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Measuring the wrong things

August 28, 2013

Adrian Gonzales has once again raised an interesting question on Logistics Viewpoints when he suggests ‘A Better Way to Evaluate Supply Chain Talent’.

The article makes the case for a more holistic view of ‘success’, essentially that measurements must focus on broad outcomes rather than narrow targets. He cites a supply chain expert who may exceed goals for savings, but at the expense of destroying key supplier relationships.

The challenge that Adrian highlights will be familiar to many in the world of contracts. We wrestle with many stakeholders who are motivated by specific interests and it is our job to understand those drivers and ensure objective assessment of the true business interests. But while this may be our theoretical role, it is often not recognized. Indeed, we know from research that many contracts professionals have very few performance measures and that this becomes a real problem when management starts pushing for precise performance data.

At IACCM, we have been able to develop extensive insights to the role and value of contract managers and more broadly of high-performing supply chain or commercial groups. These relate to direct contributions to business performance – stemming cost or revenue leakage, improving margin, reducing sources of customer dissatisfaction, raising competitiveness. Achieving these outcomes demands a more holistic analysis of contract performance than is typical, but the benefits of doing so are enormous.

Adrian is right to raise this question. Savings negotiated, risks avoided, compliance rates achieved are all the types of measures we commonly encounter, but they are rarely linked to impact analysis. What ultimate effect did those achievements have on the bottom line, on competitiveness, on efficiency? These questions are far too often unasked and unanswered.

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