International Hunger For Contract Management

The recognition and sophistication of contract management varies substantially around the globe. As my previous blog indicated, in some countries and industries it is still viewed very much as an administrative discipline, yet in others it has evolved to being a strategic capability.

Top companies understand that they must perform on their contracts, whether buying or selling. But they have very different approaches to their management of performance – and high on the list is the variation in how much visibility senior management actually has into its contracts. A majority only know when there is a major problem; the minor issues, the day to day erosion of value or savings, is not something they see or hear about.

Most organizations have invested substantially in the quality of their sales process and their procurement organization. Together, these yield promises of revenue or savings. Yet without a robust contracting process, companies fail to optimize both revenue and savings; and they suffer signifincant erosion in the subsequent delivery or acquisition cycle. Good contracts ensure that commitments are achievable; they also ensure that value trades are made through intelligent negotiation; and they establish a robust governance and performance framework, which includes active monitoring of the output or outcome.

It is encouraging to see growing understanding of the need for a contracting system that ensures enhanced performance capability. At IACCM, we witness this as a result of our worldwide operations. It is evident in growing skepticism about traditional approaches to Procurement; it is evident in growing discussion over the tools and the timing for commercial intervention in the sales process; it is evident in teh number of countries in which investment is being made to build contract management skills. A recent example is a survey of Hispanic countries undertaken by IACCM member Pablo Cilotta, which reveals a strong demand not only for increased member meetings, but also for formal training. We observe similar trends in India, Indonesia and Africa.

Management hunger for better business performance is increasingly reflected in their readiness to invest in contract management.