Procurement strategies that fail to take service-quality standards into account or are implemented too early or incompletely have increased the cost of meetings at some corporations, according to an exclusive Meetings Monitor survey. Much of the extra cost is in the form of labor hours, according to buyers who said they are asked to justify meeting expenditures to procurement departments that don't understand the complexities of event sourcing.
Nearly half the 189 corporate buyer respondents to the survey reported greater involvement from procurement or finance divisions in their company's meetings management over the past two years. Among corporate buyers who reported the growing involvement of procurement, 39 percent said these strategies actually increased the cost of meetings at their companies. More than one-third of such procurement-affected buyers said these strategies made no difference to overall meeting spend, while 23 percent reported a decrease.
Dick Zeller, vice president of consolidation solutions for meetings management firm Maritz McGettigan, said that historically, procurement-based approaches to corporate meeting management have had a failure rate of up to 70 percent.
"There are certainly some procurement departments out there that have not evolved to a collaborative type of process and really have not fully engaged the key stakeholders in the process," Zeller said, "and those are the ones where things maybe are not working, or even driving up costs."
However, he said, during the past five years many corporate procurement or finance departments became more "enlightened" and incorporated a blend of cost-cutting strategies with attention to service-quality requirements and risk management. Procurement departments are most effective when they drive policy and act as a facilitator to help corporate meeting buyers leverage spend with suppliers, he said.
As do many corporations, Abbott Park, Ill.-based pharmaceutical company Abbott Laboratories has a blended approach to meetings management, said Lilian Brozek, manager of event marketing for Abbott's international division. The procurement department sets limits on spending, while Abbott meeting buyers are in charge of negotiating contracts with suppliers. The company's meeting planning department adopted procurement strategies in 2002, she said, after realizing that no one knew the division's total meeting spend.
"Fear was a really good motivator," Brozek said, "so we decided to police ourselves before they came after us."
Abbott meeting buyers must justify the use of certain suppliers with the procurement department, she said, a process that has created some problems. Brozek's division, which includes seven meeting planners and three coordinators, plans more than 140 meetings of 20 to 2,000 attendees per year.
"Procurement has created more work, because we haven't found the right way to streamline it," Brozek said. "We started to streamline it with online tools and automated approval, but we still haven't found the right procedure that makes it easy. However, I don't think it's wrong. I think it's important."
Most frustration comes from a lack of consistent communication, she said, so Brozek's department has tried to build open dialogue between the two departments. Abbott's international division has four employees in its procurement department who must approve all purchase orders, so educating the department on the complexities of meeting sourcing has been challenging, she said.
"I still don't think they're convinced about our ways of procuring, and they don't understand a lot of our business. So, every time we have something that is new to the procurement department, or slightly different from what we've done before, we have to re-explain," Brozek said.
The relationship is continually evolving, she said.
"I think there are two ways we would be happy," Brozek said. "If they delegated the purchasing authority to us and then we reported on a quarterly basis what our decisions were based on, or if they let us train one of their people to be a sourcing specialist in our business, then I would be happy to let them have the purse strings."
Incorporating procurement strategies into meetings management is a process that can take three months to one year to implement, said Maritz's Zeller. When the process is implemented correctly, it can be very successful, he said. Most companies fail when they attempt to launch procurement strategies too quickly, without buy-in from meeting stakeholders, he added.
"We recommend a phased-in process. Select a business unit or a meeting type that you'll target first, or maybe the people who would be most open to change," Zeller said. Service-level agreements and metrics that define service quality must be built in from the beginning, he said, with meeting buyers, procurement and suppliers all in agreement about what is acceptable for specific types of events.
Among Meetings Monitor survey respondents who said they were working more with procurement, 40 percent implemented service-level agreements in the past two years, 20 percent created quality-service indices and 11 percent created balanced scorecards (respondents were allowed to choose more than one answer). However, 51 percent of those respondents had not implemented any of those service-quality metrics.
Service-quality standards for meetings have been defined through a collaboration of procurement and meeting stakeholders at Alexandria, Va.-based management consulting firm A.T. Kearney, said chief of global procurement Jim Haddow. The firm's meetings management department has created and monitored service metrics, he said, making it easier for procurement to track.
"We have good buy-in from our senior management with regard to controlling more meetings that are going on internally," Haddow said, "so that's helped us tremendously."
A.T. Kearney began incorporating procurement strategies in meeting sourcing in the past 18 months, Haddow said, after it implemented its first formal meetings policy
(Meetings Today, June 7, 2004). Haddow said his department is working to extend that process to the company's global operations.
For some companies, the complexities of building metrics around meeting spending are difficult enough to justify outsourcing the entire meeting management process. Harry Perales, senior manager of global procurement at Campbell Soup Co. in Camden, N.J., said his company has outsourced its meetings management to American Express since 2001.
"We have a strategic sourcing team here, so everything that we analyze has to be validated in terms of what you really saved or what you avoided in terms of cost," Perales said. "Unfortunately, when you try to apply traditional commodity-type metrics around meetings, it doesn't work."
Perales said his company continually reviews the effectiveness of using Amex services, and is developing meeting management return on investment metrics. "It's challenging," he said. "All of us ask how we justify the return on investment, and how do we get the metrics around it, because meetings don't fall into a nice tidy commodity that you can measure in a typical procurement metric."