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The key to organizational success

by TIM CUMMINS, CEO, IACCM

In the words of strategy guru Gary Hamel: ‘Sometime over the next decade, your company will be challenged to change in a way for which it has no precedent.‘ That change, he warns, will involve ‘painful restructurings’, in order to transform decision-making practices and organizational designs.

The cause of this disruptive change is networked technology and the consequent plethora of choice in how services are acquired and delivered. The result is organizational uncertainty. It is not just a matter of how to structure organizations, but there are fundamental questions over the scope of role, division of responsibilities, organizational skills and competencies, and the mix between ‘people-based’ and automated activity. And the analysis does not stop there — further choices remain in terms of both location of resources and the potential for outsourcing.

So we are confronted by a dynamic mix of factors, a confluence of choices that no manager has previously faced because many have arisen as a direct result of the networked age in which we live. It is of course important to remember that this situation is not unique to our community; it is pervasive across every organization and professional group. So the inevitable result is a battle for power. Organizational positioning is always fraught with politics, influence and perceptions of relative value. And the results of this are immediately evident as we look at the varying fortunes of our community in today’s corporate landscape.

Winners and losers

The changes around us should offer unique opportunities for our community. Organizations are becoming increasingly dependent on their ability to form the right portfolio of contracted relationships. These relationships also cross into new frontiers, both in the form they take and the geographies they embrace. As a result, the ability to select, negotiate and manage trading relationships has become a core competence.

Yet this reality is not automatically translating to an enhanced role for those in Procurement, Contract Management or Legal groups. In fact, for some it is proving threatening as they are displaced by others who appear more capable or are simply better placed within the organization.

Each day we hear new stories from our members illustrating this point. For those that are gaining power and authority there is a matching story of others who are under threat. In this issue of Contracting Excellence we will explore some of those contrasts.

Tactics versus strategy

The most important lesson that we observe is that the groups which suffer are those that remain purely tactical in their operations. While the ability to drive out cost or to close deals may offer short term relief, the change highlighted by Professor Hamel demands much more. Success – and long-term status — depend upon the ability to drive sustained process improvement, making those tactics more relevant and more effective. The groups that are gaining positive focus from executives are those that can deliver change, those that offer facts, not simply opinions.

In order to develop this role, leaders in our community must begin to take a full process-based view. They need to understand the elements of forming and managing trading relationships and start to monitor organizational effectiveness beyond the boundaries of their immediate team. This does not mean they ‘own’ each element of that process, but they must use tools and resources to monitor the pressures for change, the factors that improve contract outcomes and make their company or organization more attractive to do business with. They must be visible in assisting other functional owners to understand the pressures for change in policies, practices or resource allocations.

Many of our members remain limited in their insights to the process and therefore can themselves be victims of change. They see themselves as contributing specific tasks — and if the outcome of their efforts is not positive, it is generally perceived as someone else’s fault. For example, a minority of organizations today have responsibility for, or even insights into, both the pre-award selection, validation and negotiation of relationships and the post-award contract or performance management. This is useful in avoiding blame, but useless when it comes to demonstrating strategic importance.

This lack of information means that our community is often defensive and reactive in the face of demands for greater value. They struggle to define their contribution in terms that are meaningful to senior managers. The arguments — and their survival as a group — often depend on the belief that nasty things would happen if they were not there. Short term, this may be effective; but once the perceived threat reduces or can be handled by other means, they are rapidly dismembered.

At a time of such dramatic change, we must base our future on a more striking and more creative role. That is why IACCM has been developing tools and methods to assist our membership in making more effective assessments of their status and contribution. Leading groups are making use of the unique network and benchmarking capabilities that we offer to assess and raise their status. These range from the use of on-demand market or competitive research to a holistic capability assessment and benchmarking of skills or organizational maturity.

There is no question that we face a time of great change in organizational design and roles. That represents an opportunity or a threat. Simply working harder is not the way to fix this issue. Becoming an active participant in the networked community is offering many IACCM members the chance to exert greater control over their destiny and reduce the pain of restructuring.

This article is extracted from a paper entitled Collaboration & Innovation: Organizing To Shape Outcomes, Rather Than React To Them. Copies of this longer paper will be sent on request.

Tim Cummins,

CEO, IACCM.