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‘Contract Management is more important than Procurement’

October 8, 2019

This quote, taken from the latest edition of Supply Management magazine, will be welcomed by many as recognition that it’s actually the results of an acquisition that matter. For too long, they will say, Procurement has been happy to oversee inputs, ignoring the fact that it is contract management that oversees outputs and the actual delivery of value.

I have never forgotten the words of one very senior executive who recognized this issue when he observed that “organizations frequently undertake a perfect procurement and achieve completely the wrong outcome”. He understood that ‘procurement’ is actually just one element of a much bigger process.

Many contribute to disappointing results

There can be little question that traditional procurement practices are increasingly misaligned with business interests and have not adjusted to the realities of today’s markets. However, it would not be fair to heap the blame for that onto Procurement functions. They do what they are told and trained to do. Well-managed procurements are frequently let down by others – for example, Legal providing inappropriate templates, the CFO demanding draconian savings, the business unit failing to manage supplier performance. If Procurement has failed, it is a failure of its leadership to challenge and be adequately vocal in pushing for change. In this, they have often been let down by external experts – the consultants, advisory firms and training organizations that should be assisting in preparing their teams and processes for the future but instead have focused on issues like compliance, commoditization and category management. Procurement has been led down far too many blind alleys.

Where IACCM enters the picture

The International Association for Contract & Commercial Management was founded precisely because of these chronic issues. Procurement – like Sales – is just one of many specialist disciplines. ‘Contracting’ is an overarching competence and capability. It needs ownership. When it’s left to chance, things go wrong. Often badly wrong.

For 20 years, IACCM has worked to overcome entrenched attitudes and innate resistance to change. During this time, it has directly engaged with and trained over 200,000 people who understood there must be a better way. Its research, training and advisory services have enabled massive progress for the organizations which have grasped the fundamental truth that customers and suppliers depend on each other for success and are working to develop open, cooperative relationships, founded on honesty and integrity. IACCM espouses collaboration and believes in inclusive behaviors that generate mutual, shared benefits for customers and their suppliers.

In the end, does this mean that contract management is ‘more important’ than Procurement? No, it doesn’t. They are different disciplines and they must complement each other. What is true – and the real issue here – is that both are subservient to the overarching ‘contracting process’ and must align with commercial goals and strategies. Unless there is focus on holistic development of commercial capability, simply changing names or expanding the Procurement remit delivers at best marginal improvements and could even make things worse.

IACCM’s recent benchmarking report provides insight to the current state of contract and commercial management organization and performance, highlighting also the leading practises that generate improved results.

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