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Benchmarking: A Missed Opportunity

February 15, 2012

Yesterday I wrote about ‘collaboration as a source of efficiency’ and I questioned the extent to which most contracts and commercial groups are truly committed to improving their business contribution.

One reason for my concern is the pitiful uptake on the use of benchmarking data. IACCM runs regular studies to generate meaningful metrics against which performance can be gauged. One would think that functional heads would be desperate for this information, to determine their relative performance and to be seen by top management as leaders of change and improvement, champions of good practice. In reality, with relatively few exceptions, little interest is shown in this data. It seems to become relevant only in response to a need. Let me offer an example.

A few weeks ago, an IACCM member asked for data on the typical number of contracts being handled per head of contract management staff. As you can imagine, the answer to that question has many dependencies, such as the role being performed, the complexity of the contract and the efficiency of the operation. Having established answers to these first two points, we were able to provide a benchmark relative to 40 other comparable contract management groups. We found that “the average is 4.9 heads per US$1bn of revenue. Within this, there is a significant range (2.8 to 6.5), with key dependencies appearing to be a) the extent of enterprise-wide process: b) timing of CM involvement; and c) the extent of automation. These factors strongly influenced collaboration and efficiency, revealed in the volume of contracts that could be handled at any one time (a range from 1.2 to 4.6 in the high to medium complexity category).”

What would you do with this data? My hope is that functional management would focus on the most efficient operation and explore what steps they could take to compete with it. But rather than asking for more information about the three dependencies, the reply I received was ‘The avergae of 4.9 means I need 10 additional heads’.

I can cite many other examples where our use of benchmarks is driven either by the need to defend a position (typically because our resources are under threat) or where someone wants to make a case for more people or more money. When used this way, we discredit the data. But more importantly, we miss the opportunity to be seen as true contributors to business performance and to raise our status and influence accordingly. I wish that more people would become proactive in their use and analysis of benchmarking, to set a vision of future possibilities that would ensure contract management had a secure and valued position on the corporate map.

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