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Contract Management In Europe

July 15, 2010

According to the results  of a recent survey by BearingPoint, “contract management is  not a priority at European enterprises”. The study (which is based on data from more than 100 enterprises in 18 countries) reveals low levels of centralization and investment in contract management resources and process.

These results are interesting and somewhat at variance with IACCM‘s experiences. Of course, we all know that attitudes to contract and commercial management vary substantially within Europe. While they are traditional areas within common law countries, the picture is very different elsewhere. Business units tend to operate with much greater autonomy and, while some may decide to invest in people with contract or negotiation skills, many have not. They may turn to lawyers or project managers, or simply take the view that ‘business acumen’ is expected of all senior staff.

This background is consistent with the BearingPoint observations regarding low levels of centralization and investment. Where I disagree with their findings is that we have seen a strong shift in this position stretching back several years. European companies no longer tend to trade predominantly within their own borders. As they form relationships across the EU and beyond, the cosy and relatively informal relationships of the past are being replaced with more formal approaches to negotiation and performance management.

Historically, IACCM data shows that it wasn’t just contract management that was missing – it was contracts! Just like Japan, there was no widespread belief that contracts were necesssary. Much business was undertaken via handshakes and informal methods of management and control. In countries with statute law, there was no point in having a contract – everyone knew the rules. That approach is not sustainable in a global business environment. Even so, it may not always lead to ‘contracts’ in the typical US business context; and it may not lead to a view that there needs to be extensive investment in ‘contract management’ tools and resources.

But large corporations and those with extensive international trading links woke up to the problems that this creates several years ago. Not only does informality generate real risks of misunderstanding, or non-enforceability, but it also means there is no management data to understand the commitments or obligations affecting their company. So we have seen rapid movements in all the EU countries to improve their controls and the visibility of contract data. Several European software providers have had great success in implementing their products.  IACCM membership in these countries has also been growing strongly, but not always from designated ‘contracts professioanls’. The drivers for improvement may be lawyers, but also they are often from business operations, project management or even finance. Companies in France, Germany, Spain, the Netherlands and the Nordics are all moving fast to develop ‘contracting competence’. And this is in some cases mirrored in public sector agencies.

So I agree whole-heartedly with the conclusion of the BearingPoint report: ““With enterprises becoming increasingly global, transparent and functionally diverse, it is essential to keep an overview of all the company’s activities and obligations with sustained and efficient contract management. Since management support is crucial for the operation, executives should have quick and convenient access to all contract information at any time. Therefore, broad situation analysis, change management and a wide and interconnected IT system for process support are vital for optimal contract management”. What surprises me is that they have found so few companies already on this journey – but maybe they did not talk to many of the 5,000+ corporations that have become members of IACCM!

  1. Looking at the BearingPoint study, “Ony eight percent of the companies regard their Contract Management as best practice.”

    That’s probably in-line with IACCM’s findings. There is a lot of room for improvement!

  2. Magnificent website. Plenty of useful information here.
    I’m sending it to a few buddies ans also sharing in delicious. And certainly, thank you in your sweat!

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