Agility, contracts and value: time for new thinking

Agility is defined as “the ability to move quickly and easily”. It is an attribute that today’s business considers highly desirable, yet typically struggles to achieve. Research shows this is particularly true for the contracting process and the management of external relationships.

Agility in the context of contracts

it is important to distinguish here between contracts for agility and having a contracting process that is itself agile.

‘Agile contracts’ are simply a form of agreement that supports the parties when undertaking agile performance. But the act of preparing an agreement is just one small component of the overall transaction or relationship and enabling agility through a set of contract terms is very different from actually having an agile commercial process.

There is little question that most people would like to make their trading relationships more agile. Quick and easy to identify the right supplier or customer; quick and easy to reach agreement on the terms; quick and easy to undertake delivery; quick and easy to make changes or secure improvements. But as IACCM’s 2019 Benchmarking Study shows, ‘quick and easy’ is not a description that can typically be applied to the overall contracting process. While the simplest transactions  (such as buying off Amazon) may be ‘agile’, as soon as something enters the more formal sales and procurement process it becomes subject to delay and complications. And even when one aspect of that process has been made ‘agile’ (for example a catalog buy), it doesn’t guarantee that other aspects of the downstream process have the same characteristics. Indeed, fragmented action may even make the downstream process even more complicated and inefficient.

Tackling a mismatch

One major finding by IACCM – and now the subject of further in-depth research – is the fact that the contract terms and the governance models used to support each trading relationship are frequently not ‘fit for purpose’. There is, quite simply, a mismatch between what the parties want to achieve and the contract and contract management model that they deploy to achieve it.

Ironically, one major reason for this turns out to be that efforts to be ‘agile’ in  entering into the contract result in overall rigidity and loss of flexibility in its performance. Specifically, both buyers and providers tend to be wedded to the use of standardized contract templates that are frequently designed to limit agility and which are themselves not readily adjusted to reflect specific aspects of the required relationship.

Becoming agile

Agility is itself often seen as complex. IACCM’s work with a group of major corporations (its Ressarch Forum members) is proving this not to be the case. What is perhaps the most challenging aspect is finding people with the mental agility to recognise that they really can make things better!

In a series of mini-conferences, which started this week in India, IACCM will inspire its members with the insights they need to drive new conversations and discover new levels of agility and value in their trading relationships. Key to this is starting to think and act holistically in managing the contracting process