Over the term of an international assignment, the costs of storage can be significant. Reviewing your company’s policy, in particular as it relates to storage of goods, presents an opportunity to make better use of the company resources available.
Current Storage Policy Practices in Australia
A recent policy benchmark for Australian companies sending employees overseas demonstrated that the storage allowance often corresponds to the length of an assignment, with little if any items being excluded. In the event the assignment is extended, so too is the storage. Typically a three year storage entitlement is provided with no limitation on the amount of goods in store.
A closer look at the details of the goods in storage and assignee behaviour associated with the storage of household goods can be revealing and may offer you the opportunity to reduce your costs. Let’s explore this a little further.
Three Year Assignment: Receiving a consignment out of storage… A Personal Experience
Many years ago, I was fortunate to be sent on assignment to Australia from Connecticut, USA for three years. My relocation entitlements included the storage of household goods. When I returned home to Connecticut, I received the goods out of storage. I was very grateful to have had the chance to retain my furniture in good condition; it was lovely to have my lounges, dining room and bedroom furniture, our painting and photos rolling off the truck and into place – it felt like home. However, once all those pieces were put into place, I started to discover boxes upon boxes of “unidentified stuff “which ended up in the garage – a sea of cartons stacked on top of each other, nearly a third of the storage volume that just came out of the container appeared to be excess. What exactly was all this stuff?
As we opened each box history unfolded before us. When we left Connecticut three years earlier my daughter was 7 (and now 10), and we found ourselves looking at tricycles, a play kitchen and strollers, I wondered “what was I thinking” three years ago? Of course there was also the electronics and the herd of electrified Christmas reindeer that had become non-functional, the stereo equipment now eclipsed by iPod technology and boxes and boxes of bibs and bobs that I probably should have discarded before heading to Australia. After donating items of some use, and compiling a list of items we needed to purchase, we promptly hired a garbage skip to discard the remainder – it seemed so wasteful.
By breaking down the costs, I calculate my employer paid approximately $200 per week for my consignment, which over a three year period equalled $31,200. Considering the items we donated and discarded upon our return it seems the cost was unnecessarily and unintentionally inflated by a third, approximately $10,000 over the life of the assignment.
Although that may appear to be an incremental amount of cost of my overall assignment, if we consider that many assignees in a population have a similar storage experience, the cost to the company can become significant; i.e. with 60 assignees per year that amount quickly adds up to a significant sum of approximately $200,000 over 1 year or $600,000 over a 3 year period. If assignments are extended, the storage costs continue to mount, and the usefulness of some goods in storage will diminish over time.
Understanding Assignee Behaviour
How does this happen? Why are things put into storage only to be later discarded? Why pay for storage of goods when a significant number of items are most likely going to be thrown away upon delivery?
I hypothesise that usually it is a lack of time on the part of the departing employee and their family to “deal” with what needs to be stored, saved and what should be discarded. Leading up to an exciting overseas assignment, the last thing you are thinking about is culling your belongings, it is just too hard and most people say… “ throw it in storage, the company is paying for it, I will deal with it after we come back”. That impulse may be leading to an unintended inflation of costs for the Company.
One of the key questions most employees are keen to understand at the outset is what their future will be after the assignment, i.e. will they repatriate to a job or will they be on a series of international assignments. The answer to this question is fundamental to an employee’s willingness to cull goods.
Some Storage Management Solutions
For a company to determine whether storage is warranted, an in-principle decision should be made at the outset about the future career of the employee going on assignment. If he/she is earmarked for repatriation at the end of the assignment, then it could be argued that storage is warranted. If, on the other hand, the employee is earmarked for a series of international assignments, then storage may not be warranted.
When it is determined that storage is warranted, ongoing management of the storage is recommended. Here are some solutions to consider:
1) Incentives before storage: Incentivise assignees to store only items that will be functional and valued upon return by offering a nominal lump sum to the family for making donations to local charities and thereby reducing the total volume of items being stored. Ask your supplier to arrange for charitable donation pick-ups and consider reimbursing your assignee for garbage skip expenses.
2) Time to Prepare: Lack of time is one of the major contributing factors to “throwing everything into storage”. Often an assignment is confirmed by the organisation close to the departure date. As the employee focuses on finalising projects, handing over aspects of their current job to another whilst simultaneously beginning the new job role, the decision on what to transport or not is left to the trailing partner. Often the trailing partner is working so they too are focused on winding up their employment obligations. Then there are the real estate and family activities that need to be addressed. Not to mention the children’s schooling. It all becomes too stressful to make decisions about culling personal effects. For many it is the least of their concern. By providing assignees with some time off to prepare for the move, relocating families are much more likely to make considered decisions about what they are storing, and feel supported by their employer and by each other in the process.
3) Assignee Accountability: Policy design should take into consideration changes in employee circumstances, including the responsibility of storage. If employees change their status whilst on assignment either through localisation or by leaving the employ of the company, they should be assigned accountability for storage costs.
4) Annual Storage Audit: Conduct a storage review on an annual or biannual basis to confirm the status of employees and their entitlements. Consider the storage costs and the length of time the consignments have been in storage. Check with your supplier when rates are reviewed and insurance values need to be amended.
Evaluating your assignee populations’ need for storage, considering some practical approaches to storage and assignee accountability, and reviewing storage on a regular basis can result in cost savings and a reduced impact on the environment.
It is far better to plan for storage than to waste time, effort and money in storing items that are later discarded.
TEMI Steering Committee Member since 2013
Global Manager Corporate Mobility Services
Tel +61 3 8696 6041