How many Contract Managers do you need?
It is planning season so I am increasingly being asked for data to support headcount and resource estimates. The questions apply to both contract management and commercial management and for organizations large and small.
As IACCM benchmarks have consistently shown, the answers on headcount and budget are highly variable, but driven by a range of broadly consistent factors. These include obvious considerations such as the scope of the role being performed, the extent of use of offshore / outsourced resources and the relative complexity of the underlying workload.
There is extensive variation in how contract management is performed and this is reflected in the visible level of cost. Even where there are dedicated resources, the average cost ranges from approximately 0.1% of revenue to 0.7% of revenue. Often, the identifiable resources are just the tip of the iceberg – and in some cases, the iceberg is completely concealed. For example, in a study recently conducted by IACCM, we discovered one company where contract management was costing $30 million in legal resources alone, representing almost 30% of the average lawyer’s workload. In another, the role was performed entirely within business units at an estimated cost of more than $200 million.
As identified in the IACCM 2015 Benchmark Report, dedicated contract management resources generate significant efficiencies and cost reduction. But the picture is no longer simple because the nature of those resources is changing fast. In the past, contract management would be performed by a dedicated business function or professional group and the activity depended on people. Today, as we work with organizations on their forward plan, the nature of the skills required is shifting and the extent of automation is growing. The contract management function is poised for major changes which will also transform the value it can provide to the business.
In Part II of this blog, I will describe how that future is likely to look