IT'S ALL ABOUT CONTROL.
When Cynthia Kashima joined VeriSign in Mountain View, Calif., as purchasing specialist in August 2002, her job description included travel and event management for the 2,000-employee company. “VeriSign saw that costs were high and no one was managing the. They wanted it controlled,” she says.
The company's solution: Funnel all meeting and travel contracts through purchasing. Along with that move, VeriSign designated Novato, Calif.-based Ambassadors Performance Group as its preferred event management supplier, handling a major incentive, three annual executive road shows, and an increasing number of smaller events. Even holiday parties at offices across the country are starting to be consolidated through APG. “We think their buying power is better,” Kashima explains.
Another Set of Eyes
For Elaine Macy, founding partner at incentive company Ambassadors Performance Group, working with people like Kashima has become the norm. “All my presentations in the past three months have been to procurement or purchasing departments,” she says.
In many companies, this is part of an effort to control outside expenses in all areas. “A very significant number of Fortune 500 companies are moving to — or are well into — a strategic sourcing model for their procurement departments,” explains Mark Trowbridge, general partner at Strategic Procurement Solutions, a consultancy in Coleville, Calif. “Their CEOs are saying things like, ‘Mr. CPO [Chief Procurement Officer], you are responsible for every dollar spent with outside suppliers, and your task is to bring that down 7 percent this year.’” One result of that trend, he says, is that “corporate travel departments are reporting more and more to procurement in every industry sector.”
Whether meeting departments will start reporting to procurement is debatable. But procurement's involvement somewhere in the process seems ever more likely. “More and more often, Carlson Marketing Group is hearing from clients that there is an additional step in the process, an additional set of eyes involved in the decision,” says Patty Sabo, senior buyer at Carlson in Plymouth, Minn. “They tell us that their procurement departments will be reviewing proposals and budgets — as a first or intermediary step or even as the final decision-maker.”
Rise of the Vendor Manager
Number-crunchers as final decision-makers for incentive meetings? Even procurement types have a little trouble imagining that. “The typical purchasing person does not have the perspective necessary to plan a large meeting,” says Trowbridge, who spent years as a procurement officer before launching his consulting firm. “But the purchasing group can bring resources to the planning process. For example, there may be big printing expenses involved. Procurement may have an establishedwith a printer. You have to look at the whole picture — at all the things that need to be bought.” The bottom line, he says: Procurement should help where it can, “and then get out of the way.”
It's happening like that at some companies. Adding a procurement officer to the meeting planning process was part of a larger strategic reorganization for Microsoft, explains Daphne Meyers, CMM, program manager, partner events, for Microsoft Business Solutions in Fargo, N.D. Meyers manages major conferences for Microsoft's value-added resellers, or VARS. Microsoft recently segmented meeting planning into two functions: strategic and tactical. It's an echo of the corporate philosophy to focus on core businesses and outsource everything else, Meyers notes.
As the “business owner,” Meyers handles the strategic side of meetings. “I have ultimate responsibility for messaging and content, for the look and feel of the events, and for the budget,” she says. If that represents the core of a meeting, Meyers' counterpart, the “process owner,” handles the noncore aspects of a meeting, from registration to buses. All those tasks get outsourced, with the process owner managing all the vendors, Meyers says.
Meyers discusses an event's objectives with the process owner, who then works on vendor RFPs with the procurement officer assigned to the events team. The process owner has event expertise and knows what information the vendor needs about the meeting, Meyers explains, while the procurement person is focused on Microsoft's corporate guidelines for vendors, including legal requirements and price.
Then Meyers gets back into the picture to make final decisions. “By that time, the vendors have met the procurement standards,” she notes. “It's all very collaborative.”
The system was put into place after a huge vendor review and analysis performed by the procurement department. It's a process that is under way companywide, as Microsoft endeavors to consolidate its spending and reduce the number of vendors with which it has contracts. “Events was where it all started, because everyone across the company touches events in some way,” Meyers says. “It's the old consolidation issue. You might have 20 different people calling the downtown Sheraton.” Now, while there may still be a few people calling the Sheraton, each of them will be using the same contract. Another piece of the procurement project was the creation of standard contracts with some hotel chains.
Nice Knowing You
Meyers has ultimate responsibility for the success or failure of her meetings. But in a sense, she's now two steps away from her suppliers. Does it mean meetings are no longer a relationship business? Yes and no. Relationships with current suppliers, those that have been vetted by procurement, remain critical. “You forget they're vendors,” Meyers says. “They know everything about you, you know everything about them. They're intimately involved.”
But doing business has changed. “I've been involved with meetings for 14 years, and there has been a steady trend toward more legal clauses, more paperwork, more signoffs,” she says. “I don't think that trend's going to reverse. Even a vendor you know personally needs to jump through the same hoops as someone you don't know.”
APG's Elaine Macy can relate. “The third-party environment has changed tremendously,” she says. “We have to showimmediately. We have to be more aware of a company's budgets, requirements, and philosophy than even its employees are. We have to show that we can purchase better, show our supplier contracts, and show our negotiated concessions.” She also notes that APG typically works on a fee basis when procurement is involved. “You have to go to a flat fee. That's the way of the future.”
At Marsh USA, meeting planning, which had fallen under the marketing umbrella, is now aligned with finance. The move is part of an effort to streamline meeting operations, consolidating them through the event management team. Marianne Steckert, vice president, came on board to lead the team in late 2002.
Air travel already is consolidated at financial services giant Marsh McLennan, parent of Marsh USA. Now the focus is on capturing and leveraging the company's total meeting spend, starting with Marsh USA, the largest unit of the Marsh Inc. division of Marsh McLennan. Meetings of 30 or more attendees in a non-Marsh location, or events that cost $25,000 or more, now must go through Steckert's team for review and then approval by the executive committee. “When we get this right, the idea is to roll it out across the operating companies,” Steckert says.
The heart of the project is Steckert's search for a technology vendor who can provide online RFPs, Web-based registration, and quick access to all kinds of meeting information, such as the number of room nights booked with a particular hotel chain over a specified period.
Another important report she wants to run: the cost avoidance sheet, showing initial budgets, actual budgets, and variances. These are her report cards. Anyone in finance who remains uncertain of the benefit of an internal event management team, she says, “will understand when they see the cost avoidance sheets.” For example, a report could show that a meeting came in under budget because Steckert chose a five-star hotel on off-peak dates. Alternatively, a report could show that the company ran thousands of dollars over on room nights and go on to explain that the conference had been booked for 100 attendees but 120 showed up.
By actively looking for numbers to crunch, Steckert is making sure the pencil-pushers get the data they need. But as head of the event management team, Steckert's first concern is the success of an event, including all the intangibles that come into play in addition to cold hard cash.
Trowbridge suggests following Steckert's lead: Find procurement before it finds you. “Meeting planners who sit down and say, ‘What could we do together?’ will be the best friends of procurement groups,” he says.
The New Site Inspector
For companies in which the procurement/planning relationship is in its infancy (or merely a future possibility), Trowbridge also suggests inviting representatives from the procurement department to a major event “so that they understand the value-add and the human element that planners bring to the whole thing. The value-add is so important. It's not just dollars and cents.”
Site visits also can be eye-opening for purchasing executives, as VeriSign's Cynthia Kashima discovered in June when she accompanied APG's Elaine Macy to check out four properties in contention for the company's President's Club incentive conference in April 2004. “Elaine looked at the location, the adult and child activities, the amenities that the hotel had to offer, how the rooms were decorated,” notes Kashima, who hopes to be on-site for next April's event. But the biggest thing Kashima learned on the trip, she says, was the importance of finding a good destination management company. “I had no experience in dealing with DMCs before this trip,” she notes. “Thewill be playing a big role for our President's Club, so it was imperative that we choose the right company. I learned a lot by listening to Elaine ask questions, especially about their knowledge of the location.”
It's a critical education process, and SRS' Trowbridge encourages planners to involve procurement. “It's incumbent upon meeting organizers not to view them as something threatening and to realize that they are being given responsibility for spending with all outside suppliers,” he says. “Although procurement people have a reputation, sometimes deserved, for focusing on the lowest unit price and not the total value, they are trained negotiators. They're trained to look at qualitative and quantitative aspects of a purchase.”
It might take a little more convincing for meeting managers who see their own blood, sweat, and tears in every aspect of the major events they handle for their companies. “What's at stake is huge, especially if you're talking about incentive meetings with lots of senior management involved,” says Kevin Mitchell, chairman of the Business Travel Coalition in Radnor, Pa. “You just can't take a cold and calculated by-the-numbers approach. There's a natural conflict.”
Meetings, Maybe. But Incentives?
Traditionally, incentive trips are luxurious, even downright decadent. Doesn't strict control by a purchasing department hinder a planner from doing his or her job: providing an experience that winners couldn't create on their own?
That depends. Patty Sabo, senior buyer at Carlson Marketing Group in Plymouth, Minn., points out that “the involvement of procurement departments can actually be a great help to maintaining and growing incentive and meeting travel.” She adds that “by demonstrating ROI and tying a program back to the company's measurable objectives, it's more difficult for clients to say ‘I'm not sure it's worth it.’”
Still, Elaine Macy, founding partner at incentive company Ambassadors Performance Group, Novato, Calif., has seen a shift toward more subdued incentives since clients started involving their procurement departments. “I've been in this business for 32 years. It's a huge change,” she says. “Incentives used to be fun, frills, parties. Now it's strictly by the numbers.”
Macy knows of one financial services company that did four incentive meetings in 2002 with a budget of $2.5 million; in 2003, the company did one large incentive and one very small incentive with a budget of $1 million.
In addition, she says, “many execs tell us they don't want to stay at luxury hotels because of the perception.” This may be temporary, however; one of her clients who crossed luxury names off the list in 2003 already has put them back for 2004.
“Every company wants to use incentives,” she stresses. “But they're not convinced the ROI is there. Every dollar counts in today's economy.”