The Role of a Contract Manager: 2014 update
It is now almost 6 years since I wrote a blog ‘The Role of a Contract Manager’. It has attracted more than 100,000 views and, in that sense, seems to be the authoritative description of a contract management job.
In 2009, I prepared an update, which explained how the role was changing in the face of tough economic conditions and the growing importance of contract management in securing business performance.
It seems to me that it is once more time to review the contribution of contract management and how the practitioner community and its role are evolving.
The business environment continues to change at a rapid pace and many of those changes are of direct and immediate relevance to contracting and commercial management. For example:
- Since the financial collapse of 2008, there have been wild swings in relative prosperity and trading patterns within the global economy. This has led to substantial shifts in where trade is undertaken and there is no sign that this volatility will end soon.
- Outsourcing appeared unstoppable several years ago, yet increasingly is being questioned and the size, duration and location of outsourcing arrangements continue to alter. This has impact not only on the outsourcing agreements themselves, but also on underlying procurement policies and attitudes.
- The power of the buyer was taken for granted back in 2008, resulting in sharp focus on price and risk allocation onto the supplier. Today, there is far more understanding of the destructive nature of such an approach. Supplier power has returned in many industries and increasingly there is recognition that success depends on greater collaboration and a sharing of risk.
- The continued growth of regulation is forcing organizations to face up to the issues created by inappropriate or poorly managed trading relationships. Regulatory and reputational risks are pushing management to ensure greater transparency and visibility into organizational behavior both internally and within their suppliers and customers.
- Automation increasingly replaces people in the performance o f mundane or administrative contract management tasks. It also supports a growing wave of improved management and performance data, enabling contracts professionals to anticipate problems and manage, rather than administer, contracts.
- Executive management has awoken to the costs associated with poor contracting, especially in failure to secure the anticipated benefits or, as highlighted above, through failure to ensure appropriate forms of governance and performance management.
Taken together, these and other factors are transforming the role of contract and commercial management. Today, it is not simply an operational function overseeing transactional negotiation, implementation and management of contracts. Increasingly it is a critical vehicle for high value management information that supports strategic decision-making.
A result of this is the steady emergence of two types of contract or commercial manager. A majority still performs a role that has changed little from that set out in the original blog, though it is important to note that the required knowledge, measurements and skills required to perform that role have evolved at a rapid pace (I will write more on this is a future blog).
The second contract management role is far more strategic and is about business enablement rather than tactical operations. In this role, the contract manager is both an adviser to executives and a vehicle for implementing organizational goals. Essentially, the strategic contract manager ensures that contracts and contracting procedures are used to execute business strategies – for example, with regard to desired levels of risk, or through the creation of market competitive commitment capabilities, or via more relational or collaborative forms of agreement with trading partners. But this strategic role also informs management about trends or issues that are observed as a result of more thorough analysis of the contracts and their performance. For example, what are the types and severities of different risks and where are they occurring? What are the market trends with regard to the sort of commitments expected by customers or resisted by suppliers? How can the business overall be empowered to exercise better commercial judgment and to reduce regulatory, reputational or margin risks?
Today’s trends suggest that the role of contract management is secure and will become increasingly pervasive. It will be recognized as a life-cycle discipline, with measurements reflecting its impact on revenues and the bottom line. In leading organizations, it will also be an integrated discipline, quite probably part of a shared services unit, that oversees contracting for all trading relationships – buy, sell and distribution channel (even though operational resources may remain embedded within business units).
With this transition, contract management will offer an interesting and fulfilling career path, increasingly supported by structured education and training from university level upward. But with growing sophistication and an increasingly strategic role, the volume of the more administrative, operational tasks will reduce and in many cases will be performed via automation or through greater competence in other groups, such as Sales, Project Management and Procurement.
Therefore, while the job itself will become more highly valued, the numbers bearing the title may over time start to reduce. Those that remain will be more highly paid, have greater status and – of course – will be endowed with skills and knowledge that go beyond the traditional role of a contract manager.
The International Association for Contract & Commercial Management undertakes extensive cross-industry, international research to monitor trends and needs in the field of contracting. It identifies best practices and undertakes extensive benchmarking, as well as offering thought leadership in training and assessment services.