Why don’t they understand?
In a recent poll, 82% of contract and commercial managers said that their biggest challenge is ‘providing measurable business value’. While a similar percentage say that they enjoy their work, many are frustrated that it isn’t better understood or appreciated.
So what’s the problem?
It’s the fact that most of us can’t clearly describe why our work is important. We may talk about managing risks, but what risks and whose risks? When did they last occur? What are we doing to stop them? Some of us may suggest we ensure overall business integrity and compliance – which to others sounds an awful lot like bureaucracy and inflexibility. Of course there is always the claim that we improve or safeguard margins, either through revenue protection or via savings, which is probably true but often hard to illustrate.
So the real challenge is that contracts and commercial groups frequently lack a clear sense of mission. They often undertake highly diverse activities, ‘fixing things’ as they arise. While individually these activities may be important, it is almost impossible to describe cumulatively what value they have brought. And as we discover when we undertake IACCM’s capability assessments, contracts and commercial groups are generally not well aligned to corporate goals and strategic priorities.
There are in fact several issues that undermine the way contract and commercial managers are perceived. One is the lack of consistency in skills and standards. Practitioners come from a variety of backgrounds and tend to bring those backgrounds with them. In other words, their prior job or professional training influences the way they see their role. On one level, this diversity can bring strength to a commercial function; but it also brings the danger of inconsistency, confusing to users of the service.
Another factor is the absence of well-established tools or methods. Investment in contract and commercial capabilities tends to be limited and this results in variable approaches in the delivery of services, often again dependent on the individual practitioner. 55% feel that ‘gaining status and recognition’ is a problem and, without this, it is unlikely that investment will increase.
The third factor is the overall lack of meaningful data. Right now, the best way of gaining recognition is when there are major losses or exposures from poor contracts or commercial decisions. To the extent data exists, it is often at a transactional level or of little real meaning in terms of demonstrating contribution. For example, efficiency measures such as number of contracts handled or benchmarks of headcount tell us nothing about quality or value, nor do ‘estimates’ of negotiated savings or revenue gains at the point of contract signature.
Without a clear and easily described sense of purpose, it is almost impossible to develop a coherent approach to what we do or how we do it. And to excite people about our value, we must focus on driving improvements, to tackling the challenges of today, not those of the past. For example, are we visibly developing better contracting models that assist in managing market uncertainty? Are we actively promoting digitization of our contracting process to streamline and simplify getting to agreement? Are we proactive in tackling common sources of tension or value erosion in the negotiation and performance of our contracts? Are we seen as innovators and a source of new ideas, or as guardians of outdated rules and procedures that others see as barriers to doing their job?
Unless we are clear why we are doing something, it is impossible to check that what we do is actually of value to anyone.
So might a mission statement for contract and commercial management be something like: “We provide you with the contracts and commercial advice that ensure competitive success”.
What ideas do you have? What is the best mission statement for contract and commercial management that you have seen?