Do Contract Managers & Lawyers Actually Care About Results?
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.