Managing Meetings At: Educational Testing Services--Firm Policies Lower Midmarket Co.'s Costs

The establishment of strict policies that centralize control of many logistical aspects of meetings management, with strong consequences for noncompliance, has helped Education Testing Service avoid about $3.5 million in combined transient and meeting expenditures.

The Princeton, N.J.-based nonprofit educational testing and measurement firm in the past three years created a central meetings and travel management department and mandated policy that gives that department extensive control over meeting site selection, air travel choices, contracts and payment options. With nonreimbursement a possibility for the noncompliant, and policy exceptions granted only by the firm's two top executives, compliance is high.

ETS has negotiated overall deals with hotel chains, airlines, a travel management company and a corporate card vendor, each of which has a specific meetings component, and uses volume from both transient and meetings travel to affect the negotiated prices for both.

ETS also has eliminated all direct payments to hotels for meeting services in favor of charging all expenses on meeting cards held only by the travel and meetings department, providing a key tool for ensuring compliance, said manager of corporate meeting planning Pamela Wynne.

The stringent policies are a necessity for ETS, a privately held nonprofit organization with some for-profit subsidiaries, which has a combined annual travel and meeting spending of about $12.5 million "We're a nonprofit and our budget is low, so we need to keep prices as low as possible," Wynne said.

ETS began to centralize its planning operations in November 2001, following the realization that the company's meeting planners throughout its American divisions were booking the same individual properties, hotel chains and airlines without capitalizing on the firm's collective volume or communicating meeting plans to each other. The department, which now contains four full-time meeting planners, two managers and three travel and ground transportation coordinators, before January 2002 had no full-time planners at all, Wynne said.

To give the newly centralized department some authority, ETS senior management agreed to issue policies requiring meeting sponsors to register their events with the department prior to any communication with hotels. Today, an intranet-based meeting request form, introduced last year, facilitates that contact and details the proposed meeting's budget and logistical needs.

If the meeting is to be held in the Princeton area, meeting sponsors must use the Chauncey Conference Center, also in Princeton, owned by ETS and operated by Aramark Harrison Lodging, unless the property is unavailable. Between 30 percent and 40 percent of ETS' 850 annual meetings, the vast majority of which are of 50 attendees or less, are held at Chauncey, Wynne said.

"Otherwise, once we receive the meeting request form, we then farm it out to the national representatives of our three preferred hotel chains," Wynne said. "We will provide choices for them as to where to go. If they choose to ignore them, they need from our CEO or CFO a policy exception, which gives [the executives] the opportunity to ask them questions. Unless there's a true business need, like a client demanding to use a certain location, it's very rare."

The three preferred hotel chains ETS has contracted with obligate the firm to consider the properties as primary choices in given destinations. In return, ETS receives preferred rates and consideration of an addendum that lists standard clauses and company-specific needs, like a silent area if the purpose of the meeting is grading tests.

Destination selection is rarely a problem—ETS holds no incentive travel events, so destinations are selected based on business need—and Wynne has made it clear through extensive communication with meeting sponsors that the preferred properties are their most cost-effective options.

"Dollars talk," Wynne said. "If they request a hotel outside the preferred chains, I ensure it will be more expensive. There are challenges, but usually they are very happy, because there is less for them to think about and they are able to focus on their own responsibilities."

ETS has similar deals with airlines, car rental and ground transportation providers: Sponsors and attendees can use only preferred suppliers. All bookings, online or via the phone, must be made through ETS' preferred agency, Oakland, N.J.-based Stratton Travel Management. Any bookings in violation of those policies run the risk of at least partial nonreimbursement, Wynne said. "We have a set per diem rate, and we will reimburse up to that," she said. "If they buy their own airline tickets, unless the CFO signs an exception form, they run that risk. It's really a deterrent."

Compliance is monitored partly through ETS' expense management policies. Before the centralization, the firm sourced meeting suppliers through an electronic requisition system. Since then, though, the company pays all meeting expenditures on a meeting-specific version of its preferred JPMorgan Chase Visa corporate card. Wynne and three other planners—and nobody else—have the cards, pay expenses and issue bills to appropriate departments.

"We no longer have any direct billing, it's all on the corporate card, which means we no longer have to make any deposits, and we get extra points and card rebates at year-end," Wynne said. "Every hotel vendor in the electronic system was shut off, and no check will be issued to any hotel. It's a mandated policy: Any request to cut a check to any travel vendor will be referred to us."

That allows Wynne's department to rectify hotel contracts that are signed without authority, she said. If such a contract is signed, the sponsor has no way to pay for it, as there is no access to a meeting card and no checks will be cut to a hotel. The sponsor has no choice but to return to the hotel and ask for the contract to be deleted or revised so that it meets Wynne's department's approval.

"We will push it back and turn it away," Wynne said. "We hate to do it to hotels, but they need to understand where we're coming from. The individual departments have authority over their own budgets, but we have the authority to spend ETS money."

Wynne's department has developed metrics that show the disparity between actual expenditures and the theoretical costs were they booked without the department's negotiated preferred deals. Combined with similar processes in the ETS transient travel program, the total annual avoidance is about $3.5 million.

Beginning in July, Wynne said, that effort expanded to further demonstrate cost savings through soft-dollar discounts and incentives received from suppliers, as well as more comprehensively quantifying the effect of consolidation.