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A Growing Momentum for Contract & Commercial Management (Part 1)

March 6, 2012

Last week, a series of events confirmed the scale of the challenge and opportunity facing the contracts and commercial community. Each day, I had meetings which reinforced the importance of equipping organizations with increased commercial acumen, at both a tactical and strategic level. They also illustrated the scale of the task facing IACCM, as it is increasingly looked upon as the association that can offer leadership in supporting today’s business needs.

My week began with a UK member meeting in London. I have already reported on the excellent presentation by Srini Krishna, who described Microsoft’s outsourcing of finance back-office operations. At the same meeting, Ross McKean and Dave Halliday (partners at law firm Baker & McKenzie) built on IACCM’s annual research of the most negotiated terms and conditions with results from a study they undertook on the key issues in outsourcing contracts – I will write more about that later this week.

On Tuesday, the latest IACCM Executive Roundtable was held at the UK’s National Audit Office. In recent years, the NAO has issued a number of reports which highlighted the absence of commercial skills within the public sector and the impact this has on project and contract outcomes. This meeting focused on the issue of skills and sought to address the question ‘how do you overcome a risk environment which results in an inefficient use of capital?’ The resulting conversation led to a lively debate over the differences between ‘contract management ‘ and ‘commercial management’ (an old chestnut), resolving that in essence ‘doing contracts’ can be an excellent foundation for ‘being commercial’. It was suggested that there are really three tiers to progression, with the Foundation level being about technical competency, understanding standards and compliance, developing analytical skills; the Mid-tier is a time to develop softer skills of relationship management, communication, and business judgment, combined with greater depth of financial awareness and modelling, often applied in a deal-making environment; and the Advanced tier is when a true commercial expert can set the environment for top management, either in terms of commercial policies and strategies (eg for a business or product line), as well as handling the most complex market opportunities.

The week progressed with some excellent discussions with Achilles – a name not yet well known to the sell-side contracts community, yet it should be. There is potential for their work on supplier compliance and selection to have a major impact on our commercial work and contract terms. This conversation once more illustrated the importance of the contracts community stepping back and exerting more influence over its environment. Achilles represents a tremendous opportunity to eliminate much of the low-value redundancy from negotiations and bidding. Why aren’t we on top of things like this?

That afternoon, I met with the Chief Procurement Officers of two large international corporations, representing a group of CPOs who are determined to tackle the skill issues that they face within their organizations. They perceive a major gap in the ability of today’s procurement staff and training to respond to the value needs of their business. Leadership, relationship management, analysis, commercial judgment – these are the types of capabilities urgently needed. They also feel that external professional bodies must be far more effective at addressing the demands of rapid change and responding to the pressures of global markets. Exciting stuff for IACCM, because these needs go to the heart of our purpose and activities.

Thursday included a lively session with the UK Cabinet Office, where we had a group of IACCM members acting as ‘the voice of the supplier’ and offering constructive input to the significant efforts that UK Government is making to improve public sector acquisition. The thoughtful discussion reflected well on the approach being taken by commercial leaders as they seek to influence both the buyers and their own management in developing more robust and transparent trading terms and relationships. Again, I will share more details in a later blog.

And on Friday, I had been invited to present to yet another group of CPOs, this time in Brussels at the Procurement Leadership Council. Once more we had a lively discussion, the focus this time being on the future Procurement ROI (return on investment) and how to generate greater support for an end-to-end process role, including supplier relationship management.

As with so many weeks, there is so much to write about. The themes for both buyers and sellers are so similar; the opportunities for shared learning and action are so great; and the prize to be won from increased harmonization are so large. As the week goes on, I will expand on the issues I have touched on in this blog and share my excitement over the growing momentum and all that it offers to the contracts and commercial community.

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