CORPORATE SERVICES EXPENSE MANAGEMENT SOLUTIONS

Prepared for American Express by A.T. Kearney

The American Express Meetings & Events Best Practice Study 2005 ®

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C 2005 American Express

2005-1062

Contents 1

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Introduction ■

Who Should Read This Report

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Why This Study Was Conducted

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Market Overview

Study Overview ■

Objectives

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Methodology

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Demographics

Study Findings ■

Challenges

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Best Practices

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Savings Potential

Introduction Who Should Read This Report The results of this study should prove informative to a wide audience of people who are involved in meetings and events management: ■ ■ ■ ■ ■

CEOs, CFOs and other Finance Managers Procurement Managers Travel Managers Meeting and Event Planners Corporate Card Program Managers

Why This Study Was Conducted As an industry leader in expense management solutions, American Express Corporate Services is committed to supporting organizations to optimize benefits from their expense management program. Many companies today have focused on gaining control over traditional Travel and Entertainment expenses and are now looking to other opportunities for cost control and savings. One of the last major areas of unmanaged spend is Meetings and Events. American Express partnered with A.T. Kearney, a leading management consulting firm, to conduct the Meetings & Events Best Practice Study. The key focus of the study is on establishing a best-practice approach to meetings and events management to provide insights which enable organizations to benefit from gains in meeting efficiency and effectiveness. The study highlights how such gains may be achieved through better understanding, execution, and control of the end-to-end meetings management process, including development of policy, improved visibility and consolidation of spending, application of appropriate human- and financial resources, and the use of technology. Market Overview The size of the global meetings and events market is difficult to calculate precisely. However, a widely accepted estimate lies at approximately $100 billion, with expectations for further growth in 2005. Globally, corporate meeting planners forecast budget increases of 5% in 2005, building on a 3% increase in 2004.1

Importance of Meetings & Events Management in the Next 2 Years...

Meetings and events spend can amount to 2% of a company’s revenues or up to two-thirds of total T&E spend in some instances.2 In recent years, the idea of controlling meeting costs has been gaining senior management attention, and this trend is expected to continue. More than three-quarters (82%) of companies in this study stated that meetings and events management will be an “important” to “extremely important” issue for them over the next two years.

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Source: FutureWatch 2005 (MPI & American Express) American Express Corporate Meeting Solutions

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CORPORATE SERVICES EXPENSE MANAGEMENT SOLUTIONS

Study Overview Objectives ■

Understand the key drivers of meetings and events spending

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Define the end-to-end meetings and events management process

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Identify relevant best practices across this process to help companies gain more control over meetings and events expenses, and ultimately drive cost savings

Demographics

Study Findings

Participants vary in geography, industry, and size.

Geography (% of locations)

Challenges Many companies experience significant barriers to effectively managing meetings and events spend. Eight key challenges were identified and are detailed below. Note that many barriers are related to the fragmentation of purchasing.

Methodology

Challenges with Meetings/Events Management

The study examined current meetings and events practices at 105 American Express Corporate Card customers in 113 locations in the U.S. and Europe. A.T. Kearney:

1. Lack of senior management focus

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Shareholder Meetings

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Client Forums

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Incentive Meetings

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Product Launches

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Trade Shows

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Analyst Meetings

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Board of Directors Meetings

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Departmental Meetings

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Recruitment Events

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Training Events

3. Decentralized execution without central coordination

in-depth interviews with 12 companies, speaking with representatives from procurement, finance, travel, marketing, training, recruiting, and meeting/event planning.

a short, closed-question survey with 93 companies. The survey covered the main themes of the study: Policy, Resources, Spend Capture, Spend Tracking, Supplier Selection, and Payment.

Large

2. Absence of formal guidelines/policies

■ Conducted

■ Conducted

Typical Meetings & Events

4. Lack of data/management information 5. Lack of ‘demand management’

Industry (% of companies)

6. Fragmentation of purchasing 7. Difficulty in measuring effectiveness 8. Resistance to change

■ Conducted

interviews with representatives of airlines, hotels and event management companies to explore supplier perspectives on the meetings and events planning and purchasing process.

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Categories of Meeting/Event Spend 1. Lack of senior management focus There is often an absence of executive-level focus at the ‘category’ level, i.e. for meetings/events as a whole across the entire enterprise. Senior management attention tends to be driven by actual spend per management accounting categories such as sales, marketing, training, etc. Without a clear idea of the magnitude of spend, companies are often unaware of the direct and indirect costs that they may, in fact, be able to curtail.

Ensured confidentiality of all participant responses.

Company Size (% of companies/$ revenues)

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Air Tickets

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Rail Tickets

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Coach/Bus Tickets

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Other Ground Transportation

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Hotel/Lodging

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Venue

2. Absence of formal guidelines/policies

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Catering

Only 20% of surveyed companies have a dedicated meeting/event policy. Even for those that do, in the majority of cases these guidelines and policies are not consistently applied across the enterprise. At best, meetings/events frequently merit only a subsidiary clause attached to the Travel and Entertainment policy. 29% of participants include meeting/event language within their T&E policy; 36% have informal guidelines only; 15% have no policy or informal guidelines.

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Other Food & Beverage*

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Trainers/Speakers

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Entertainment/Production

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A / V Equipment*

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Other Equipment/Decoration*

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Printed Materials

As part of policy, companies must define what they refer to as a meeting/event. In this study, a meeting/event was defined as a group of people gathered at one location (where at least some participants are physically present) for a business purpose, and requiring at least one service being provided by an external supplier. At the right are some examples of meetings and events held by companies in the study, and examples of the different types of spend that must be covered by the policy.

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Promotional Materials/Gifts

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Event Management Company

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PR Firm

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Destination Management Company

*May also classify as hotel expense

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CORPORATE SERVICES EXPENSE MANAGEMENT SOLUTIONS

3. Decentralized execution without central coordination

Percentage of Companies Reported To...

The majority of companies interviewed did not have centralized management of meetings/events, nor was there centralized coordination among those who actually do the planning and execution of meetings/events. Without central coordination and control, fragmentation reigns; the look, feel and overall quality of events will vary, sometimes significantly, and the risk increases as contracts are signed without proper guidance and/or oversight. 4. Lack of data/management information

7. Difficulty in measuring effectiveness

The primary objectives of ‘demand management’ are to reduce consumption and/or to improve the return on investment of a process or activity. The study reveals that in the absence of a formal approval process, many meetings/events are held that have little or no proven business benefit. Companies are moving toward tightening approvals, with respondents from 32% of the companies interviewed reporting a high priority on establishing a stringent approval process on an event-by-event basis.

Measuring meeting/event effectiveness in a meaningful and insightful way can be difficult. Typically, organizations distribute attendee satisfaction survey forms at the end of a meeting/event. These may cover a range of topics but often elicit feedback on superficial aspects of the gathering, such as the quality of the venue and the catering—providing little insight to the planner or sponsor about the value of meeting content. Without understanding the link between meeting/event activity and actual subsequent behavior of attendees, it is not possible to conduct a meaningful cost-benefit analysis.

6. Fragmentation of purchasing

Meetings/events expenditure is typically fragmented amongst a number of cost categories, with only 10% of companies surveyed using a single, discrete meetings/events cost center or category; 21% use four or more cost centers or categories such as travel, marketing, training, and recruiting. Payment mechanisms are similarly fragmented. Most companies surveyed use multiple corporate cards, checks and electronic transfers to pay for meetings/events…82% of participants use some type of corporate card; 59% use checks or cash; 43% use electronic payment. Companies using multiple payment mechanisms face inefficient, incomplete and/or inaccurate data-collection processes and are missing a critical step in gaining control and visibility over spend information.

5. Lack of ‘demand management’

Fragmented purchasing across business units leads to fragmented spend across various categories and suppliers. Without supplier consolidation, purchasing is time- and cost-inefficient; contract negotiation is decentralized and is often performed on an event-byevent basis. Consequently, purchasing power in many companies is not effectively leveraged.

Percentage of Companies That Track Meetings/Events Expenses Reported To Use...

Payment fragmentation leads to great difficulty in tracking meeting/event spend. 72% of study participants said they track this spending, but they use multiple data sources to do so. As a result, companies in the study could not accurately report meeting/event spend at the corporate level.

Outside the core T&E categories there is often no formal bidding process or use of tools to drive standardized sourcing practices. Supplier selection is frequently based on historical affiliation or individual preference rather than on economically-sound criteria. The non-standard, highly-variable nature of meeting/event transactions adds additional complexity to procurement practices in this category.

Percentage of Companies Reported To...

8. Resistance to change Who controls meeting budgets can be a surprisingly emotional issue, especially for meetings and events perceived to influence brand perception or competitiveness. This often deeplyrooted sense of ownership can generate strong resistance to change, especially when a newly mandated procurement process generates greater visibility over how events are initiated, planned, budgeted and accounted for.

Meeting/Event Spend is Negotiated...

NOTE: CMC STANDS FOR CORPORATE MEETING CARD; CC STANDS FOR CORPORATE CARD; CPC STANDS FOR CORPORATE PURCHASING CARD; OTHER INCLUDES ANY HOME-GROWN SOLUTIONS.

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Best Practices Through detailed interviews conducted with companies and suppliers, an end-to-end meetings/events management process was defined and best practices were developed in accordance with this process. The figure below illustrates the end-to-end process from top to bottom along the left-hand side. On the right is a summary of the best practices that correspond to each component of the process chain.

Summary of Best Practices Policy and Governance

Organizational Resources

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Common, standard definitions of meetings/events Formal policy for meetings/events which is aligned with T&E policy and with terms that cover 80% of total meetings/events ■ Clear senior ownership of the policy ■ Active communication of the policy followed-through with enforcement and compliance tracking ■ ■ ■

Clear definition of roles and responsibilities of Meeting Planners supported by appropriate internal and external training Central control of internal and external planning resources Centralized, detailed enterprise-wide meeting/event data linked to relevant T&E data and accessible to key stakeholders for planning, sourcing and policy compliance tracking

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Budgeting & Master Scheduling

Supplier Selection and Negotiation

Organizing & Planning

Attendee Booking & Management

Payment & Reimbursement

Reconciliation & Allocation

Rolled-up central budget for meetings/events that captures associated T&E spend and is based on annual bottom-up budgeting for key events coupled with top down estimate for all remaining meetings/events ■ Comprehensive shared central calendar that is centrally coordinated but maintained by Meeting Planners; privacy options set by planners control access to entries ■ The ability to leverage calendar information for sourcing purposes and for managing cancelled space ■ ■

Continuous efforts to consolidate suppliers across all spend categories Preferred supplier lists specific to meetings/events for all categories that can be ‘commoditized’; enforcement of preferred lists is supported through the use of a centralized supplier database ■ The ability to aggregate meeting/event spend volumes with T&E volumes, providing a better base for price negotiation ■ Standardized, formal sourcing criteria developed with the support of Procurement

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Standard planning guidelines supported by a planning tool, which is integrated with other enterprise-wide systems Clear, specific and executable objectives are set at the initiation stage of a meeting/event

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Web-based tools for registration and related bookings Processes to ensure that host-funded attendees utilize the tools and deals of the company sponsoring the meeting/event ■ Attendee data that is captured near-real time and is provided to suppliers with regularity ■

Centralized payment mechanism for all cost categories including attendee T&E spend but excluding attendee incidentals which are paid via individually settled corporate cards ■ Processes that ensure payment is direct to the supplier (vs. via Event Management Company) ■ Online employee expense reporting system that accepts downloads of corporate card data

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Payment mechanism that integrates with Finance systems/tools to minimize manual processing of expenses and allocations ■ Meeting/event identifiers tied to all invoices facilitate reconciliation/allocation ■

Post-Event Evaluation

Standardized post-event evaluation forms/processes for the internal Meeting Planners, the event itself and the suppliers ■ Two-way review process conducted with suppliers for feedback on approach, quality of brief and performance ■ Process for feeding back results of reviews to key stakeholders for future planning, training and supplier selection ■ Widely accepted measures of meeting/event effectiveness per meeting/event type

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CORPORATE SERVICES EXPENSE MANAGEMENT SOLUTIONS

Savings Potential In studying best practice meeting/event planning processes, it is evident that a “managed” meetings program can result in significant cost savings for all organizations, regardless of size, industry or location. By redesigning processes by which meetings are planned, sourced, managed, paid and reconciled, companies have the potential to better control their costs while improving quality. Often the introduction of these changes requires some reallocation of responsibilities and adjustments to the company’s organizational structure. Depending on the maturity of a company’s existing meetings/events management processes and level of automation, the sources and degree of savings will vary. Nevertheless, most ‘best practice’ companies can realize substantial direct and indirect savings by addressing the following four areas: ■

Demand Management

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Supplier Management

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Compliance Management

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Transaction Processing

guidelines or informal standards. Introducing standardized processes for approval, compliance tracking and reconciliation can have an immediate effect on meeting/event spend. External risks can be reduced by involving internal “experts,” such as procurement professionals who can review contracts to ensure that potential contract risks are reduced as much as possible. Transaction Processing The study revealed that there are several major areas for process improvement: meeting/event planning, attendee registration and management, travel booking, payment/allocation. These processes are highly manual at most companies. Automating these processes can provide companies with better efficiencies and data, which can then lead to further savings opportunities. Savings Summary The figure below illustrates the savings opportunities available to companies across these four areas. It is important to note that there are interdependencies among each of the four areas. Accordingly, it is estimated that companies can save 10%-15% overall on their meeting/event spend by implementing a managed meeting/event program, as outlined below.

Demand Management A company’s demand for meetings/events is mainly driven by industry and culture, which in turn influence types of events, frequency, size, budget, locations, commitment to training, etc. There may be considerable variation in demand across regions and business units. No matter what the degree of demand, however, the study revealed that most companies do not have formal policies in place that outline when meetings/events are appropriate, whether the meeting or event warrants travel, what budget parameters must be met, who authorizes spend, etc. Companies that can address these areas and even ask meeting sponsors to justify conducting the meeting or event, can begin to ensure that their money is well spent.

Meeting/Event Management: Sources of Economic Benefits Demand Management

Sources

Potential Measures

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Align Specifications With Purpose

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Reduce Requirements

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Reduce Frequency

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Encourage Substitution

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Utilize Distressed Space

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Tighten Approvals

Compliance Management ■

The study revealed that a large proportion of companies cannot enforce or do not strictly enforce compliance of meeting/event planning due to a lack of official policies or governance processes. Often, it is the meeting planners themselves who are the “guardians” of compliance, leaving ample room for deviations from 8

Eliminate Unnecessary Meetings

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Supplier Management By overcoming the challenges of fragmented spend and non-standardized planning and purchase practices, companies can consolidate volume to reduce purchase prices and streamline administrative costs. The choice of a dedicated, centralized payment mechanism can help a company consolidate the data it needs to strengthen its negotiation position with suppliers and enhance savings.

Total Savings Potential of 10% – 15%

Heighten Cost Awareness

Supplier Management

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Consolidate Suppliers

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Appoint Preferred Suppliers

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Use Standardized Sourcing Tools Standardize Supplier Selection Criteria

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Involve Procurement Department

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Centralize Contract Review

Compliance Management

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Ensure Compliance to Policy Through: ■

Stringent Enforcement

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Automated Tools

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Follow-through On Non-compliant Behavior

Transaction Processing

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Improve Attendee Registration Process

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Improve Payment/ Reconciliation Process

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Improve Event Planning Process

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Improve Travel Booking Process

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Improve Attendee Reimbursement Process

SOURCE: A.T. KEARNEY ANALYSIS; SAVINGS ESTIMATES ARE PROPRIETARY TO A.T. KEARNEY AND NOT PRODUCED AS PART OF THIS STUDY.

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CORPORATE SERVICES EXPENSE MANAGEMENT SOLUTIONS

Estimating Savings Potential In order to assess the viability of introducing a ‘managed’ meeting/event program and to identify key focus areas, companies should first identify their savings potential. This calculation can form the basis for a business case to be presented to senior management. Following the six-step approach below will help obtain relevant information to assess savings potential.

Where to Start – Estimating Savings Potential 1. Assess the current situation vs. ‘best practice’ 2. Define ‘best practice’ target for your organization 3. Assess the gap between current situation and ‘best practice’ 4. Establish benefit expectations

Conclusion: Change Management is Required Given the widespread need to alter both well-established behaviors and culture, the change management aspect of a meetings/events management program should not be underestimated. As many companies in the study attested, sensitivities and a strong sense of ownership often reign over meetings/events, and the resistance to change is powerful. There is no easy way to manage through this, but there are some standard change management principles that can and should be applied to help ensure sustainable change: ■

Recognize legitimate business purposes to meetings/events and don’t ‘over-commoditize’

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Give ownership of change targets to individual business units

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Start small and gain momentum with success, and

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Meetings and events should be procured the same way commodities are: with objectivity, accountability, and by following an established process.

5. Prioritize areas to be addressed 6. Obtain endorsement from senior leadership

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