Contract Management Opportunities

Yesterday I met with a newly-appointed Group Head of Commercial Management at a large international defense supplier. One of his first moves was to undertake a study of the satisfaction of internal customers as well as the contract mangement team. He found a high level of consistency in the replies. Among them were:

– There is a lack of clarity in the purpose of the function

– Although individuals work hard, the function is often a bottleneck

– If there was earlier involvement, the process would work better

– Functional leadership is lacking visibility and direction

– What is the value statement?

– Why aren’t the processes and service levels more consistent?

– Too much fire-fighting, too little focus on cross-group learning and efficiency

These comments were reflected (although more succinctly) in a note I received today from a senior contracts exectuive in the oil and gas sector (this time dealing with procurement contracts): “The challenges are huge and range from internal stakeholder engagement, to contractor / global capacity, internal controls (or lack thereof), too many cooks, local vs whole of organisation strategies, etc, etc ….”

In other words, highly consistent messages that occur with remarkable frequency.  I have written before about many aspects of these opportunities for improvement and how they can be addressed. It remains astonishing that, even though the focus and importance of contract management is increasingly recognized, the functional approach remains largely tactical. The newly appointed Head of Commercial asked at one point: “At IACCM, you must see all the companies that have real leaders within Commercial or Contract Management – the people who are really leading change and improvement. What percentage would you say that is – perhaps around 50%?”

Paul Mallory (IACCM’s Global Head of Learning) and I looked at each other. Both of us were thinking of the 80 / 20 rule, but as Paul then said, “20% is rather generous, it is probably more like 10%”.

Those 10% are revealing the tremendous difference that good contract management can deliver to the business, yet progress remains alarmingly slow. Perhaps it will only come when new leaders are introduced – people who do not have a background in the contracts or commercial function. Certainly the evidence points to the fact that very few incumbents have the enthusiasm or imagination to carry the function forward.

IACCM’s Global Forum (www.iaccm.com/globalforum) will feature an executive program that explores ‘The Future of Contracting’ and will equip leaders to promote and drive the changes required to manage trading relationships in today’s market conditions.