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Performance indicators for contract managers

July 1, 2016

I want to share a question that appeared this week on the IACCM message board.

“Has anyone had any success in setting up and managing KPIs for Contracts Management. The intent would be to set internal KPIs for our contracts team. Since the ‘success’ of a contract (say a construction contract) is influenced by many factors outside of the Contracts Administrators control I don’t want to set up KPI’s on contract value/growth etc. Some obvious ones are timeline to execute contracts, timeline to review invoices, execute changes etc but they don’t really seem to add much ‘value’ – any thoughts?”

I encounter similar questions on a regular basis. They reflect the dilemma faced by many contracts and commercial groups, discussed extensively in IACCM’s forthcoming ‘Future of Contract & Commercial Management’ report. In an age when there is growing executive focus on value-add, it is essential that we find answers – and to me, those answers lie in the question.
Contract management groups occupy a very privileged position. They have insight to their organization’s critical assets – its contracts. Yet rather than embracing the opportunity this represents, they step away from offering any insight or taking any responsibility for the performance of the agreements they have constructed or are managing. Our questioner is correct when she says ‘success is influenced by many factors outside the contract administrator’s control’ – but surely this is the beauty of the situation. The key question is ‘what are those factors and what is the extent of their influence?’
In fact, we already know many of the likely answers. They were identified in IACCM’s work on ‘the ten pitfalls of contract management’ – things like poorly defined or managed scope and goals, failure to engage stakeholders, poor handover to the implementation team, lack of investment in relevant technology.
By gathering relevant data on the factors that undermine success, a contract management team offers massive value to their executives. They become a source of measurable financial improvements and provide critical insights to organizational performance and how it can be improved. Best of all, they demonstrate quite clearly that it isn’t contract managers who undermine success – it is broader failings in the overall process by which contracts are formed and implemented.

 

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