The theme of this year’s IACCM Americas Conference was ‘Partnering for Performance’. Speaker after speaker confirmed the importance of contracting to overall business results, focusing on the outcome and the value of partnering externally with buyers, suppliers and other third parties, as well as internally between legal, the contracts management organization, IT, and the relevant business units.
The conference confirmed that the goal of contracting should be to enable all parties to achieve success; adversarial approaches that focus on risk allocation and the consequences of failure typically lead to disappointing results. The presenters emphasized that the purpose of contracting is to agree on a desired outcome and to establish an effective governance process to facilitate this.
Presentation summaries follow:
Tim Cummins, IACCM CEO, opened the conference with a presentation that described why business has become more complex and the implications this has for contracts and commercial practices and practitioners. He highlighted the ‘big themes’ that are on the executive agenda and suggested that these represent a major opportunity for the contracts and legal expert – or a significant threat if we fail to respond. Tim proposed that we must increase our focus on the management of risk, but that this demands a new approach through contract terms and procedures that reduce the probability of risk events damaging results or outcomes, rather than today’s focus on the allocation of blame when things go wrong.
Craig Silliman, Senior Vice President & General Counsel, Verizon Business & Verizon Telecom, highlighted ‘an inherent conflict’ between standard forms of contract and a healthy business relationship. He suggested that standard terms typically reflect the lack of any deep relationship. Craig discussed achieving the right balance between penalties and incentives, and the overall economics of contracting and keeping focus on the real purpose of the contract. He made extensive reference to IACCM research on the most frequently negotiated terms and discussed the obstacles to change from adversarial negotiations over risk allocation, to a more constructive focus on the management of the relationship. He proposed a number of steps that organizations can take to improve the quality of their contracting.
Daniel Mahlebashian, Chief Contracting Officer and Global Director Purchasing, IT, General Motors Company, who discussed the restructure of GM’s contracting processes following the recent bankruptcy of GM and how this has led to a stronger focus on supplier relationships and outcomes. Dan stressed the need to allow suppliers to innovate and to achieve a mutual trust with suppliers. In response to a question from the audience, Dan discussed how the automation of GM’s IT contracts and procedures proved invaluable in the audit and business recovery. He also acknowledged the invaluable role performed by IACCM in causing his regular re-evaluation of contract rules and practices, to ensure GM’s sustained competitiveness and attraction as a business partner.
Keld Jensen, CEO, MarketWatch Centre for Negotiation A/S, presented on creating a SMARTnership™ with suppliers. He emphasized the importance of the “Golden Rule” to always do unto others what you would have them do to you. He spoke to research findings that trust, which is critical to good relationships, has been decreasing among partners, resulting in a world “trust crisis”. Interestingly, the United States and Latin America are traditionally relatively ‘low trust’ societies – and in the US, recent years have seen a substantial decline in trust levels. This has a marked impact on contract and negotiation practices. Keld also emphasized that it is the person/people behind the transaction that results in success, not the company. Success depends on trust, likeability and credibility. Keld spoke to the “15/85 rule” – 15 percent of success is formal education, technical skills, and the like and 85% of success is trust, likeability and credibility.
Tim Minahan, SVP Marketing, Ariba, spoke to Ariba’s contract lifecycle management system’s recent partnership with Salesforce.com. Tim invited Tim Cummins to join him in his presentation and both addressed the current misalignment between contact management professionals, sales and legal, and how that misalignment results in unintended and unnecessary bottlenecks that delay or prevent the closing of transactions. They also reflected on the concerns expressed by both legal and contract management over the expectations that Sales often creates with customers. Both emphasized the importance of early and ongoing collaboration, internal and external, and unveiled recent survey results showing that automation results in substantial improvements in communication, timing of involvement and the visibility of progress and commitments. Discussions also included how to define the contract and the role of a contract, to increase understanding of its value across all parts of the business.
MC McNeill, Vice President, IBM Global Services, spoke to linking contract management with product lifecycle management, and shared IBM’s contracting mission statement of creating, facilitating and documenting business understandings for customers, partners and suppliers. Ms. McNeill described IBM’s implementation of its internal automation contracting process “Agreements on Demand”, which has facilitated self-service within the business units, while maintaining a high degree of central visibility and strategic control. She also introduced three current topics that are high on the management agenda at IBM and where the contracts and legal staff are playing a major role in policy definition.
Margaret Smith, Executive Director, Worldwide Contract Management, Accenture, and Roselle Harde, Americas Lead, Contract Management gave an inspiring presentation on contracting processes and models, market trends and expectations, and organizational design, roles and alignment. They described the growth in status and contribution of the Contract Management function at Accenture and the recent decision to merge with Legal, to improve synergies throughout the process.
Lucy Bassli, Senior Attorney, Legal and Corporate Affairs, Microsoft Corporation, ended Day Two with a dynamic presentation about reassessing risks in contracts, and drawing a clear line between legal and business advice. Ms. Bassli also commented on Microsoft’s relatively recent global outsourcing division and how this has led to outsourcing of many contract-related activities, such as the creation of Master Outsourcing Services Agreements and Statements of Work, plus service level management.
Dalip Raheja, CEO of the MPower Group, spoke on the theme ‘Strategic Sourcing Is Dead’. He made a very credible argument that the fundamental values that underpin today’s sourcing practices are not sustainable. He revealed data that shows the steady reduction of achievable savings and suggested that sourcing and procurement groups must reinvent themselves, with particular focus on improved business and market intelligence. They must demonstrate increased value in delivering business goals – and to do that, they must start to appreciate what executive management is seeking to achieve and then design their services accordingly.
Kate Vitasek, Professor at the University of Tennessee and leading author, gave insights to extensive research on outsourcing contracts and relationships. Kate observed that ‘We talk about partnering, but we buy transactions’. She highlighted how organizations must focus on objectives and set goals and targets accordingly. Successful outcomes are those which concentrate on what is to be done, rather than how it is to be done. Kate outlined some key principles for successful contracting, including the fact that transactional contracting stifles innovation and undermines the value that can be achieved.
Claude Marais, Managing Director of Governance Services at TPI, and Steve Addante, Division CIO at Walgreens, discussed the working relationship between their organizations in managing key outsourcing agreements. They set out a compelling argument for the value provided by rigorous supplier measurements – not simply due to service level, but because of the lack of quality in invoicing and contract management by suppliers.
Todd Snelgrove, Global Manager of Customer Value at SKF Group, described how SKF has focused on distinguishing between price and cost. The company seeks to compete on total cost, rather than purchase price, and through this approach has delivered increased customer value and enhanced its competitiveness. Todd described how this has led to far greater internal integration between sales and procurement and is also dramatically altering the way that SKF interfaces with its suppliers.
Craig Guarente, Vice President, Global Contracts, Oracle Corporation, started off the morning with a discussion on reengineering contract management skills and competencies in a time of continuous change. Craig discussed how best to restructure the organizational design for better contracting to achieve shorter cycle times while balancing speed with appropriate review to ensure quality of control is not sacrificed. Craig spoke to how best to manage skills and implement performance metrics in a changing environment.
Diane Carco, President, Swingtide Inc., and Richard Sandler, Vice President, MSS Contracts, CSC, teamed up to present on best practices in contract exit strategies from the buyer’s view and the customer’s view, respectively. The theme was to manage and nurture contractual relationships when planning exit strategies. The duo also spoke to post-award contracting and relationship management, and emphasized the critical role of managing relationships.
Jon Hughes, Partner, Vantage Partners, presented on the importance of contract and relationship management, and how these two areas are intertwined. He posed the question, “Will contract management and relationship management converge?” He discussed the selection of suppliers and customers, and discussed what selection criteria should look like. Jon emphasized the importance of the contract and its negotiation to the ensuing relationship and provided extensive research data showing the value that is typically lost when relationships are not collaborative.
After the morning networking and refreshment break, Michel Gahard, Legal and Corporate Affairs, Microsoft Corporation, addressed global contracting standards, and posed the question, “Can the technology industry simplify its contracting?” Michel spoke to the impact of the economic volatility on contracting processes and models, as well as the potential benefits of reengineering contracting standards. He outlined the project that he has led on behalf of IACCM, comparing the standard agreements (buy-side and sell-side) of major technology providers. This analysis has resulted in the development of a set of model terms (sell side) and will shortly release a buy-side version. The objective of this activity is to shorten cycle times by avoiding or reducing time spent on repetitive and predictable negotiation issues. Michel urged the audience to consider themselves ‘ a movement for change’.
Peter Allen, President, Global Sales & Marketing, CSC, covered what is becoming an increasingly “hot topic” – Cloud Computing, and the changing role of the CIO in the management of supplier networks. Peter set out some basic principles related to ‘cloud’, including the misconceptions in the market today.
Dave Barton, Director of Contracts, Agilent Technologies, presented in an entertaining fashion and engaged the audience by starting out with the question, “What three things do you look for in a consultant?” The purpose of the question was to inspire audience collaboration and experiences. The partnership and relationship management theme continued with his asking the audience to identify certain drummers, whose photos were part of his slides. Some drummers were successful, and some not, because of relationships within the band and with other people. Dave spoke to how best to balance contracting quality and performance, and how to best build contract and commercial competency across the organization through addressing and managing change. He emphasized our roles as the agents of change.
The final session was led by IACCM Board Members and Senior Staff. The panel addressed the leadership challenge and the journey to excellence in contracting. Diane Homolak, Director for Americas Legal Quality and Operations, Hewlett-Packard, and the other three panel members, discussed the challenges and opportunities of raising the status of contracts and contracting professionals. The panel addressed current research and how organizations can benefit from that research. The panel asked the audience to think about skills development and where to turn to for the proper training of a contracting professional.
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