Skip to content

IACCM Americas Conference: Part I

March 3, 2011

‘Partnering for performance’ was the theme of the 2011 IACCM Americas conference. And speaker after speaker confirmed the importance of contracting to overall business results – and the value that can be gained from greater collaboration.

A number of presenters highlighted the annual IACCM study of the ‘most negotiated terms’ and the terms that negotiators believe would deliver value. In the words of Craig Silliman, General Counsel at Verizon, “We don’t negotiate the things we see as important > There is a misalignment between what we do and what is important. Why is that?’

Jon Hughes, from Vantage Partners, spelled out some of the costs of adversarial negotiations. For buyers, these include likely loss of expected innovation, scope changes that lead to additional costs, higher probability of project delays or off-contract purchasing and increased quality problems.

In the opening presentation, Tim Cummins, IACCM CEO, suggested that contracts and legal staff must focus on improved risk management. This is one of the top issues on the CEO agenda and, Tim suggested, key to their demands for more creativity and less bureaucracy. He advocated that we stop worrying so much about reforming attitudes to the traditional ‘top ten’ negotiated terms, and concentrate instead on reducing the probability of bad things occurring. That could be achieved through the governance and management terms such as scope and goals, change management, communications and reporting and service levels. Tim stated that IACCM will continue its focus on researching and promoting ‘good practice’ in the construction and drafting of provisions in this area.

Kate Vitasek presented a lively counter-point in a debate over service level management. A presentation led by Claude Marais, from TPI and featuring the CIO of Walgreen’s advocated rigorous measurement s and monitoring, which could yield ‘millions of dollars a year’ in savings and credits. While acknowledging the validity of this approach, Kate suggested that it was reflective of a contracting mentality where ‘ we acquire transactions, rather than outcomes’. She advocated an approach based on objectives and value, rather than micro-management. Research at the University of Tennessee has shown such methods to bring far greater success and business contribution.

In my next posts, I will highlight some of the other major themes to come from the event.

If you like the sound of this event, don’t despair! The IACCM EMEA Conference will take place in AMsterdam in May and feature a number of the same speakers and many of the same themes. Visit http://www.iaccm.com/emea for details

 

2 Comments
  1. I had a nice conversation about this topic with Claude before Tim’s post. I think that there is still an enormous split in the contracting world and if Walgreens is buying transactions, they should measure transactions. If they are buying outcomes, they ought to measure outcomes. Measuring outcomes is different than measuring transactions. To suppose that there is a one size fits all approach to monitoring and measuring performance is naïve.

    • Jeanette, I tend to agree with you. In practical terms, companies must decide how much and what type of investment to make in their various relationships. They must also make an honest appraisal of what they can really expect from the other side. For example, while suppliers may complain about micro-management and the impact on outcomes, in truth they often are not willing to invest in a more strategic or innovative relationship. And if they really do not like to be micro-managed in the way Claude outlined, they should improve the reliability and accuracy of their overall performance. Hiring TPI is not cheap; Walgreens and others only do this because they get a substantial ROI from uncovering supplier failures. And as they indicated, this is not just because of service level failures. Most of the ‘savings’ came from incorrect invoices, falsely claimed activities, duplicate charges etc. So even if I am buying outcomes, it seems it is probably still necessary to validate these fundamental issues of supplier competence.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: