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Contracts are not the impediment … but they can lead to a solution

August 5, 2013

Few would disagree that business undergoes continual change and that we have been experiencing an environment of particular turbulence.

It is inevitable that business structures struggle to keep pace with the changes going on around them. Many of these cannot be anticipated and their effect is often cumulative. As a result, wherever we turn – skills, processes, systems, policies, practices – we find gaps and shortfalls in capability. The ambitions of our business leaders are typically far ahead of the ability of their organization to execute.

Within this environment, contracts and their management are increasingly seen by many as contributing to the problem. The process through which contracts are produced or negotiated is perceived as inflexible, bureaucratic and therefore a symbol of all that is wrong. And indeed, it is frequently true that the contracting process becomes an impediment to doing what we need and the contract itself becomes misaligned with business strategy or market requirements.

In truth, the contracting process can never be more than the sum of the component parts of the business. Contracts reflect capabilities, they don’t create them. Those who are charged with establishing and documenting business commitments cannot alter the realities of existing skills, processes and systems. Their job is in many ways to protect the business from its natural over-optimism and in performing that task, they will rarely be popular.

But in a well-run organization, those who are charged with contracting can and should be at the forefront when it comes to identifying and challenging lack of capability. The contracting life-cycle offers potential for invaluable insights to the mismatches that occur in an era of rapid change.  To that extent, the people responsible for contracts do indeed have a choice – they can defend the status-quo, or promote change.

In coming days, I will highlight a few examples of the types of issues that analysis of contract experience can offer and thereby become a source of strategic capability.

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