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Do you really have a contract management process?

August 7, 2014

Many organizations claim to have a process for contract management, yet this claim often does not stand up to scrutiny. This becomes evident as soon as anyone starts to ask questions about process efficiency or effectiveness;  quite simply, there is no data because ‘the process’ lacks an owner and is typically quite fragmented in its operation and oversight.

This issue is becoming more evident as executives awaken to the importance that contract management has in the delivery of business results. As they ask more questions, it is rapidly obvious that no one has answers and no one actually feels accountable (or capable) of providing them. Examples range from wanting to know how effective the contracting process is in handling business risks; what types of contract should be deployed to optimize business results; how the contracts and contracting process compare with those of competitors …. the list goes on and right now, very few organizations have answers.

Of course, some turn to IACCM and we are able to assist with broad industry information. In a growing number of cases, we are asked to conduct specific research or to advise on the best way to improve the process. But in many cases, the challenge is much bigger. Executives are calling for ‘increased competence’ in contracting or commercial management – and that is a relatively undefined concept. When responsibilities are fragmented and business units see the process as somewhat optional, when process steps lack definitive guidance on timing and when there is little data flowing on actual operation, it is very hard for anyone to step forward and take accountability.

Major improvements depend upon ownership. And that ownership has to be at a sufficiently senior level that the broader organization takes notice. This does not imply that any specific individual or function has unilateral decision rights – there are many stakeholders involved in contracting (and this is a key reason for the problems). However, it does mean that there is a focal point for the efficiency and effectiveness of the contract management lifecycle. With that ownership comes a more holistic view that starts to yield meaningful data on performance and a focal point for driving continuous update and improvement.

A process that lacks data is not really a process at all. It is a set of loosely connected activities that may or may not operate in the organizational interest. Today, contract management far too often falls into the latter category.

4 Comments
  1. Dan permalink

    Very relevant Tim, particularly the last two paragraphs.

  2. Good article Tim. To your point, the most successful contracts I’ve seen are those that conduct a Post-Award Kick-Off Meeting and discuss key topics such as contract governance, how they’ll interface and communicate, how they’ll make decisions (roles and authorities), and how they’ll manage all contract-related activities, (the processes Tim refers to) such as Contract Changes, New Service Requests, Issues and Disputes, Risk, Deliverables, and Formal Contract Communications.

    While these things will likely not be completed at the Kick-Off Meeting, it does serve as the catalyst and starting point for assigning ownership and due dates to get their contract governance and administration system (processes) developed and implemented soon.

    With a successful Post-Award Kick-Off Meeting, both parties will come away with a common understanding of the contract, their roles and responsibilities, and how they will manage the contract and their activities together.

    Without this common understanding early after signing, both parties will struggle with “who”, “how” and “when” to manage these activities; problems will turn into issues, and the relationship will suffer.

Trackbacks & Pingbacks

  1. Do you really have a contract management process? | Commitment Matters | Contract Business Intelligence
  2. Contract Management and the Sales Process: Problems of Convenience - Corridor Company

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