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Ease Of Doing Business

July 16, 2009

Many times we hear executives talk about ”ease of doing business’. Intuitively, it sounds like an attribute any company should have. And we can probably all think of good examples – especially of those organizations that really make it hard to want to do business with them.

High on my list of ‘hard to do business with’ come mobile phone companies (because of their impenetrable charging formulas and their mostly unhelpful and unempowered call centers). There are others, where for example you are passed from person to person, where no one seems to control anything, where the software systems apparently have no interconnectivity …..

 But how does it relate to the world of bids and contracts? What should those in Legal or Contract Management be doing to address  ‘ease of doing business?’ IACCM undertook a survey at the end of last year. Its focus was on service-oriented, business to business contracts.  The results showed large variations in performance between the companies in the particular market sector that we surveyed. But those who were good at one important characteristic were not necessarily good at all of them. The study also revealed that the size of the  legal or contracts organization was significant in determining rankings – but even more important was how and when they were engaged. Excessively large groups did as badly as those organizations with almost no contract resources; in both cases, they caused levels of inefficiency and inflexibility.

The most effective contracts and legal teams were those actively involved in ensuring that corporate policies and practices were aligned with contract commtments – and that the commitments on offer reflected market needs. They were also adept at explaining limits and sought to apply intelligence to the wants and needs of the other side.  Not surprisingly, it was one of these groups that commissioned the study!

So how are the firms easier to contract with? The three most common reasons:

  1. They are more flexible on terms and during negotiations (i.e., prepared to hear-out all perspectives on a given issue before making a decision and willing to accept alternate contract text in the interest of being balanced);
  2. They understand not only the contract but the business side of the deal as well; 
  3. They are able to establish good relationships with clients. They keep customers’ need in mind and partner with them to best meet those needs.

There were extensive additional comments about the specific companies in the study and IACCM was able to feed back relative rankings on a series of important characteristics.  This led several of them to undertake improvement initiatives. Perhaps not surprisingly, those who fared worst are those which today are still talking about making improvements – in other words, the ‘ease of doing business’ gap has widened.

While this particular study applied to supplier characteristics, the attributes are equally relevant on the buy-side. Companies that want to be a ‘customer of choice’ should also consider the characteristics mentioned above – and perhaps undertake similar studies of their relative market positioning.

Anyone wanting to learn more about the study – or perhaps interested in knowing specifics for their industry, including their position relative to competition – should contact Katherine Kawamoto at IACCM (kkawamoto@iaccm.com) .

And if you have particular horror stories that you would like to share, please send them to me – it is always good to hear how bad some organizations can be!

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