Total Rewards Quarterly

Mobility in the Time of Costs - The India Story

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India on the Global Map

In the past year, we have witnessed a multitude of events across the globe – fluctuations in oil prices and commodity prices, volatile currencies, the Brexit frenzy, market slow down, terrorist attacks, political coups, social campaigns, refugee crisis, just to name a few. With such macroeconomic volatility, moving human capital is not only a daunting task but also a complex one. While the world is fighting its challenges on social, economic and political fronts – India seems to be consistently stable and cautiously growing. In 2015, GDP growth for the world averaged at 2.47% while India stood tall at 7.6%*. Between 2000 and 2015, the World Bank reported that the world’s GDP more than doubled. In comparison, GDP growth rates in the US and European economies have grown by a mere 70%. Yet, during that same time, India’s GDP has more than quadrupled. Moreover, during the past 10 years, outward direct investment in overseas economies by Indian companies has increased 30 fold

One of the major factors that has led to such growth figures is the phenomenon of ‘globalization’. This phenomenon has changed the manner in which Indian companies operate and how they deploy talent within and overseas as well as attract talent from abroad.

Talent Surplus in India

India promises a bright future with sufficient talent that meets the growing demands of employment. Not only is the supply sufficient internally, it actually exceeds the demands.

While China & US have more than a quarter of the world’s tertiary educated talent, the challenge for them has been managing the demand and supply of talent internally. It’s only India that has tertiary educated talent which is in surplus.

Growing businesses and surplus supply of a qualified talent pool has built the case for global mobility from India. This implies that when Indian companies make a global footprint, they would be bridging the talent gap across the world.

Table 1 highlights that 9 out of 10 organizations in India show increase or same growth in mobility over the last year, while this statistic for the world stands at 79% and is expected to decrease.

 

In this article, we’ll explore the ways in which Indian companies, through their global mobility programs, are responding to the need for globally mobile talent as they expand their operations overseas.

The Cost of Global Mobility

Global mobility practitioners are well versed with the notion of high costs and investments by the company in sending employees on an international assignment. In general, a typical international assignment lasting three years will cost approximately three to five times the employee’s basic salary, for each year the employee is on assignment (when considering the typical assignment benefits that most companies provide). This can include relocation expenses, ongoing family support, housing, children’s education, cost of living adjustments and other assignment allowances/premiums, regular home leave and assistance with income taxes. This means that an employee earning the equivalent of USD 100,000 per year can cost the company over USD 1 million for a three-year international assignment. The larger the number of employees a company sends on assignment, more acutely these cost pressures will be felt. India has some of the largest mobility programs in the world today, involving tens of thousands of employees on assignment at any given time.

With Volume Comes More Challenge on Costs

The volume of international assignments for Indian companies continues to present challenges which lead to a focus on issues that are more tactical and operational in nature.

60% of Indian organizations quote the ability to ‘reduce costs’ as a challenge. Optimizing costs appears to be a continuing focus in the current economic scenario. This translates towards driving efficiencies through lower cost profiles and appropriate selection of assignees for global mobility.

How to Manage Costs?

Indian and global companies share a similar view on the best ways to manage costs – the primary focus for all companies with respect to managing costs is via the optimization of internal operations and processes.

 

Could Flexibility Hold the Key?

Mobility functions across both – a global or an Indian company have responded in similar ways in terms of aligning mobility policies with business goals and offering more flexibility in terms of the policies available for use by the business units.

Whether its flexibility to manage costs by introducing policies or flexibility to manage employees within the same costs, it’s “flexibility” that is showing the way.

Finding the Right Balance Between Costs, Operational Excellence and Strategic Alignment

Traditionally viewed as a transactional function (whose primary goal was to ensure a smooth relocation experience for the employee and accompanying family members), global mobility is now evolving to a bigger role with greater responsibilities. While operational excellence in global mobility continues to be a priority (and expectation) for most companies, the expansion of global business is driving a greater diversity in the types of employees, the roles being undertaken, the types of assignments and locations of assignment. Areas that were traditionally considered outside the scope of global mobility, like locally-hired non-nationals or business travel are now being placed squarely under the global mobility function purview.

Businesses require more options and greater flexibility in the methods by which employees are transferred, not only in ways that align the costs with the employee’s role on assignment but attract the right people. To meet these competing objectives, global mobility is adopting a more strategic role.

What’s in Store for Global Mobility Professionals?

While the focus on operational excellence and cost management makes sense in the Indian context, the demands of an expanding global economy drive the global mobility function to become a more strategic partner for businesses.

Global mobility functions across organizations are engaging more with business units and leaders today to ensure necessary strategic alignment. It’s clear that the mobility function is moving away from being a transaction function, and now global mobility professionals must march forward! The focus on this function will continue to intensify and in the coming years, mobility specialists will be going places, literally!

Figure 6: Mobility as a Business: Offer the Right Solutions for the Business and Talent Agendas

Two out of three organizations in India have rated “achieving strategic objectives” of the organization as the top priority for global mobility programs in the upcoming year. Employee mobility is expected to achieve the larger organizational goals and international movements are now reviewed against the long-term objectives of the organization.

Global mobility functions across organizations are engaging more with business units and leaders today to ensure necessary strategic alignment. It’s clear that the mobility function is moving away from being a transaction function, and now global mobility professionals must march forward! The focus on this function will continue to intensify and in the coming years, mobility specialists will be going places, literally!

Data Source:
*http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG)




Article by:

Fred Schlomann
MD – APAC,
AIRINC

Mathangi Jayaraman
Consultant,
Aon Hewitt

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