The shift of supplier contracting away from travel managers' responsibilities at many companies has raised questions about the future of the profession. Factors contributing to a dampening of enthusiasm—evident in recent industry seminars entitled Will There Be Managed Travel In Five Years? and Die Another Day—include the growing influence of procurement departments, senior management-driven reciprocal arrangements and the possibilities of suppliers dropping deals or distributors taking them over.
Yet, while such changes as the increasingly common and never painless alignment of procurement and travel can be scary, they do not have to mean that justifying the value of travel management today is any more arduous than it is different. Not only is negotiating with vendors but one of many travel management functions, but the movement by procurement departments to take over travel contracting has worked only in the rarest of instances and only with a large degree of collaboration.
"People are saying things like, 'Discerning organizations have begun to accept that travel is much like supplies,' but I absolutely do not believe that," said Michael McMahon, chief procurement officer at Deloitte & Touche, noting that such an attitude has squandered integration efforts at many companies. "The core of this whole thing is you can't have that attitude. No purchasing group will offer a class on airline contracting. Personally, I think there are very few procurement people who understand it. You do need to have someone in the organization who really understands travel. If you don't, it will be a tough road."
"I've never seen such complexity in a pricing model as we do with airlines," said Linda Randle, director of corporate services and purchasing at Brisbane, Calif.-based Stentor. "A lot of us struggle with explaining to CFOs that there are volume agreements, but there are other means to secure the lowest rate."
"The travel and procurement organizations have different skills," said Paul Tomaszeski, executive director of administration with Novartis Pharmaceuticals in East Hanover, N.J., who also is working though an internal alignment. "In simple terms, the difficulty is about turf protection, but aligning objectives and working together can produce success."
At last month's Association of Corporate Travel Executives conference in Las Vegas, Deloitte & Touche offered a seminar illustrating attainable relief for buyers from both the purchasing and travel departments. Billed as a rare success story, the session had McMahon, D&T's relatively new head of procurement, and its veteran director of global conferences and travel groups, Margaret Moynihan, providing a candid recount of their wrestling match with alignment.
"There has been a clear trend in aligning travel and procurement, particularly among larger companies," opened McMahon, whose $6 billion consulting firm spends about $200 million annually in the U.S. on air travel. Companies are centralizing supplier contracting "as a way to reduce costs without cutting jobs, which resonates with CFOs and others. If you haven't centralized everything, you're diluting your leverage. Yet, to do that, you need senior management support, clearly defined roles and you need to communicate about 100 times more than you think you should have to."
Showing, in part, how eagerly the industry yearns for optimism about such changes, D&T's presentation garnered impassioned applause even when mentioned at a completely different session the following day. Yet, feelings are exactly the thing purchasing experts are eradicating by taking on a bigger role in the travel buying process.
"We let objective information and data drive as much as possible of our decision making," McMahon said. "Very little of it is done with emotion. We think we saved about 20 percent more than we would have if we were not a team."
The movement to procurement methodologies partly is driven by the increasing complexity of supplier contracting, which was cited by some in BTN's last Salary & Attitudes survey
(BTN, July 15, 2002) as a reason for pessimism. According to Moynihan, "The facts and the analysis win out. We may be the travel specialists, but there is analysis to support the decisions procurement makes."
For Deloitte & Touche, aligning procurement and travel started with a business process review led by an independent consultant who knew neither of the principals and brought "no emotion to the project," Moynihan said. McMahon said conducting such a review without a mediator is impossible "without damaging relationships.
"This represents a transformation from 'I own it and I make the decisions' to 'We own it and I don't make the decision anymore,' " McMahon added. "It all comes down to people working with one another, and you have to have enlightened management on all sides. When you re-craft all these job descriptions, you have to say, 'You're still doing the same things, it's just with the team.' Once you get over the feelings, then people move on and sign up, or they find something else to do."
Moynihan noted that the only personnel change was one analyst in her department moving to a compliance division that now handles corporate card and policy development and enforcement. Though all three departments collaborate, procurement runs other supplier selection and contracting and Moynihan heads all aspects of meetings and online booking, as well as day-to-day agency, airline, hotel and car rental service operations.
Giving up the contracting aspect of supplier relationships was one of the bigger challenges for Moynihan. "What concerned me most was that one of the best feelings you have in this job is about the relationships you have created," she said. "I thought, 'I've been dealing with corporate card for 20 years and now someone is going to take it away?' You've got to know when to let go. It was going to the right place, and I was still going to have access to the data that we needed."
"Even though you're now mainly on operations, it doesn't mean you're losing your relationships with the providers," McMahon noted. "Suppliers get a tighter and more disciplined approach to performance, but they also require as much education as the internal people." Moynihan said that, at first, suppliers thought they were "supposed to talk only to the procurement people." If that were true, McMahon said, "it just won't work." This is largely because the travel department retains the relationships with travelers. "Margaret owns the end user," McMahon said. As the liaison between supplier and end user, Moynihan's challenge partly is a struggle with perception. While about 65 percent of buyers polled at an ACTE session said a procurement approach does not reduce traveler satisfaction, more than 80 percent of vendors said it does.
Of course, dealing with the personal experiences of travelers is just one of the many facets of travel that make it different from standard commodities. According to the D&T folks, McMahon's understanding of that was a major reason the pair was able to work together. As they put it, the "mild-mannered midwesterner" was asked to speak with Queens, N.Y.-born Moynihan during his recruitment. Her first question to him was, "So what do you know about travel?" "Nothing," was his response, and she told the company's COO that McMahon "really knows what he's talking about."
See The Changing Role Of The Travel Manager, Part II, in the June 9 issue.