Jack Eichhorn has seen both sides of the equation. Having made the shift about a year ago from meeting planner at another high-tech company to procurement exec at Redwood Shores, Calif.-based Oracle, Eichhorn is well-versed in the nuances of the planner/procurement relationship — especially when it comes to incentives. Now, as director of global meeting services in Oracle's procurement organization, this insight helps him to source incentives.

“With my background and understanding of the logistics side,” he says, “I can help the program managers of these events to achieve a successful incentive while internally aligning the event with procurement's overall goals.”

One of the ways he does that is by taking a holistic look at incentives across multiple sales organizations within Oracle. He and his team then look to consolidate multiple incentive programs under one contract, bringing each sales unit to the same location, one after another, in a single year. This way, the company can leverage the same vendors and suppliers for multiple events while ensuring that no attendee experiences the same trip twice.

As Eichhorn knows, all incentives are not alike: They have different types of qualifiers and varying goals. And unlike a meeting or training audience, incentive qualifiers are motivated by the choice of hotel or resort — often, it's the property itself that inspires them to sell.

But not all procurement managers understand this, says Alison Jenks, vice president of marketing for Los Angeles-based event-planning company TBA Global LLC. “I have seen both sides of the coin. The smart companies are looking at incentives as a powerful motivator and getting behind the programs,” she says. “Where I see companies making mistakes is by focusing on reducing costs and losing sight of what an incentive event is supposed to be.”

The major stumbling blocks are created when companies want to choose a property that isn't as high-end as it should be, or they want to cut the creative touches that transform a trip into a reward. “With an incentive program, we try to create an event that the corporate attendees couldn't create on their own,” says Jenks. “It's a program that will inspire them for future success and that they will be talking about for years to come.”

Caren Bigelow, director of planning and vendor relations at Atlanta-based USMotivation, often finds that it's the added touches — room gifts, gala dinners, and private tours — that procurement wants to cut first. And that's where the conflict begins.

Following is a look at three companies and how they balance the goals of their incentives with the demands of procurement. Each situation is a creative solution to meeting the needs of both sides — and most importantly, the needs of the winners.

Dotted-Line Relationship

For Dan Young, planning successful incentives year after year requires creative thought, years of relationship building, and an executive team that believes in the value. As director of event planning and field recognition at Minneapolis-based Thrivent Financial for Lutherans, Young heads a meeting staff that plans 175 events per year, including the company's four annual incentive trips. This year, his top group will go to The Ritz-Carlton, Kapalua, in Hawaii, with a Mediterranean cruise scheduled for next year and a tour of Ireland the following year.

The division that Young leads handles every aspect of the incentive trip: contract negotiation and design, logistics, ground transportation, food and beverage, and air travel. And he wouldn't have it any other way. “Our department once reported to the CFO,” he says, “but we began reporting to marketing and field distribution in 2005 because more than half the events we plan affect the field force. We have more ownership over our events now, and we manage our own budgets.”

Young is quick to note that the realignment does not mean that finance is cut out of the equation. “We're in a dotted-line relationship with procurement and purchasing, and we report all events to the CFO and purchasing departments,” he says. “We are all credited CMPs with five to 10 years' experience in event planning. Our CFO understands that this expertise does not exist in the finance division. Finance understands budgets and approval processes, but they don't understand what it takes to fund an incentive conference.”

Young and his team at Thrivent begin planning the company's incentives four years out and announce the destinations two years in advance in order to create anticipation among the field force. Each conference begins with an event profile drawn up by the meeting-planning division that captures all the elements of the incentive, including objective, purpose, budget, room nights, logistics, etc. The event sponsor signs off on the completed profile, and for those events with a budget of more than $250,000, the CFO and/or the president also signs off.

Once the appropriate signoffs have occurred, planners proceed with the request-for-proposal process and contract negotiations with the property. Young works with a contract lawyer from Thrivent's law division to approve the contract. Once it's approved, the event planner has the authority to sign the contract and take over all the plans for the incentive.

Budgets for Thrivent's four annual incentives are between $6 million and $8 million, but because the approval process is so tight, Young says he does not receive any push back from procurement on his contracts: “We own the event and the budget and are held accountable for the results. We have per-person targets for spend, and I am held accountable in both my goals and my compensation to stay within those spending limits.”

Young notes that the premise behind aligning procurement with meetings and incentives is volume buying, which does not always align with the goal of the incentive. “If we took our participants to the same hotel chain for 10 years, that would lock us out of experiencing unique properties,” he says, “and [the attendees] would get bored.”

Slowly Standardizing Sourcing

At Amsterdam-based global financial services company ING, incentives are slowly being folded into the sourcing process, in an approach that has been evolving since 2000. Many of ING's incentives are content-rich, with the main focus being the educational component of the trip rather than the reward. However, these trips do reward qualifiers with recognition awards and leisure time throughout the program.

At ING, meeting planners are decentralized and report to their respective sales areas. “Planners are tied with the businesses they support for their meetings,” says Lisa Poulton, director of conference planning operations, “but they have a consistent approach for managing events across the company to ensure compliance with all aspects of the policy.” Working within procurement's guidelines for sourcing is “strongly suggested,” she says — but it is not mandated.

“Planners are encouraged to use the consolidated RFP function for their incentives, but this varies depending on the program,” adds Deanna Bloodgood, sourcing specialist for travel, meetings, and incentives. The same is true for the use of preferred properties. “It is not mandated. The ultimate decision is up to the business units.”

Bloodgood says that the sourcing process for incentives differs depending on the objectives and goals of the program. “In the past two years, we have begun sourcing hotels for larger incentive programs using a consolidated RFP,” she notes. This approach allows ING to piggyback multiple programs in a single RFP in order to bring a bulk of business to a particular property or hotel chain and have greater negotiating power.

While any corporate shift is bound to incur some push back, both planners and procurement are getting an education. “I came from a company that did not do strategic sourcing, so initially I was adverse to the idea,” says Larissa Schultz, senior conference planner at ING. “But it is important to not be afraid of this relationship.

“I now look at procurement as a partner in the process,” she adds. “They take on the legal aspects of the program and iron out details in the terms and conditions of the contracts so that the planner can focus on meeting logistics, program content, and better serving the client.”

“We Are Procurement”

At St. Paul, Minn.-based Land O'Lakes Inc., the absence of a centralized meeting department meant that Jill Burke, meeting planner, business event management, and the three other planners at the company were responding to ad hoc requests from individual business units that needed assistance with events. “They were not mandated to use us, so we did just a fraction of the incentives,” recalls Burke.

In an effort to get a grip on meeting spend, Land O'Lakes recently evolved Burke's role into one of procurement. The company's incentives, which are events specifically for Land O'Lakes' customers, are now sourced through StarCite under the same guidelines as meetings.

Although Burke's role will change as a result of the realignment, which began in January, she says that, in the end, the shift will alleviate some of the burden on the individual business units and help to minimize risk for the company.

“With this new structure, all four of the company's meeting planners and the department's two coordinators are essentially going to be procurement,” explains Burke. “Before, we had people who were not experienced in contract negotiations, and this opened up a liability for the company because aspects such as attrition were not being negotiated. Now the sourcing and site selection will go through us, and we will have more control in the negotiating process.”

Under the new structure, administrative personnel from each business unit will come to Burke and her colleagues in procurement before contracting for their incentive trips. Burke's group will assist with contract negotiations and sourcing, and, when needed, logistical functions such as booking air travel, ground transportation, and food and beverage. Her department uses StarCite to issue RFPs to registered properties, monitor proposals that come in, and track meeting spend.

“[The event sponsor] will still work with whomever they worked with in the past,” says Burke. “They will come to us to do negotiations and sourcing. If they have a specific property that they want to use, we will look at that and evaluate more cost-effective options to arrive at the best decision.”

Maximum Value

Whatever the arrangement between meetings and procurement departments, it's clear that meeting planners and purchasing managers are not as far along the learning curve with incentives as they are with meetings.

“Incentives are the last area that some companies are bringing under procurement,” says Chris Wilkes, American Express Business Travel's advisory services practice leader for meetings, who is based in Providence, R.I. “They want to have that same level of oversight but are treading lightly to make sure that they do not undermine the objective of the incentive.”

USMotivation's Caren Bigelow says she has seen procurement departments scale back more recently and corporate planners regain some control, especially when it comes to incentive programs.

“In the beginning, procurement was a four-letter word,” recalls Bigelow. “They came in like gangbusters, and all they wanted to do was cut, cut, cut. But this has changed. It has been an education process for corporations. Procurement has figured out that incentives are different from meetings.”

By keeping the lines of communication open and focusing on educating procurement on the goals of the incentive, planners are smoothing the transition and tying the value of the program into the larger context of the company's business goals.

“An incentive event needs to be viewed as an investment in the most powerful performers that a company has,” says TBA Global's Jenks. “These are the people who will take the company to the next level.”

4 Tips for Incentive Purchasing

  1. Educate Procurement

    While some procurement directors have a meeting-planning background, many simply do not have in-depth knowledge of purchasing meetings and incentive travel. Planners should educate procurement about the goals and objectives of the incentive and about why using a higher-end property or expanding budgets for program enhancements might be critical to the success of the event. And because relationships with suppliers are often based on more than just price point and services rendered, it's also important to educate them about the nuances of each relationship and to work together to quantify the value that each supplier brings to the event.

  2. Prove the ROI of Your Incentives

    If the goal of the incentive is to motivate attendees and increase productivity and sales, planners will need to prove the return on investment of the incentive trip in order to establish its value to upper management. Work with procurement on the front end as well as after the program to show executive management how the results will drive business goals for the following year.

  3. Learn From Procurement

    While you might have a handle on the number of programs that your department sources each year and the amount that you spend on incentives for your group, procurement's visibility into meetings and events spend spans the entire company. By leveraging this total-organization perspective, procurement can help planners to fill cancellations with other internal programs to minimize attrition penalties as well as to negotiate volume discounts by leveraging suppliers for more than one program at a time.

  4. Partner on the RFP

    While the request for proposal might have to go out through procurement, that doesn't mean planners shouldn't have a say in the process. Work with procurement to craft the RFP and make sure it clearly states the objectives of the incentive. Then make sure that all suitable properties have a chance to bid for the event. Often procurement will go outside preferred-supplier agreements for incentives as long as the property comes in with a proposal that meets the budget.