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Improving Sales Contracting

April 14, 2011

Earlier this week, IACCM issued a research report ‘The State of Sales Contract Management’.

Mark Hope, an IACCM member from the UK, wrote to me with the following comments:

“The survey report is very interesting as far as its scope goes but not as multil dimensional as I’d hoped it would be. Ultimately it focuses on automation as the answer which really is only part of the solution.

 In my view, based on 26 years experience on both the sales and procurement sides of operations, the big issue with sales contracting, that differs from procurement contracting, is that of structure and organisation and experience. Very typically, large corporate sales forces are organised by account and typically the vast majority of the sales are standard transactions on standard terms. This often results in Account Directors and Account Managers quite literally being involved in a once in a lifetime bespoke deal.

 The problem for the commercial contracts community is that by the end of the negotiation of a bespoke deal on an account, the Account Team they have been dealing with is now up to speed but along comes the next deal on a different account with a different Account Team with little or no knowledge of negotiating bespoke deals and so it all starts again. 

The difficulty in cracking this problem is that generally sales forces are commission driven and therefore it is not easy to remove the bespoke busines from the account and give it to more seasoned sales and operational people to deal with, particularly as the bespoke deals are usually the big numbers. Also if a specialised team is set up, the members of this team are likely to become frazzled by repeatedly doing the big deals. It would be interesting to know what sales models in what sectors have overcome this problem and how and may be some research around that would be beneficial? 

In conclusion, I’m sure automation has its place but, in my view, a company’s organisational structure and the experience of the practitioners are the key problem areas. Whilst I have focussed on the sales force above, we in the commercial contracts community have similar issues but probably to a lesser extent as many of us do bespoke deals a lot of the time as our “day job”.”

I agree with Mark that a major problem for ‘big deals’ is that those appointed to lead them frequently have little direct experience (and I would welcome the observations he seeks on possible answers). But I think thazt the challenges of sales contracting and commercial competency are much bigger than just the occasional large opportunity. I think they permeate the entire area of commercial policy and practice, contracting standards, implementation, post-award management …. as the report highlights, there are substantial revenue and profit opportunities that most companies are missing.

So my reply to Mark was: “I agree with all you say, but ….

We did not enter this study with any particular expectation regarding results and nor did we have any particular automation focus. However, in analysing the results we discovered a far more significant connection between automation and performance than we expected. This was, in fact, the ‘new news’ since I am not aware of such a strong link ever being established before, especially to the type of automation adopted.

Therefore our report sought to go beyond another reiteration of the standard problems and to see whether there was any key to fixing them. It seems to me that the link here is the improved quality of process and communications, together with better data sharing and capture. Automation does not flourish in isolation, but it is enabling earlier involvement, elimination of the trivial work undertaken by many commercial staff, increased understanding by account teams, more internal collaboration, increased re-use of solutions – all problems indicated in your email.

Perhaps, if we understand that many of today’s problems have resulted from global technology, we might also accept that technology use is a key piece of the solution. It will be effective only if we focus on defining a process, deploying skills, documenting and sharing knowledge – but I am satisfied that it has become a dependency for good performance in any medium / large organisation.”

 

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