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Ease Of Doing Business

January 24, 2010

I was reviewing some recent IACCM reports and came across one that looked at ‘ease of doing business’, with specific focus on the contract negotiation process.

Ease of doing business is one of those terms used extensively by senior management, yet rarely with any precision. It is generally seen as a desired state, but few seem to have any particular idea what steps should be taken to get there.

Last year, a leading professional services and consulting firm decided that it wanted to understand the concept in more detail. In particular, they asked IACCM three questions: 

  1.  does ‘ease of doing business’ really matter when it comes to contract negotiation?
  2. And if so, what does the client think of when they consider a company relatively ‘easier’ or ‘more difficult’ to do business with?
  3. And finally, if it does matters and if there are precise indicators, then how are we doing relative to our competitors?

Interesting questions … and the report details the answers. Firstly, yes – it does appear that contract negotiation practices and process make a difference. Buyers do see ‘ease of doing business’ at this phase of a relationship as an important indicator of how you are likely to behave in future. So especially when you are trying to win new business, or when the opportunity is viewed as ‘strategic’, you will do better if you are easy to do business with.

Secondly, we did find common and consistent characteristics in the attributes that represent ‘ease of doing business’. There were about 12 in total, of course with varying levels of importance. Areas such as communication, speed, respect for the client perspective and needs, understanding of their business shown by approrpiate terms, the right players on the team – these were the types of things that mattered. So we were able to use these to undertake a benchmark of the top 8 competitors in this particular market. And the differences proved to be significant. Of course, our analysis provided indicators against each important characteristic, but we were also able to produce a fascinating summary benchmark – which certainly caught the eye of top management!

For example, Company C met or exceeded client expectations in over 55% of cases – versus bottom of the pile CompanyF that managed just 31%.  Indeed, Company F (which has recently announced poor business results and laid off significant numbers of staff) is rated unsatisfactory in its contract negotiations by more than 40% of its clients or prospects. But others on the list should not feel smug – Company A, for example, is also negatively rated by 33% of the respondents.

Equipped with this information, the contract management leadership team had the material they needed to grab management attention and to get the remit to drive serious improvement. That process in now under way, with a series of targetted projects to reengineer areas of the organization, establish new approaches to sales empowerment, better define the interface between the contracts team and the review and approval process, review contract structures and terms and explore automation.

It is projects of this type – relatively simple, relatively cheap – that transform the role and status of contracts groups. Of course, they may also originate from other areas of the business – for example, Sales may feel such frustration that they demand improvement, or Legal may want to get a better handle on workload and more efficient deployment of legal resources. But whatever the driver, why wouldn’t any professional group want to know how well its activities were perceived in the market? Why wouldn’t they wish to drive improvements and be valued contributors to company success?

The answer certainly eludes me; but unfortunately, studies like this tend to be the exception rather than the norm. And perhaps that helps to explain the issue raised by a contracts director in another recent blog ‘A Disappearing Breed, Or Just A Hidden Breed?

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