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Do Contract Managers & Lawyers Actually Care About Results?

April 24, 2014

How many contract and commercial managers, how many lawyers, actually care about the quality of the contracts they produce? How many actively monitor or seek to learn from the operational impacts and issues associated with contracts? How many take time to read research studies or to ask questions about what works and what doesn’t? If you are engaged with the production or negotiation of contracts, what is your HONEST answer to the following statement options?

My goal is:

  • to get the contract signed
  • to get the contract signed at a level of risk that I personally think acceptable
  • to get the contract signed at a level of risk that the business tells me is acceptable
  • to produce a contract that I believe will deliver the desired business results and outcomes
  • to produce a contract that I will then monitor to ensure it supports delivery of the desired business results and outcomes and will learn from this experience

Many of those reading this blog will most likely opt for one of the higher value answers – but that is probably a reflection of the type of people who read articles like this. In my  experience, most contract and commercial managers have limited ambition to learn, to question or to challenge the status-quo – even those who are functional leaders or directors. For example, less than 3% of the IACCM membership typically takes the time to read our research reports – even at a summary level!

Let me explain my concern with an example. Recently I have been writing extensively about the research we have undertaken that shows the primary causes of claim and dispute. Just yesterday I published data suggesting that almost one in ten contracts results in a significant claim. We know (from input by contract and commercial managers) that disagreements over scope and failure to perform to schedule / service levels head the list of causes. So you would think that any self-respecting contract professional would focus strongly on these areas in order to reduce the risk of financial loss.

Sadly, you would in many cases be wrong. Our benchmark studies show that while the general complexity of contracts has grown, the level of engagement in these key areas of Scope of Work and Service Level Agreements is actually falling. Today, 52% of contract and legal professionals say they are involved in reviewing SoWs ‘most of the time’ (down from 74% ten years ago). And just 33% review SLAs ‘most of the time’ – down from 75%. So here we have clear indications that the areas that are most likely to result in risk are frequently not even reviewed (the percentages involved with drafting are even lower).

Instead, many contracts groups have upped their focus on trying to deal with the fall-out from poor contracts. They battle over consequences, rather than work together to reduce causes. Why is that? I am sure many would claim it is a result of workload. All that added regulation, all those extra pages to review, the demands of volatile markets … But surely any group that wanted to demonstrate its relevance and value would be assembling the research data and pointing out to top management that the process needs to change, that the business must focus on contracts that support good results, rather than just protecting against failure.

  1. Laurie Griffin permalink

    Good article but sometimes there is a disconnect between the people reviewing the contract and the people who are faced with handling a claim after the contract is executed. When there is a claim, the individuals who have direct responsibility in reviewing and negotiating the terms of the contract need to be advised of the problems which resulted in the claim. That way they cannot avoid potential claims in the future.

  2. Good topic Tim. I still find many people within the business that feel a contract is just something you sign and then move on. They feel the real role of the contracts manager is still simply house the contract somewhere and let me know when it is expired, or what it says if there is a problem. Breaking this mindset is a difficult thing, especially when business units are too focused on their own areas and are resistant to “letting in” others in their affairs. I think people within different units of the business expect different results from the contract and all too often we end up with, “to get the contract signed at a level of risk that I personally think acceptable.”

  3. Ronald Herron permalink

    The simple truth, there is a disconnect, the contract generator and the contract manager are pressured to just get contract signed and react to claims as they arise. As a contractor we are forced to work with contracts that are written with a focus on legal protection, and not on the SOW or SLAs. This is where the most opportunity exist for improvement. Communication and trust must have some place in contract generation. I know trust has become nonexistent in contracts, that a fresh idea!

    • Ron
      you are right with your observations on where time should be spent. Of course the opportunity is for us to help management understand how we could make that change happen and then show them the improvements we bring to business results.

      • Ronald Herron permalink

        How could improvements be implemented when no one receives feed back? At my end of the process contracts are written long before we see them, there may be some valuable ideas and solutions that come from this end given the opportunity. I would think contract generators would make use of this resource.

    • Well of course I do not know quite what your role is, but any professional can undertake analysis and promote the business case for change. It may be a tough journey, but being prepared to fight for the right thing is the hallmark of the true professional. Most take the view that others should do it, or management should somehow just know, or they will wait until someone asks … and then they complain when management questions what value they bring or decides to award the best jobs elsewhere …

  4. Chris Woolhouse permalink

    In order to tackle this in our organisation we have a combination of Procurement and Supplier Relationship Management involved in negotiating/drafting the contracts along with Legal. That way, we include the stakeholders who will have to manage/run the contract in the contracting process, ensuring the right checks and balances are made, and the “Let’s just get it signed” mentality cannot come to the fore.

  5. Eugene P. Grace permalink

    Based on my experience, I think you are highlighting the differing priorities of sales, contract procurement/administration and legal. Many firms think these departments are separate with little overlap. I have been successful in structuring workflows that recognize that increasing revenues is the organizational priority. This required high levels of cooperation among the three groups. In this context, sales-procurement-legal were viewed as part of a continuum of enhanced revenue and not as silos. The legal function, in most cases, was thought of in economic terms with clear recognition of potential and quantified loss. The lawyer assigned to the unit was required to be fully conversant with their operations down to a fine level of detail. Sales people were given training in what legal terms could be altered and to what degree. Monthly meetings with sales and procurement discussed the more difficult contracts for the period. Contracts were drafted in such a manner that my side would sign as buyer or seller. Contracts provided substantial liability protection but not to the point of protecting the company in every conceivable instance. The business and legal terms of the contract were segmented into separate contract elements. Once a contract was negotiated by seven counterparties, it was rarely changed thereafter. Thereafter, most business and legal review focused on the various schedules to the contract (statement of work, fees). This took buy-in of executive management. In retrospect, the revenues far outweighed the potential and realized liability.

  6. towanda perrine permalink

    Great article. Thanks for the info. Does anyone know where I can find a blank “how to get contract signed ” to fill out?

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  1. Whether Contract Managers and Lawyers Care About Results Is Probably Irrelevant « Adams on Contract Drafting

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