product or service is to use. The technical buyer (procurement) can’t really make decisions based on price, as most of the RMCs offer their services for free. With many of them also offering the organisation a cash-back in the form of a transition fee or a percentage of their referrals. Leaving the person that signs off on the sale, the ‘economic’ buyer looking at the entire service as an easy solution, even though they are not always sure what they are buying.
The middleman model however is hampered by several factors that may not be evident, including the redundant and cumbersome exchange of information between the middleman and all parties, with multiple handoffs of the same information, exchanged between the transferee, the supplier, the intermediary and corporation. In addition, the so-called free service does not account for baked in commissions that the RMC must charge to make money. The other red flag is that they audit the supplier’s invoice, the same invoice they are paid a percentage of. Which at the very least should be viewed as a possible conflict of interest. There is also the murky arrangement with a cash-back to the company on the sale of the employee’s home. The entire thing is getting complicated.
The question is, does the middleman model work in an information age? With the changed workforce, remote work, gig work, low loyalty, and the flattening out of organisations, indicators are pointing in a new direction for relocation ...
Photo: Larry Kruger, Customized Moving.