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Contract Management – by design or by default?

October 28, 2010

“Was your contracting process defined, or did it evolve by default?”

That is the question asked by Craig Silliman, General Counsel at Verizon Business, in today’s webinar that was jointly hosted by IACCM and Ariba.

This week has been marked by growing evidence of Legal interest and leadership in getting to grips with contract management. For some, it seems to be the pressure of workload that results from an inefficient and undefined process. For others, it may be the result of audit and regulatory concerns. But whatever the driver, this is the third blog this week highlighting leadership by in-house counsel.

I welcome this development because, as Craig and co-panellists Chris Davies from Fujitsu and Debby Leap from HAVI emphasized, progress can only occur if there is leadership. This does not inevitably come from Legal, but the General Counsel often has greater incentives to drive improvement than other executives. Yet as Craig pointed out, this is often perverse, since in reality the major benefits of contracting efficiency are observed in financial results.

The panel members represented different functions – Sourcing, Commercial Management and Legal – yet each agreed that successful contract process reengineering must start with an understanding of the company-wide benefits to be achieved – for example, greater speed, reduced workload, improved controls and faster response to changing business and market needs. The problems created by inefficient and fragmented contracting are primarily resolved through process definition; this inevitably leads to the conclusion that automation is required in order to secure and safeguard the benefits.

“Without an effective and inclusive process, contract decisions are often surrounded by apparent risk and uncertainty,” observed Craig Silliman. ” And when there is uncertainty, it is always easier to say ‘no'”. In today’s environment of rapid and unpredictable change, many of the old rules and procedures rapidly become redundant, yet without a clear process or methods to gather business and market intelligence, the need for change is obscured. The contracting process becomes rooted in protecting policies and principles of the past.

In summarizing the conversation, I observed that ownership, process and automation are game-changing steps and can enable us to respond to the challenge created by today’s global complexity. Since this was recently highlighted by CEO’s as the number one issue for management, it further confirms the increasing urgency of transformation – and the strategic significance that contract management has in 21st century business.

If you have not already started on the journey to reengineering, now is the time to begin!

One Comment
  1. These thoughts are well summarized, Tim. They speak to the heart of what it takes to achieve business transformation and create better intelligence and management visibility to mitigate risk and improve operating performance.

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