Adopting a new way of thinking about procurement, travel and meetings, Cisco Systems is using collaborative management to ensure that every dollar it spends on travel and meetings is influenced using a process which ensures to shareholders that the expense is legitimate.
With more than 1,600 meetings a year at a cost of over $60 million and travel expenses of more than $300 million, the trick is designing a process that is nimble enough to support the frantic pace of Cisco's business and resources.
"One way [to do this] is to force all spend owners to be in a room and justify how they spent money," said Simon Seidler, manager of global procurement contracts assigned to travel, meetings and corporate marketing events in Cisco's newly named Global Spend Optimization unit.
"The other is to build a process that does all that dynamically," Seidler said. Cisco's long-established meeting services organization, headed by global manager Michele Snock, "built that methodology where opportunities that come into her group are put through a process and bid out. We can at least put our stamp of approval on this to say that the process was followed. We can't say that with all the dollars in the organization right now, and that's what we're trying to do."
[PROFILE_1]Earlier this year, Seidler rejoined Cisco, where he previously worked for about 18 months before heading to law school. With an MBA, procurement experience at AT&T and a law degree, Seidler was hired as a procurement liaison to three indirect spend categories: meetings, travel and corporate marketing (which manages events). Cisco has taken the same approach with other indirect expense categories, assigning a procurement expert as a liaison to each subject matter expert within the company, covering workplace resources, construction, real estate and office infrastructure. By contrast, the purchasing of all goods used in products follows a typical supply-chain management approach.
"Our metric is dollars influenced," Seidler said. "[We ask] 'How do we pass spend underneath the microscope to make sure that the process used to spend shareholders' dollars is a legitimate process?' "
Cisco doesn't mandate much--certainly not the use of meeting services. So, Snock and her team for the past eight years have built their value proposition with a "sell, don't tell" approach. Meeting Services' internal team of 12 in the U.S., U.K. and Singapore, combined with four contractors, define meeting requirements, develop budgets, source and contract with vendors, and manage logistics, registration, housing and evaluations. The department estimates that it manages about 60 percent of Cisco's meetings expenditures. In the end, they must deliver service levels that are equal to, if not better than, those offered by outside providers, Snock said.
But business units also are free to use other approved third-party vendors. To optimize Cisco's total spend on meetings and events, the company now requires contract review, data and more financial detail on all expenses. Seidler also is encouraging business unit managers to use internal planning services, which offer the lowest cost and best process.
"I try to demonstrate to other departments the value to the company" of using internal resources, Seidler said. As the liaison to corporate event marketing, Seidler said he touches most business booked at hotels or off-site venues and consults with decision-makers on how they book certain properties, or use approved third-party planning organizations to book the space.
"On the one side, we do want to channel them through the internal process, but another thing we have on our plate is to work through our vendors and help them build our processes into theirs," he added. If Snock's team isn't managing the contracting, they are unable to do that.
"I will admit that over the years we've had a bit of a challenge to get all of the event marketing spend, but through Simon's greater education about the benefits to the company, events are starting to go through our organization," Snock said. "Through Simon, there's better education on the benefits of contracting." Throughout the organization, Snock said, the alignment also is providing her department with "greater clout. The global procurement organization is looking to optimize spend throughout the company, not just meetings and events."
"We're tracking 9 percent savings on all our spend. We want to increase our savings by touching more meetings," to better leverage with suppliers. "That's why this is so critical that we message out to people what we can really do," Snock said.
The meetings department is looking for three things: sourcing, leveraging of preferred suppliers and use of the organization's contract to ensure that the legal clauses are there. "That's the story that we've been telling, but now that Simon is out there, we're being heard," Snock added.
Another new element of process control is an electronic repository of all contracts, required by Cisco's legal department. Meeting services maintains this repository, even for contracts executed by other departments or outside vendors. The new process also calls for Snock's team or Seidler to review all meeting contracts to ensure that such reviews are completed and returned to the meeting owner as quickly as possible.
"The playbook that he's given us allows us to know when to go to him, and when to just proceed," Snock said.
Another change in the new playbook requires third-party meeting management companies to complete a template that details the actual rooms consumed, hotel rate and line-item detail of budgets, Snock added. "If we don't have that data, we don't have complete data. If we have it, then we can use it to benefit all."
When it contracted with meeting management companies to source and produce events, Cisco used to write a blanket purchase order and track spending by that vendor, Seidler said. "We'd lose visibility to the detail spend on air, hotel, etc. We're putting new processes in place with existing vendors so they report back to us all that detail."
Unlike other areas of indirect purchasing, where data and trends help procurement teams understand market conditions, meetings offer "a lot of challenges in quantifying the service. Even though we think two hotels are similar, if one is two miles from the convention center, that makes a huge difference," Seidler said.
That is when Seidler relies on subject matter experts to help define the "best value," and where the collaborative relationship between travel, meetings and Cisco's new spend optimization department comes into play. Using playbooks that detail how each dollar spent must be "influenced," travel and meetings continue to operate as subject-matter expects in the organization, reporting into finance.
"I try to work with each of these organizations differently, depending on what they need. Some groups are very empowered and mature; they know what they want to do and how to do it. They have strategies on how they're buying to fulfill their needs. I try to help refine Michele's processes a little bit and channel other groups to use her services. The best strategy for leveraging Cisco's spend is to have it go through Michele's group--they've built that methodology and have a process in place to at least get the best deal."
Snock also is tweaking the services that her team delivers internally. This month, her team will begin training to deliver a more consultative internal approach. For example, if an internal client requests a meeting in February in Phoenix, the planner would discuss the cost of that request, ask if the budget supports it and suggest alternatives to ensure that the meeting owner can make the most informed decision about the best use of the company's money. Meeting services also is trying to shorten the sourcing process by providing more information to meeting owners up front, in the form of online budget estimators and other variables to help guide decision-making. "By making that improvement up front, we'll be a better respected and more valued advisor to the organization," Snock explained.
Cisco also is building an online dashboard to help internal decision-makers make better decisions about meetings and travel, Snock said. The intent is to allow the management team to look at all upcoming meetings and events, and average fares by department, "to let them know where they stand" compared with budget. Other elements that Cisco is building into this dashboard would allow management to look at the average meeting spend by person.
One element that still concerns Seidler, however, is that "we don't know what we don't know. We don't know accurately what doesn't go through the process. All we do know is what goes through the process. As we're doing that, we can see what the trends are--up slope, down, flat. There's really a lot of process improvement, refining that dynamic bidding process we use, informing people how they can better negotiate or leverage spend, if they have those opportunities." Along the way, Seidler is looking for ways to provide meeting services with better advice, insight or negotiating tips.
"We're trying to understand what we need to get better on, and figuring out whether we need to do more vendor consolidation, breaking out things that are packaged," or take other approaches, he said. As collaborators, meetings, travel and spend optimization share their purchasing strategies, but develop them on their own.
"His attitude is different from what I'm used to in purchasing," said Snock, a veteran of Advanced Micro Devices, Conference Planners and Hilton Hotels. All "corporations have purchasing departments, but the 21st Century way of looking at buying is not just purchasing or procurement, but really is strategic sourcing … I know Simon has, and the management of Cisco has, the attitude that it's not just about procuring, it's not just about getting the best prices, but about getting the best value."
"I want to say it's so refreshing, but this really is the Cisco way,"_she added. "Cisco is really into this--value and collaboration. We don't have silos, but horizontal collaboration. If you leverage your business partners, you're maximizing the ability to get things done in the best possible way for the company. Our relationship is a perfect example of how you should leverage all this most appropriately."