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Would you rather be a gearbox or a cog?

June 15, 2020

It often takes a crisis to better understand the value of things or people that were previously seen as minor or peripheral.

It has rather been that way with contracts and contract management – until now viewed by most people as necessary, but not central to the operations of the business. COVID-19 has demonstrated the folly of that view, showing the importance of:

a) having formal agreements and understandings in place; and

b) having people who are skilled in the analysis and re-negotiation of those agreements; and

c) treating ‘contracting’ and its data flows as an integrated business process.

Of course, it also highlighted for many the cost and consequence of failing to invest in the right technology to support the management of those contracts – but there is every sign that this will at last be remedied.

Contracting is the gearbox

Organizations live and die based on their ability to win and deliver contracts. In many ways, a business is an ecosystem of contracts. COVID-19 showed the consequences of fragmentation – unclear roles and responsibilities, broken data flows, the difficulty of finding and extracting information from within contracts, limited connectivity between supply management and customer management. The fact that ‘contracting’ spans so many different functional groups and systems means that it lacks integration and integrity.

The severity of these weaknesses instantly became evident as people started to work from home and traditional communication flows and ‘work-arounds’ were disrupted – and as the sheer volume of issues and demands for management information became overwhelming.

These experiences have elevated appreciation of the critical importance of the contracting process. They are also leading to greater thought about the suitability of today’s contracts as management instruments (their form, structure and content are all under review). Perhaps most important, there is a surge of appreciation for the need to have someone responsible for the overall quality and integrity of the contracting process – ensuring clear roles and responsibilities, defining data flows, developing the digital platform that sits across functional applications.

Stepping up

For too long, ‘contract management’ has been seen as simply another vertical in the ‘stack’ of business processes and hence (from a technology perspective) was viewed as an application in the ERP suite of programs. Now, it is dawning on executives that contract management technology and practitioners are actually ‘the meat in the sandwich’, crossing the multiple functional applications and providing the interface for data flows  or only with, but also between trading partners.

Hence, contracts and contract management represent the gearbox that allows smooth movement and alterations of speed. And with that realisation comes the opportunity for the practitioner to itself change gear and step up from being just another cog …… so are you ready?


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