Much is being written about ’Future Procurement’, mostly envisaging a new, expanded role for the existing function.
While those forecasts may be correct, I prefer to view this topic through the lens of organizational competency, rather than assuming the need for a specific function or experts to create capability.
What are the problems with procurement today? Why is there this constant drumbeat about the need for change? Many would say those performing the role are too narrow in their thinking, too limited in their accountability, too constrained in their contribution and that overall capability lacks coherence (and to the extent this is true, it is typically not the practitioners at fault, but the constraints put upon them by outdated rules, processes, measurements and systems).
So in this context is it procurement that’s wrong, or is it a failure to look more holistically at the capability to deliver outcomes through or with external providers? This capability requires coordination across multiple stakeholders – it is a cross-functional integration role, not a traditional discipline; and it certainly is not something that today’s practitioners have been taught to do. So why would we assume that procurement steps into that role?
Therefore we must give thought here to the question – ‘are we seeking to fundamentally redefine what we mean by procurement, or are we trying to reform or redesign the current procurement phase to fit better within an overall delivery system?’
Among the challenges we face that have driven a need for reform are:
– the massive increase in externally acquired goods and services
– the steady shift from acquisition of goods to a predominance of services
– the continuing evolution of relationship types and models with little thought given to the organisational capabilities needed for their management
On top of these, the scale of market change and uncertainty today require fundamentally different capabilities to assess, to contract and to manage. Adaptability, agility, predictive capability, dynamic reform – these are not characteristics that those outside the function generally associate with procurement.
So what do we need? As one senior executive recently said to me, “we could essentially outsource everything except contract management – and that’s arguably the area of capability where we’ve made the least investment”.
I think few would disagree that procurement capability needs to change, to be more adaptive and responsive, more effective at analysing and replicating its own success. But does the role itself need to expand, or does it need to be better instructed and managed, provided with fit for purpose tools and policies? In a perfect world, I might argue that organizations want full self-service capabilities without function. ‘Future procurement’ may well be fulfilled by people equipped with intelligent machines.
With this in mind, modern procurement should be an enabling and oversight function, equipping the organisation with the tools and knowledge needed to successfully select and manage supply relationships.
To do this, there needs to be segmentation based on the type of relationship needed to achieve the required outcome. That’s because different forms of relationship require very different skills and capabilities for their management.
Traditional procurement was strongly focused on input. Indeed, as a former head of the GSA in the US observed ‘we often undertake a perfect procurement and achieve completely the wrong outcome’. Too often, procurement has been a rules based system designed to support product acquisition.
When it comes to delivering value, contract award is the beginning, not the end. While there has been some excellent work reskilling and attempting to convert thinking from ‘procurement’ to ‘commercial’, post-award skills and competencies have until recently been largely ignored and the transformation of existing thought and behaviours are at best patchy. Even where training has been applied, its effectiveness is constrained by the actions or inactions of others – for example, legal, finance, operations – or the embedded assumptions of executives or suppliers.
Leading practice is to design for a full acquisition lifecycle. And in this wider context, at a recent conference, delegates recognised that procurement is just one phase in the much wider discipline of contracting.
So I would suggest that the question regarding ’Future Procurement’ is one that we cannot and should not seek to answer without first having defined and understood the overall contracting lifecycle – from inception of requirement to delivery of outcome or termination of need. It is this capability that is missing and simply fiddling with procurement may enable marginal improvements, but will not fix the problems.
You are busy – in fact, operational workload for most contract and commercial professionals is running at record levels. With business conditions in such a state of chaos, there just is not time to think beyond the latest crisis, the day-to-day firefighting ….
It is so easy for all of us to fall into the trap of immediate priorities and think that somehow our hard work, our dedication will be acknowledged and rewarded. The trouble is that the world around us is always moving on, others are focused on ‘the next big thing’ – and one day, we realize that we have been left behind.
Sustainability – environmental, social, governance – is one of those topics. It is humming along in the background, steadily gaining pace. Its success has a massive dependency on new and revised commercial policies, practices and processes. Contracts and their management will be critical to achieving sustainability goals and targets. And this is no longer some distant, abstract dream. It is here, It is now. And it is time to join the journey.
World Sustainable Contracting Day is upon us – it happens on May 17th and it costs NOTHING to attend. Getting to grips with how CCM is impacted and how it can impact the sustainability agenda is important not just for the world, but also for you – making your job and career sustainable. Register now!
Are there benefits in consolidating buy-side and sell-side contracting and commercial resources? If yes, should this be a full or partial integration and are there potential exposures or conflicts of interest to watch out for?
These are questions that many organizations – especially those in business-to-business markets – periodically ask. It seems logical that a consolidation of resources might offer greater efficiencies and savings, perhaps also adding to organizational effectiveness through a broader skill set and improved data flows. Based on extensive insight from its benchmark studies – and regular conversations with members – World Commerce and Contracting has produced a short report and here is an extract from it.
Current State
Across industry as a whole, full integration of buy-side and sell-side contracting and commercial management is relatively common in smaller organizations, where it offers resource and skill efficiencies. In these organizations, individual practitioners are often responsible for both purchasing and sales contracting. This is less likely to be the case in larger corporations, where functional separation and individual specialism are the norm. However, this is not universal and there are significant variations between industries. The table below, based on data from six indicative industries, illustrates the point.
What is the state of integration of resources responsible for buy side and sell side contracting?
| Aerospace / Defense | Banking / Insurance / Financial | Engineering / Construction / Real Estate | Manufacturing / Processing | Services / Outsourcing / Consulting | Telecoms | |
| No integration (separate reporting lines) | 53.20% | 66.70% | 31.80% | 74.10% | 47.80% | 84.60% |
| Plans for integration | 2.10% | 5.60% | 4.50% | 3.70% | 8.70% | 3.80% |
| Areas of partial integration | 34.00% | 19.40% | 40.90% | 18.50% | 26.10% | 11.50% |
| Fully integrated | 10.60% | 8.30% | 22.70% | 3.70% | 17.40% | 0.00% |
It is notable that the industries with higher levels of integration are generally project / program oriented where greater coordination between buy-side and sell-side activities is essential. However, as the data shows, integration is typically not absolute. ‘Partial integration’ often means that team members supporting the sales contract also take responsibility for sub-contracts, rather than more general procurement activities.
The Report
The report goes on to discuss the benefits of integration, the extent to which these are typically achieved, the barriers that often prevent success and emerging trends that are making this an important topic for the future.
Yesterday, my 9-year-old grandson declared that money is evil. He has concluded that the world should operate through acts of kindness. We then discussed some of the practical realities behind trade, human progress and economics. By the end of our conversation, he came to accept that there is benefit in having an agreed medium of exchange and that the real problem is in the way that wealth is pursued.
This is surely the moral issue that lies at the heart of the sustainability agenda – it is our need to balance core values of personal or organizational benefit with broader social well-being. Ultimately, it is a matter of conscience.
A shared endeavor
In this context, I believe we must view sustainability as a shared endeavor to improve our world – not an opportunity to make money.
The environmental and social principles that underlie these new values create a need for shared standards of governance. Those standards include increased collaboration, greater transparency and an acceptance of shared responsibility. They depend on unity of purpose, superseding traditional forms of competition, operating across the boundaries of faction and function.
Building this new structure must be open and accessible to all – an inclusive experience for voices to be heard, ideas shared and respected, knowledge and learning to be freely accessed. Once we start charging money – for example, conferences or training programs that demand delegate fees – we inevitably exclude many from participation. And that is why World Commerce & Contracting is developing a series of free events, open to all who wish to participate. It is part of the new face of commerce. I hope you will join us for the first of these, on May 17th.
‘Agility’ appears on many organizational goals and agendas. Given the experience of the pandemic, that is scarcely surprising. The need for speed and adaptability has taken on a new level of urgency, whether reacting to risks and threats, or grasping new opportunities.
Being agile is especially challenging for commercial and contracts teams. We are not the sort of people who operate in a vacuum. Most of our actions and decisions involve others, both inside and outside the walls of our organization. Therefore our ability to operate flexibly and at speed is typically constrained by their responsiveness.
For CCM groups, ‘agile’ has two distinct meanings. It may relate to our internal operations and processes, but it may equally refer to agile contracts. The recent World Commerce & Contracting benchmark study tells us that agile contracts are on the rise – a growing number of organizations are observing increased demand and use. Given the uncertainties that surround us, that is not surprising – though the study continues to show substantial variations between industries.
We also know that many remain confused about agile contracting – when and how to use it, how to reconcile it with traditional financial and budgeting systems, what form the contract should take – indeed, should there even be a formal contract at all?
Questions like this have been at the heart of a month’s-long collaborative activity that has pulled together a set of principles, collectively known as the ‘Agile Contract Manifesto’. Designed to accompany the long established ‘Agile Manifesto’, this set of twelve rules or principles provide a framework to guide contract developers and negotiators. Over the coming weeks, we will be socializing and testing the Manifesto with the commercial and contracts community – webinars, roundtables and at the WorldCC conferences, as well as third party events.
For now, we are collecting input on both forms of agile through a survey that tests both organizational agility and also seeks reaction to the Manifesto Principles. I hope you will share your view and help us all on the path to increased agility!
Hesitant? Confused? Frightened of making the wrong choice?
These are common emotions among those charged with reviewing and selecting contract management tools and systems. While software has been available for almost 25 years, the success stories are few and far between. Many have invested, only to discover that functionality is not there, that adoption rates are low, that implementation costs rapidly spiral …..
Is automating contract management doomed to fail? Discover the answers!
It is a complicated process, leading many to conclude that the best way forward is to tackle specific elements, using a variety of tools. But there have been remarkable advances in the technologies now available to us, so is past experience a good guide? Could it be that the problem is not in the software, but in the way we assume contracting must be done?
With the growing pressure on legal, commercial and procurement teams to deliver greater value, there is no question that contract performance must improve. Streamlining the process, identifying sources of value and empowering the business to better manage risk can only be achieved through technology. So which technology to consider and choose?
The confusion of choice
With more than 250 options, it is not surprising that those charged with identifying and selecting a system feel overwhelmed. Do we want an application, a platform, a set of integrated tools from multiple suppliers? The WorldCC selection tool has been designed to help in evaluating and narrowing the options. It is supplier agnostic, free to use and comes with no strings attached (i.e. you will not be inundated with calls from possible vendors or consultants!). Following a major update and overhaul, the tool (already used by more than 20,000 organizations) is about to be re-launched, along with an explanatory webinar and discussion of the latest trends and opportunities for contract management automation.
If you want clarity, sign up for the launch webinar due to run on February 3rd. Participate live, or receive the recording. You can register here.
Yesterday saw the launch of the first in World Commerce & Contracting’s series of industry benchmark reports – and where better to start than the Technology and Software sector.
With so much emphasis now placed on the social and business impacts of technology and software, it is natural to suppose that this industry would be at the forefront in its deployment – that they would be well in the lead in streamlining and digitizing commercial and contracting processes.
That may be a reasonable supposition – but it would be wrong! Relative to cross-industry averages, commercial and contract management capabilities in the technology and software sector are among the least developed and technology deployment is among the lowest.
Without diving into the specific data (there is a wealth of that in the report), what are the reasons behind this neglect? The research suggests that many organizations in this sector simply have not adjusted to the changes in their offerings and market. In many cases, they are operating with CCM resources and systems designed to support a world of product sales and licensing. Their investments have focused on pre-award contracting, to support speed and volume. They utilize extensive offshore and outsourced resources and in many cases see contracts purely as legal or financial instruments, rather than as tools that support effective and profitable business operations. As the industry has shifted towards performance, outcome and ‘as-a-Service’ commercial models, internal capabilities in negotiating and managing these forms of relationship have not adequately developed.
The report indicates growing executive awareness of the need for improvement – 63% of respondents indicate a growth in focus and 75% highlight adoption of tools and systems as a priority, especially to support post-award value and performance. There is appreciation that technology alone will not be enough – raising current skills and retaining talent are also high on the agenda.
In summary, the industry has a pressing need for improved visibility into contracts and contract data across the lifecycle. In an environment of longer-term services and performance contracts, there is increased recognition of the critical impact CCM has on economic and financial performance – overall operational cost, value retention and opportunities for revenue growth. The historic focus on audit and compliance is taking a back seat and speed, while remaining important, must be fully aligned with value. And the benefits? Analysis of comparative performance suggests potential margin improvements of 5-7%.
The WorldCC benchmark report was published on January 13th, 2022 and results were also presented in a webinar, conducted in partnership with leading technology provider Icertis. This is the first in a series of 10 industry reports that will be published over the next 10 weeks; #2 in the series will address Healthcare & Pharma and is due for release on January 24th.
I am neither a fortune-teller, nor a clairvoyant, but I do have extensive insights to the discipline of commercial and contract management and what the year ahead may hold for practitioners in this field.
After the shocks of 2020, many felt that 2021 must be better. In large part, they were wrong. It turned out to be a massively disrupted year and we enter 2022 with many in the CCM community recovering from unprecedented levels of operational workload. They suffered from the disjointed nature of the contracting process – often struggling to find agreements, or to gather required information; facing the frustration of data fragmentation and difficulties in accessing key stakeholders. The innate inefficiencies of current organizational and procedural design – and the absence of integrated technology – became all too evident, hampering efforts to deal effectively with continued market disruption, supply challenges and frequent contract renegotiations.
So this time, surely, 2022 cannot be worse?
The signs are mixed. Supply disruptions continue. Workforce availability – and skill shortages – are proving a persistent problem. Geopolitical insecurity is threatening world trade. And in its various forms, the pandemic continues. Yet uncertainty brings with it opportunities. WorldCC’s recent benchmark report highlights massive growth in executive interest and investment in raising contracting and commercial capabilities, since these are critical in managing market volatility. The research tells us that the focus for CCM must be:
- Protecting against disruption
- Better anticipating and managing risk
- Operating at speed
- Safeguarding revenue and growth
These objectives will be met through simplification – of process, of data flows, of artefacts such as contracts and governance frameworks. They demand a new blend of people and technology – a shift that is recognized and welcomed by many of today’s CCM practitioners.
So does this add up to a happy new year?
For those who dislike change, 2022 will be an unsettling year. For those that embrace change, 2022 will perhaps turn out to be the most satisfying year of their career.
For many, 2021 has once again been a year like no other. Volatile, uncertain, emotionally and intellectually challenging. In future years, researchers looking back at how we reacted – the impacts on our societies, our values, the way we interact with each other – will observe the opportunists and the philanthropists, those who sought advantage and those who acted generously to others. But will they mark it as a turning point in human attitudes and behaviors?
It is in times like this that questions of ethics come to the fore – and commercial ethics are a critical element in overall well-being and recovery. There are some who have sought to profit, who have delighted in the disruption and their ability to add to it. I suspect historians will observe this in many of the supply shortages that have occurred. They may well comment also on the actions of the media, so often desperate to sensationalize, to spread alarm and despondency. The role of politicians – and geopolitics in particular – is also certain to come under scrutiny.
But what of the business world in general? Has this shared experience caused us to think and act differently? Will future generations look back and see a turning point, a shift from competition to cooperation, a new spirit of collaboration?
Back in April, at the World Commerce and Contracting Academic Symposium, Ugur Sahin (CEO of BioNTech and developer of the Pfizer vaccine) called on the commercial community to formulate a new model – a model for ‘trust based collaboration’. He drew on the experience of vaccine development, achieved in record time, to explain and extol the commercial framework that had been used to such positive effect.
So can we learn from the experiences of vaccine development? Does this provide us with a fresh perspective on the ethical and practical standards for commercial relationships, or was this just an aberration?
The CFO of Pfizer recently observed that the best deals are often those where there is no deal. In making this comment, he perhaps mirrored Ugur Sahin’s reflection that in a time of crisis, there is no room or place for contracts. Creative action demands a focus on discipline and structure, but not on issues of commercial precision and enforceability. Those come later, once there is sufficient certainty about outcomes. Hence, BioNTech and Pfizer established clear procedures for governance, but contracts came much later.
AstraZeneca and Oxford University followed a similar path, though with commercial principles in some ways more clearly defined. From the outset, they established that any vaccine they produced would be on a non-profit basis. With an average price of $4 (against Pfizer’s $20) and much lower distribution and storage costs, AstraZeneca have arguably contributed far more to the world than any other manufacturer. Their commercial ethos has extended to supporting production at scale in many of the world’s poorest countries, entering contracts and providing a full guidance toolkit to support rapid availability of vaccine. (At this time, the AstraZeneca vaccine is world leader in terms of production).
Yet AstraZeneca also gained headlines for a high profile contractual dispute with the European Commission. It may well be argued that the company was commercially naïve and fell foul of geopolitics, combined with agreeing to an inappropriate form of contract. In spite of all its altruistic endeavour, AstraZeneca has emerged (unfairly, in the view of many) with a mixed reputation – unlike others, who have actually made substantial windfall profits and seen a surging share price.
So what conclusions can we draw on the status of commercial morality and ethics? Might we be able to claim that business has become more socially aware, that the pandemic has perhaps enabled greater momentum for the ESG principles and an increased sense of moral obligation? The evidence for such a change is mixed. The political environment has, if anything, deteriorated. We have yet to see whether business practices have fundamentally altered, whether ‘collaboration’, to the extent it is occurring, is being driven by need, or by principle.
Within the commercial community, there are those who are genuinely inspired and inspiring others with the potential for new and better ways. New technologies enable the sort of transparency, visibility and – in some cases – anonymity that can turn good intent into practical reality. There are heart-warming examples where exploitation is being exposed, where lives and livelihoods truly are improving. In my work at the University of Leeds, I am encouraged and excited by the number of law students who are motivated to tackle injustice and create a fairer, more open society. At WorldCC, we observe growing interest and adoption of relational principles within contracting.
Times of turbulence generate change and changes are without question happening – but many are fragile. My hope for 2022 is that the commercial community raises its voice and promotes the ethical standards and supporting systems that alone can move us along the path to making trust-based collaboration a norm, rather than an exception.
This year’s Talent and Wellbeing Survey tells us that the answer for many is yes – and they enjoy their work. They find it challenging and feel that they are making a valuable contribution to their organization’s goals. A growing proportion also take their professional status seriously and recognize the importance of a formal certification.
But there is a ‘but’ ….
Thirteen percent are unhappy with their role and position and sixteen percent (that’s one in six) plan to leave their current role in the next six months. With 65% seeing the job market as either ‘good’ or ‘excellent’, it appears unlikely that they will have too much difficulty finding an alternative.
What is it that drives people to move? The overwhelming reason is a sense of poor opportunities for career growth and training within their current employer. Indeed, 40% say that developing their career depends on moving.
‘The Great Resignation’
There is nothing in the survey results so far to indicate that there is ‘a great resignation’ among the Contracts and Commercial Management community. The data regarding plans to change job is , if anything, showing a slight decline relative to past years. One reason for this may be that executive management is showing much greater interest and appreciation for the importance of the role. ‘Feeling loved’ has a big impact on retention.
One thing that has been impacted by the pandemic is the extent to which most people want – indeed demand – flexible working. A clear majority say they would not work somewhere that did not offer this and it is the number one thing that they value about their current job – surpassing even salary and compensation.
Into the future
The CCM community appears confident that it is developing the skills needed for the future – although many also show concern over their employer’s limited investment in training. And when evaluating the areas of competence that will be most important, many appear to be at odds with expert predictions. One thing that they do recognize – and even welcome – is the ability to work increasingly with technology. Two-thirds are eager for tools and systems – most likely because they see it addressing the thing they most dislike about their job: the volume of administrative tasks.
The WorldCC Talent and Wellbeing Survey remains open for input and is gathering a wide range of data to assist individuals and employers in better understanding the current state of Contract & Commercial Management. The report (to be issued in January 2022) will provide insight to personal development and wider issues of talent growth, retention and recruitment.
Commitment Matters 