Memo from Procurement
This is to authorize the immediate purchase of:
a) two executive office chairs
b) three cases of floppy disks
c) one sales meeting for 350 employees.
If the corporate shopping list appearing at left seems slightly askew, it shouldn’t. At a growing number of firms, the goods being acquired by the purchasing department increasingly are including meetings. In a number of cases, planners for the first time are learning the name of their company’s internal procurement manager, and a host of new working relationships are being forged — but not always without conflict.
“Over the past few years, we’ve seen companies becoming more interested in managing their meetings expenses,” says Shimon Avish, director of professional services at American Express Meetings and Incentives in New York City. Encouraged by savings reaped in transient travel management, procurement departments are looking to meetings as the next logical place to cut the fat, he adds.
“All of the purchasing organizations we studied were under great pressure to deliver cost savings,” says Fraser Johnson, associate professor of operations management for the Richard Ivey School of Business at the London, Ontario-based University of Western Ontario, in reference to research he conducted on the growing role of procurement in corporate travel and meetings. “Travel seems to be one of the things chief purchasing officers focus on as an opportunity,” he notes.
“I think procurement coming into the equation is very helpful,” Avish states. “They’re forming a link between transient and meetings, and it’s driving more cost savings.”
The responsibilities of purchasing departments vary widely among companies. In some cases, procurement’s participation in meetings might be limited to reviewing and signing contracts for room blocks. Others are more active, sending out RFPs, establishing a roster of preferred vendors to track volume and spend, and leveraging those figures when negotiating directly with suppliers, to squeeze the most bang out of the company buck.
Linda Leiby, manager for purchasing meeting services at Wilmington, Del.-based pharmaceutical firm AstraZeneca, is a procurement specialist who falls into the “more active” camp, and she couldn’t be more pleased with the results. Although not a meeting planner, she takes a hands-on approach to all aspects of meetings management, a strategy that has benefitted her company’s bottom line. “There is a procurement value that can be added to the meeting services function,” Leiby says, and the numbers back her up. In 2001, the most recent year for which she has full data, her company was able to shave $22 million off its annual meetings spend, bringing the figure down to $80 million. In the future, she expects to see even greater savings as an increasing number of meetings are channeled through her department.
AstraZeneca has only a few full-time planners on staff, so most requests trickle in from administrators or executive assistants and then are contracted out to a preferred third-party planner.
“We review suppliers and have a master service agreement with each of them,” says Leiby. “We have a website that lets us capture our meetings spend, which helps us leverage our volume discounts. We negotiate each hotel contract on a program-by-program basis.” The reaction to this ramped-up level of involvement, initiated four years ago when pharmaceutical giants Astra and Zeneca merged, was at first mixed, admits Leiby.
“There were some areas in the company that welcomed it, because it was so much easier to know how much you were spending, and we had some gauge on budgets,” says Leiby. “But in some areas there was trepidation about the preferred suppliers.” In response, she notes, the company scheduled seminars to inform and reassure employees.
However, some fears relating to procurement are proving more difficult to dispel.
“There is a procurement value that can be added to the meeting services function.” — Linda Leiby, AstraZeneca
In an economy where jobs that aren’t considered “core functions” of the firm often are the first on the chopping block, there is understandable anxiety among planners about the motives of purchasing managers who begin to take an interest in meetings. “If you have a feeling someone’s looking to check out your costs because they want to take over your department, that’s not a comfortable situation,” says Carolyn Pund, Americas marketing and showcase events senior manager for Santa Clara, Calif.-based Nortel Networks.
“It’s kind of like an internal corporate takeover,” says Dawn Penfold, CMP, president of the Meeting Candidate Network, an industry search firm based in New York City. “Purchasing might have a direct relation to — and much more power with — the CFO.” This can spell trouble for cost centers such as meetings departments, she notes.
In addition, third-party companies are quick to sense procurement’s influence and, says Penfold, “they are, in many cases, going directly to purchasing and pitching their services.”
“Third parties approach purchasing managers and say, ‘You don’t have to pay me a salary or benefits,’” says Jennifer W. Brown, CMP, a partner in Meeting Sites Resource, a Newport Beach, Calif.-based independent planning firm. However, Brown acknowledges her work is much easier if there is a point person within the company who is familiar with the meetings industry. “You still need the key player who’s guiding everything,” she says. “That’s the planner’s role.”
Brown’s former experience as an in-house meetings manager makes her sympathetic to the plight of today’s beleaguered corporate planner, and she offers some words of wisdom: “Planners need to step forward and show the corporations they have value. If they can team up with the purchasing department and be a part of it, that makes a whole lot of sense.”
If purchasing is taking an interest in your job and your department, what’s the best course to take?
“Don’t become an adversary; join the team,” says Dawn Penfold. When purchasing and meetings are thrown together in the corporate version of an arranged marriage, experts say, both parties need to enter into a dialogue explaining their needs and goals.
“Travel is one of the most sensitive areas, because everybody has favorite suppliers,” says the University of Western Ontario’s Fraser Johnson, adding, “The travel budget in any organization touches many people.”
Indeed, the sheer volume of logistics involved in meeting planning can overwhelm even the most experienced purchasing manager, Johnson notes, so the opportunities for a seasoned planner to step in and offer guidance are myriad.
“Purchasing might not look at aspects beyond the rate,” says Penfold. “I doubt if they’d be able to handle costs on F&B, meeting room rental and outside services that would be required for the group.” All the more reason, Penfold adds, for planners to present themselves as a readily available source of valuable in-house knowledge about the company’s meeting habits and preferences.
“The value of internal people is their connections and their knowledge,” says Nortel’s Carolyn Pund. “If they position themselves as having value that can’t be provided by an external vendor because of their knowledge base, they have a distinct advantage.”
Another argument for retaining an in-house meetings department is that purchasing professionals — even those with years of experience — know so little about the meetings trade, the danger is for them to cede too much control to third-party vendors.
“I hear this story over and over,” says Brown of Meeting Sites Resource, ticking off names like Fireman’s Fund and insurance firm CUNA as examples of companies that let in-house planners go in favor of outsourcing.
If a company lays off a planner but continues to work with him on a contract basis, the potential for damage is less severe, since the former insider still retains knowledge of the firm. But if hired guns are running the show without proper oversight, the company could be harmed by unscrupulous vendors. “In an enterprise corporation, there just has to be someone or some department that retains control,” insists Pund.
Strategies for cooperation
Call it synergy: “Procurement directors are very focused on delivering cost savings,” according to Shimon Avish of Amex, “and meetings managers bring the other piece of the equation, which is that this is about service delivery as well.”
Getting several key items on the table can set the stage for a smooth working relationship.
Define your objectives. “Typically, when you’re coming from the procurement side, you want everything to be the most cost effective, and from the travel side, you want your volume realized,” points out Pund. Laying your cards on the table helps to set mutually beneficial goals, she says.
Set boundaries. “One thing we try to do is not step on operations’ toes,” says Tracey Wilt, Rochester, N.Y.-based purchasing consultant, travel and meetings services, for Xerox. “We position it that we’re there to make their lives easier.” One strategy that helps achieve this is to set financial parameters, Wilt says. For example, at Xerox, which is headquartered in Stamford, Conn., meetings under a certain dollar amount are left in the hands of planners, while big-ticket events involve procurement as well.
Explain your work. “Educate the purchasing department as to what your role is,” suggests Penfold. “You have the opportunity to become their top adviser and indispensible to that department.”
Tackle RFPs together. “The RFP process should be shared, especially for a major vendor,” says Pund. “It shouldn’t just be a discussion within procurement if meeting planners are going to use them.” Pund says it also helps to explain the criteria for selecting a vendor to procurement personnel, who might be unfamiliar with the nuances of meetings.
Streamline the contract process. Try to keep the chain of command simple. Not only will this keep co-workers from stepping on each others’ toes, it helps smooth the way for suppliers.
Hotel executives like John Fenton, regional director, global sales, for Marriott International in Washington, D.C., say the RFP and contract processes go more slowly if each decision has to wind through multiple levels of bureaucracy for approval.
“If the understanding of meeting planning isn’t there, having procurement involved is going to slow down the process,” Fenton says. Tap into tech. Madlyn Caliri, global group travel and events manager for Basking Ridge, N.J.-based AT&T, is a strong proponent of using the corporate intranet to speed the flow of information. “AT&T’s procurement department launched an e-procurement platform so meeting planners can receive and issue information electronically,” she explains.
Stay in touch. “We make sure we call people in procurement when we’re doing an evaluation meeting,” says Nortel’s Pund, who finds having both the travel and purchasing perspectives represented is helpful when gauging the success of a program or supplier relationship.
“It’s our corporate culture to make those interdepartmental relationships complementary,” Pund adds. Ongoing dialogue is the best way to head off any conflicts that might arise, she notes, such as differing opinions on sites and what levels of service are suitable for a high-profile gathering.
Educate other employees. Astra-Zeneca’s Linda Leiby holds regular information sessions that target administrators who make up the front lines of planning, so the purchasing department has support from the ground up. “We do them every year because we have turnover, and some people want to come and see what’s new,” she says.
Leiby also holds special seminars to help the pharmaceutical company’s novice planners grasp the fundamentals, sometimes inviting industry pros to speak to keep her audience engaged. “One time we brought our hotel partners in and had each of them talk about one aspect of meeting planning,” she says.
Will service suffer?
One of the most important topics to address both early and often pertains to service levels. A concern among planners is that procurement’s traditionally single-minded focus on the bottom line won’t take into account service quality.
John Meissner, executive director of the corporate group market for Toronto-based Fairmont Hotels & Resorts, says he has seen more than one procurement manager learn this the hard way. “Purchasing departments are being brought on because of their expertise in negotiating, but I think sometimes they don’t realize how expensive some things are, because they haven’t typically been involved in meetings,” he notes.
Marriott’s John Fenton agrees, adding, “There have been situations where procurement has tried to commodify meeting planning, and, as we know, meetings are far too complex for that to be done.”
Enterprising professionals have come up with a solution by establishing levels or tiers of meetings, with different criteria and levels of service spelled out.
“We’ve defined five different levels of meetings to drill down what suppliers they use,” says AT&T’s Madlyn Caliri. Some of the categories include training meetings, internal meetings and customer events, she says. By using an online tool Caliri developed, AT&T employees can register their meeting and have it outsourced to a third-party firm that specializes in that kind of event.
Another plus, says Caliri, is that meetings taking place overseas are sourced to a third party with a focus on this niche. “Working relationships and how you conduct business in each country are different,” she says. In China, for example, AT&T has benefitted from local vendors adept at working through that country’s notorious red tape.
At Nortel, Carolyn Pund has adopted a structure similar to AT&T’s. “The requirements, costs and types of service levels are all completely different, so our events are categorized as different types of meetings,” she says. “For high-level executive events with customers, we’re going to have different staffing needs than for user group conferences.” Top-tier events have access to the specialized vendors they need, she notes, while internal meetings are routed in a more budget-conscious direction.
Tracey Wilt of Xerox is taking this idea a step further by culling feedback directly from meeting participants, implementing a system to measure their satisfaction with service levels.
“We have surveys planned for on-staff coordinators and attendees,” Wilt says. “This way, when I have an annual review with a supplier, I’ll have this data on hand.” Wilt hopes to have the system up and running by the end of this year.
The growing influence of purchasing departments has ushered in revolutionary changes for technology suppliers. “The influence procurement now has is really exponential,” says Mike Malinchock, general manager of the DirectMeetings product line for GetThere, the Menlo Park, Calif.-based software provider.
In GetThere’s early days, sales reps would make calls on individual planners. Now, pitches often go directly to purchasing departments. “Our contracts department is working on five requests for proposal as we speak,” says Malinchock. “One of them has 86 questions.”
Although this detail creates more work for his staff, he sees the change as a positive one. “The depth of these RFPs underscores that procurement professionals are involved, which is good because it makes objective what had been a pretty subjective decision-making process.”
Purchasing professionals tend to be well-versed in the language of technology buying and know what questions to ask, adds Malinchock. “So much of it used to be based on gut feelings, but when you’re purchasing technology, the role of the gut needs to be quantified,” he says.
And while meeting planners place great stock in personal relationships with suppliers, purchasing managers prioritize cost and savings over personal connections. “You might not have that warm fuzzy relationship,” Malinchock says, “but when you’re buying technology, you have to look beyond that.”