Commercial Versus Contract Management

I am often asked to define the difference between commercial management and contract management. So here goes.

First, commercial management is a role and job title that until several years ago was largely confined to the UK and some former parts of the British Empire. It appeared to be in terminal decline – but is currently making a resurgence and is now not uncommon as a job title in North America and even some parts of Europe and Asia.

Second, commercial managers believe themselves innately superior to contract managers. They bring levels of imagination and judgment to their task that are far beyond the process-driven, administrative activities of a contract manager.

Third, commercial managers are generally more focused on sales and business development, though some may also embrace procurement, especially in connection with major projects (as opposed to minor acquisitions, which are allocated to ‘buyers’). However, some procurement specialists have taken to calling themselves ‘commercial managers’, so what is going on ….?

Job titles are of course always a problem, because when they lack any formal professional underpinning, they represent a wide range of activities and qualifications. However, if forced to make a generalization, I do think that Commercial Managers are more frequently engaged in leadership roles; whereas Contract Managers tend to be more driven by process. In the words of an excellent short article in the Spring edition of The Conference Board Review: ‘Leaders make decisions, big decisions, mid-crisis decisions, without certainty of the outcome. Managers don’t.”

And that perhaps explains in part why Commercial Management was a largely European development and Contract Management largely originated in the United States. ‘Managers may have the best MBA education possible, but they measure metrics, analyze, maintain the status quo and, as they love to say, ‘do deep data dives’.” Contract Managers follow process (which was such a strength in the US mass production environment); Commercial Managers exercise judgment (often because there is no real process to follow).

But increasingly this divide has narrowed. In part, that is because the move towards higher-risk solutions and services demands greater judgment in all organizations (process is no longer enough); but it is also because the status of many commercial functions has reduced – today, to gain credibility, they need facts amd market intelligence, not just opinions.

In the end, title does not really matter. It is the readiness to make decisions and to be held accountable that represents leadership – and it is something to which both contracts and commercial managers can aspire – so long as they understand the need to deal with ambiguity, not having all the facts, not having all the data – in fact, if they can handle the conditions that will become increasingly common in today’s volatile global markets.