Strategic goals: do you know what they are?
IACCM works with many of its members, undertaking process capability assessments. These are designed to assess current weaknesses and develop improvement plans. They include industry benchmarks, enabling an organization to target closure of specific gaps or sources of competitive advantage.
At the outset of each workshop, we discuss the strategic goals for the business that have been set by the Board or by senior management. IACCM provides a summary of these, gleaned from a variety of available sources – for example, the company website or annual reports.
In a majority of cases, the legal or commercial team does not recognize these goals. While some elements may be familiar, the overall strategy does not feature in their functional plan. As a result, the contract and commercial process frequently does not support business strategy and may even pull in the opposite direction.
When discussing how best to reconcile business strategy with functional action, it also becomes apparent that many groups are unclear about management intent. For example, a recent workshop highlighted executive interest in operating with ‘manageable risk’. But the commercial team were unsure what this meant; their interpretation was that the Board was risk averse, but no one had ever tested this view.
For commercial teams to add value, they must be contributing to business strategy. Indeed, those strategies frequently demand continuous evolution of commercial policies and practices, with underlying shifts in contract terms and relationship models. Without such alignment, groups such as contract management, legal and procurement become an impediment to the business – and a source of avoidable cost and risk.
So how confident are you that you are aware of the business strategy and that your work and outputs are supporting management goals and market values?