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Contracting and the realization of business benefits

February 28, 2010

Jason Busch produced a timely article last Friday, acknowledging the importance of proficiency in contract management both in reducing cycle times and in realizing expected benefits.

His comments were timely, because just the day before I had interviewed Lee Coulter, former Senior Vice President of Operations at Kraft. In this role, Lee was the executive responsible for many of Kraft’s outsourcing and managed services initiatives – and he formed strong views about the need for greater focus on contract management skills.

“In most complex services engagements, there is lots of conversation on what can be done and the value that can be achieved,” observed lee. “But the contract often fails to capture this.”

“You can liken the range of business relationships to human relationships,” he commented. “We may be looking for a something casual, something that is convenient for the moment. Or maybe we want something that is closer to serial dating. And sometimes we need a real business partnership.” In Lee’s experience – echoing so many others – Procurement is very good at establishing ‘the pick-up’, a transactional relationship with no real commitment. It is generally equipped to manage serial dating. But it is lost when it comes to a long-tem, high value relationship. 

Jason Busch similarly observes the need for much greater sophistication in the contracting process. Like Lee Coulter, his article implies that providers are actually much better at this than most of their customers – and are frequently frustrated by the traditional approaches followed by many customer Procurement and Legal functions.

“This is a real leadership challenge,” said Lee. “It is hard keeping organizations aligned”. And in his experience, far too many procurement and legal staff are inclined to find probelms and reasons why things cannot work, rather than exploring new directions. This, of course, is why it is often tempting to exclude the ‘contracts’ people until late in the process; and this, in turn, leads to delays and risk-averse behavior.

At Kraft, Lee did his best to drive inclusive teams and to create excitement around innovation. But success depended on radical new approaches to the contracting process and the roles and measurements of those who worked within it. The full interview, in which Lee Coulter explains his approach, is available in the IACCM library.   Lee will also be a presenter at the next IACCM conference.

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