Contracts drive efficiency and happy customers
“We have a mix of customers, some on contract and some without contracts. I analyzed customer satisfaction results – and found those with contracts are almost twice as happy as those without. The contracting process results in clear expectations and more disciplined performance.”
This insight came during a discussion at an IACCM member meeting in the UK – and it was from a representative who works in a major international corporation. Once again, it reinforces the observation made in one of my recent blogs – “contracts are a framework for business operations”.
That automatically points to the role that contracts play in driving business efficiency. But the latest IACCM benchmark data reveals that it isn’t just the contract that matters – it is also having a structured contract management organization. Companies that operate with a full-time contracts or commercial organization use approximately 35% less resources than those where contract management is performed in a devolved fashion, or as an element of other jobs.
The IACCM study gathered input on where and how the contract management role is performed. As part of the data, it explored the number of FTEs used to perform contract management tasks. In many organizations, there are dedicated practitioners, plus others (for example in Sales, Project Management, Procurement or Legal) for whom it is part of their role. What we discovered is that the overall number of FTEs required to operate in a devolved organization or where contract management is just a component of a job is substantially greater than the number needed when there is a consolidated contract management function. On average, this represents around 40 heads, but in large corporations (over $40bn annual revenue) this can increase to several hundred FTEs.