The Nebulous Cloud Called Relocation

Is the Middleman Model dead?

There is a multi million 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 (RMC) 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 organization 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 looks 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 suppliers 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 employees 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 organizations, indicators are pointing in a new direction for relocation. 

Studies show that some 70% of organizations are distancing themselves from the old process and leaning to a lump-sum or allowance program. The Relocation management companies spotted corporations making a move away from the model several years ago and have moved to what they call a core-flex model, or a managed lump sum solution. In that, they suggest that they continue to manage the “core” services (the services they are paid a commission on) and allow the transferee to have a little of their own freedom to use some of the lump sum money as they see fit. 

The million-dollar question is, do you need someone managing information in an information age? Or do we need good information and simple education? My question on a lump sum model is, whose money is it and does the service justify the built in commissions the RMC must charge to keep their operations running?  While that may not be a concern for the HR department, or inconsequential to a larger organization, is it a concern for the actual end “user” of the services, “the transferee”?

In my opinion the solution is education and street level competition from an open-source supply chain, with no referral fees.  We are all experienced consumers if we know what to look for and how to compare services. Some people still like to use a travel agent while many folks are very comfortable making their own reservations and itinerary. There is no one size fits all. In this information age, education is the answer. Knowing what to look for, how to compare intangible services and understanding the process is the perfect solution.

Upfront, clear, unbiased, information is by far the most important thing you can give your employees. In fact, understanding the service and what you are paying for is the only way to fly above the clouds and see the process logically and clearly. There is an entire industry based on this middleman model, but the world does not work like it did even five years ago. In my opinion the middleman model is dead but no one in the ecosystem wants to say anything. I will say it, the king is naked.