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IACCM - International Association for Contract & Commercial Management Contracting Excellence Magazine
 

Contracting Excellence Magazine - Feb 2012

 
 

 

Who's Smarter: Buy-side or Sell-side?

 
Few can have failed to notice IBM’s ‘Smarter Planet’ advertisements. For an organization with ‘Think’ as its motto, this initiative is worthy of attention. Many of the associated ‘advertorials’ are of real merit and, well ....... thought-provoking.
 
 

 

Few can have failed to notice IBM’s ‘Smarter Planet’ advertisements. For an organization with ‘Think’ as its motto, this initiative is worthy of attention. Many of the associated ‘advertorials’ are of real merit and, well ....... thought-provoking.

Within the overall Smarter Planet concept, IBM also discusses ‘Smarter Commerce’. A few days ago, the Financial Times ran a quarter page advertisement (which unfortunately I have lost on my travels) which discussed the relative maturity of corporate capabilities at supply management, compared with sales or market management.

The IBM view is that businesses have invested heavily in building integrated supply management (i.e. sourcing) capabilities and that the maturity of these processes has far out-distanced the competence of the sell-side operations. It calls for companies to work on integrating the areas of market management in order to implement ‘smarter commerce’.

I find this perspective interesting. It sounds a bit like consultant-speak to me and perhaps a rather superficial analysis. It is certainly true that many organizations have invested massive sums in standardizing their procurement and logistics process. Much of the investment in ERP focused on integration of these areas with manufacturing and operations. They have also attracted major investments in stand-alone software to oversee compliance, spend management and – more recently – category management.

But in the end, has this actually resulted in ‘smarter commerce’? It seems to me that many investments have actually led to dumber commerce. Rigid standards. Inability to adjust to shifting market conditions. Limited insight to risk. Continuing inability to link to critical financial performance measures. So we continue to see pressure for improved analytics, greater commercial skills, better understanding and management of supply risk …..

So does this mean that IBM has got the assessment completely wrong? I don’t disagree that the sell-side has a long way to go, but I think the challenge is simply different. While buy-side investments were being made in standards and tools, the sell-side was gaining greater investment in skills. The two are fundamentally different. Winning business for the sell-side means needing to be flexible and responsive to customer demands. Much of the software developed over the last 20 years has been designed to disable these characteristics. Sales and commercial efforts have often had to be directed to overcoming the complexity created by such systems.

So my view is that buy-side and sell-side are in quite different positions, but true ‘Smarter Commerce’ demands continuing developments by both – and in each case, it is to find systems and processes that enable more flexible and collaborative relationships, based on stable commercial principles and values.

What do you think?

 
 

Are We Stripping Superman Of His Super Powers?

 
On the 20th of February 1995 I was attending a module on Negotiation Skills as part of my Bar Vocational Course in London. To this day the thing I remember the most clearly from those nine months of classes was that there are two style of negotiation: combative and cooperative. A combative approach, our tutor said, may be appropriate in certain circumstances, but inevitably it is cooperation that leads to negotiated settlements. Seventeen years later (and having recruited commercial managers for the last ten years), what strikes me is that commercial managers thrive by “making it personal”. Prospering in the grey areas as you are obliged to do, the mere locking of two commercial managers in a room with a deadline will normally result in cooperation, mutual compromise and a deal being struck. Simon Rowley, Director of Rowley Bateman, UK
 
 

On the 20th of February 1995 I was attending a module on Negotiation Skills as part of my Bar Vocational Course in London. To this day the thing I remember the most clearly from those nine months of classes was that there are two style of negotiation: combative and cooperative. A combative approach, our tutor said, may be appropriate in certain circumstances, but inevitably it is cooperation that leads to negotiated settlements. Seventeen years later (and having recruited commercial managers for the last ten years), what strikes me is that commercial managers thrive by “making it personal”. Prospering in the grey areas as you are obliged to do, the mere locking of two commercial managers in a room with a deadline will normally result in cooperation, mutual compromise and a deal being struck.

In other words, commercial management is founded on human intervention and cooperation.

The way you have those difficult conversations, the way you read the various people around the negotiating table, the way you are able to work through an impasse in negotiation by taking time to go for a pizza with your opposite number.  For me-these are the most powerful tools in the commercial manager’s kitbag. The concern is that, in these times of austerity, headcount cuts and travel restrictions are limiting the extent to which the commercial community can make a difference by making it personal.

In response to tougher trading conditions companies have cut commercial contractor headcount and some organisations are absorbing attrition and not backfilling their permanent vacancies.  Many companies are also under pressure to cut travel expenses for their commercial teams, which is comparable to stripping Superman of his super powers. Notwithstanding the pressure on companies to hit targets in what are very challenging times, to take away from commercial managers the ability to make it personal runs the risk of being hugely counter-productive.

An experienced post-contract commercial manager is normally self-financing ten times over in the revenue they recoup and the delays and claims they prevent. As a recruiter of commercial directors and commercial managers I may not be the most objective commentator, but, in harder times when new business pipelines are uncertain, my contention is that companies should invest more in contract managers on existing programmes as they will undoubtedly benefit from their abilities in combat and cooperation.

I would welcome your comments.

Simon Rowley is a Director of Rowley Bateman, a UK-based recruiter of commercial resource throughout Europe.  (www.rowleybateman.com)

 
 

IACCM EMEA 2012 Conference: London, April 25-26

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Learning - A Company Case Study

 
A questionnaire was used to explore feelings and experiences of students undertaking a company management development qualification programme. Stuart Emmett, Learn and Change, www.learnandchange.com
 
 

How companies can help employees to learn

Executive Summary

A questionnaire was used to explore feelings and experiences of students undertaking a company management development qualification programme.

The questionnaire examined four areas:

                    Why Learn?

                    Learning experiences

                    Reflections on learning

                    Learning styles

The questionnaire results are detailed in this report (shown as the strengths and weaknesses)

The message for companies is they must:

                    Build on the strengths found by individuals

                    Recognise the reality of the weaknesses and proactively manage them into strengths

Companies must recognise the conditions for effective learning and building these into all leadership, management, learning and development practices and programmes.

The Learning Programme

This was a company learning programme for management development; this involved students working to achieve a nationally recognised professional qualification at the current equivalent of a NQF level six in Supply Chain management.

The Questionnaire

In order to examine the learning processes used, a questionnaire was designed to explore a range of questions about the feelings and experiences of students. This questionnaire examined the following four areas: -

                    1. Questions on the reasons why students wanted to study for the qualification.

                    2. Questions on students experiences whilst they were completing their studies.

                    3. Questions on reflection about their studies

                    4. Questions on students learning styles

 

(1) Results-Why learn?

The results showed various reasons why they wanted to learn.

Many different responses were given, (this, however, maybe in part due to the open nature, of the questionnaire). It was very clear however, that the main reason for wanting to learn was to increase knowledge and understanding.

Other reasons given were to make life more interesting, to meet other people etc.

Similarly, the question about the students intended outcome had also mixed responses, but the majority however; indicated the prize was the gaining of a qualification.

Other responses indicated were, to make progress, to be able to apply and use the qualification.

(2) Results-Learning Experiences

Whilst undertaking studies most students reported that they were able to use their existing experience and knowledge during the programme.

Half of the students felt they had learnt a lot, whilst the other half felt they had learnt something.

25 per cent of students felt they were given no guidance at all, on how to learn.

87 per cent of students reported receiving feedback during the programme.

75 per cent of students were very clear that no formal support had been given at work, despite, a formal mentoring programme being set up at the start by the company using senior and line managers. Clearly this had not been effective.

When asked further about their support network, around half of the students had received informal help/support at work. They also had a support network from other people; indeed all students said they were helped in this later way.

Finally, all students felt they had opportunity whilst learning, to think and reflect, and make conclusions about their learning. 75 per cent of students also felt they had opportunity, to use what they had learnt.

(3) Results-"Reflections"

In thinking back about the learning experience, the main problem students identified was finding the time. This is also reflected by a few students reporting the main time problem for them, was working shifts.

In answering the question about how students had overcome their study problems, students were, generally and remarkably, non-committal. Some of the ways however reported on overcoming problems were; for example, making time, having perseverance, and using holiday time.

When asked why some people might choose to drop out of the learning, mixed responses were found, but the responses made were mainly about lack of motivation, no support, no time, and finally, getting behind and then getting depressed.

The main reasons reported for keeping going were not to let down colleagues and others in the group. Clearly, a group-training format had also supported the individuals questioned.

Learning was felt to be important to students and their responses were: "develops" me, gives me a challenge, expanded the mind, allows me to see the bigger picture, and, keeps the mind fresh.

Students had clear views about what they needed to do to be better learners and responses mainly included having a more disciplined approach plus, concentrating more on the planning of study time and to listening without prejudice.

(4) Results-Learning Style

On learning styles students were equally divided with their self- perceptions and fell between equally between being visual / seeing learners, and being experiencing / doing learners. Furthermore, the majority felt that they were activists and would try anything once.

Results-Summary

In putting together the strengths and weaknesses from the questionnaire results, the following is a summary:

Strengths were as follows:

  • Students have clear reasons for doing the programme.
  • Programme builds on existing knowledge.
  • Provides feedback.
  • Good informal support network.
  • Able to use what has been the learnt.
  • Group peer pressure/support.

Weaknesses were as follows:

  • Lacking guidance on how to learn
  • No formal support network at work
  • Finding time to complete the assessments
  • Lack of clarity on how to overcome the learning problems
  • Many reasons for dropping out
  • Undisciplined learning approach

Messages for companies

It will be seen that individual students were motivated, had informal learning support and were able to use what they learnt; all these are good strengths for companies to build on.

Companies can however recognise the weaknesses reported by students and be pro-active to manage these.

Learning lessons here are for the provision of:

  • Formal guidance on learning
  • Formal support networks
  • Time for assessments
  • Encouraging a disciplined learning approach.

Support and guidance (both formal and informal) is critical in learning. The students above clearly had informal support, but no formal support. How therefore support is accounted for, planned for, and actually undertaken is a "must" to be considered by all companies who sponsor learning.

Effective Learning Conditions

For learning to be effective, the following learning conditions are needed:

  • Gaining attention and motivating.
  • Giving the expected outcome.
  • Stimulating recall by using past knowledge.
  • Developing new opportunities.
  • Getting learners responses.
  • Giving learning guidance.
  • Giving feedback.
  • Appraising performance.
  • Providing for transferability.
  • Ensuring retention and encourage practice.

There is much above that shows the importance of giving support and guidance to individuals who are practicing learning.

The following are some examples of how to do this:

  • Motivating = encourage and support, continually
  • Develop new opportunities = ask "how can I help"
  • Learning guidance = provide how to learn courses/discussions/self help groups/ study buddies etc
  • Feedback = say "well done"
  • Appraising =ask "how can I help you to develop"
  • Transferability = create opportunities to use and apply the learning

It should not be difficult to help and support employees learn. When doing this, a company demonstrates that it believes that learning really matters.

This report is based on:

"Improving Learning & for Individuals & Companies," 2002, ISBN 1-90429-831-1

"How to Mentor and Support Learning," 2003, ISBN 1-90429-865-6

“The Learning Toolkit” 2008, ISBN 978-1-852525-620

“The Developing People Toolkit”, 2008, ISBN 978-1-852525-651

All written by Stuart Emmett

Stuart Emmett is a freelance independent trainer and consultant who trades under the name of Learn and Change – Stuart believes that in times of change, it is only those who consciously learn, that will inherit, a successful future Stuart has operational and strategic experience in varied commercial service industries - gained in the UK and Nigeria – and is particularly interested in the “people issues” of management processes, as well as logistics and supply-chain management. He has worked on 6 continents, in over 30 countries and delivered to over 50 nationalities.

Stuart can be contacted at stuart@learnandchange.com or by visiting www.learnandchange.com

 
 

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Electronic Contracting

 
What will be covered? This article provides a brief overview of electronic contracting, sometimes called contract automation, and is designed to create awareness, not comprehensive guidance. Issues to be covered include: definition of electronic contracting drivers and benefits why cost benefits have not been realised evaluating risk defining sponsors and stakeholders considerations on contract automation Dr. Cyril Jankoff, www.TheRiskDoctor.com.au
 
 

What will be covered?

This article is a brief overview of electronic contracting, sometimes called contract automation, and is designed to create awareness, not comprehensive guidance. Issues to be coved include: 

  • definition of electronic contracting
  • drivers and benefits
  • why cost benefits have not been realised
  • evaluating risk
  • defining sponsors and stakeholders
  • considerations on contract automation

Defining ‘Electronic Contracting’

Electronic contracting is a computer network-based process that establishes terms and conditions, their negotiation and the execution, management and archiving of resultant contracts. But that doesn’t really define it. The definition the IACCM have adopted is “Electronic contracting is a process that enables creation, workflow, retention and management of contracts and terms. It may include electronic delivery mechanisms such as click-wrap agreements or electronic signatures. It applies equally to buy-side and sell-side processes, including areas such as distributors or business partner relationships’.

Drivers & Benefits

So what are the drivers for an electronic contracting process likely to include? There are three major areas or categories for focus:

  • Cost reduction
  • Cycle time reduction
  • Ease of doing business (all parties)

Why Cost Benefits have not been Realised

The reasons people are not seeing cost reductions are three fold.

  1. They don’t have good start-point metrics, so they just don’t know or don’t manage to specific reduction targets
  2. They did not reengineer the process; they simply made an existing process flow more electronic. So cycle times gained significantly, but costs did not
  3. The scope of their electronic contracting project was too limited – there are savings to be had, but they depend on expanded scope in later phases of the project.

Evaluating Risk

There are a number of ‘big picture’ risks you need to consider before you even start down the road of design and implementation.

  • The first consideration has to be, is this appropriate for our business? The answer to this is that some elements of an Electronic Contracting process are going to be worthwhile in any business – even if it is just to the level of an electronic repository and storage system for in-process and completed contracts. But the range of any initiative will certainly vary depending on the types of contracts that you undertake and the size and sophistication of your business.
  • The second big question, is there anyone internally who is going to listen to this? If your company is in crisis, or if you know that resources in key provider areas like IT are stretched to the limit, this may not be the right time to pursue this initiative. However, the answer to that will always depend to some extent on the scale of benefits or the urgency of the need. For example, if management is busy cutting costs, maybe you see ways that automation can help. If competitiveness is a big issue right now, maybe a reduction in cycle times could be high on their agenda of desirable improvements. If you aren’t sure, check the Corporate Strategic goals to see where this fits in terms of contribution.
  • When you have established the fact that in principle there may be support, you need to set about evaluating other major risks that might undermine you. In particular, they are risks you will have to show you understand and have evaluated. Second, they may reduce the potential scope of the project to such an extent that you decide it is not worth pursuing. The biggest practical risks are without doubt those of legal enforceability and acceptance by trading partners. It is suggested these are the two areas for initial focus because they are fundamental to project scoping – which markets or relationship types, which geographic areas.
  • Another key factor is whether you have strategic or business plans for contracting. Many do not. Either way, this could create conflicts. If there is a plan, you need to either fit the project within it, or gain amendments to it. If there is no plan, you may be faced with a much more fundamental strategic issue – any major implementation may demand a thorough reengineering of process and organization. It can impact measurement and management systems, review and approval processes, necessitate a complete overhaul of your standard terms and contracts. In short, a full scope Electronic Contracting initiative goes to the heart of the business and faces remarkable levels of resistance and inertia.
  • Part of any such plan should be the long-term approach to existing relationships and how to migrate them. This is a serious and risky business for any corporation. It certainly demands significant resources, but also risks upsetting established relationships. For the sales side especially, there is always great fear that this may let in competition or fracture a customer relationship. In today’s environment, it may result in immediate pushback from the customer, leading to demands for renegotiation of all agreements on their terms.
  • Be sure your assumptions are realistic. For example, one company reports that it abandoned plans for electronic signatures when it discovered that 95% of its vendors would not be in a position to use them.

Defining Sponsors and Stakeholders

Depending on scope, you may have just a few, or an enormous number of sponsors and stakeholders. Ideally, phase your project so that early numbers – and required buy-in – is limited to something you can manage. At the same time, do make sure that wider audiences are aware of the strategy and plans – otherwise you may find independent initiatives jumping up to distract or disrupt you. Any project will depend for its success on the having an adequately powerful executive champion. It sends a message about the importance of the initiative and the attention it will receive – either positive or negative. But that may not be enough. In any complex, cross-business project, you need to invest time in set-up. That means walking the corridors to get to other key executives – functional heads, business unit owners, country or regional managers, product divisions and so on. If you depend on anyone for resources, or if anyone can block or delay your implementation, you must take time up front to sell the project to them.

For key players – especially if you think their staff may become an obstacle at some future time – invite them onto an executive review board, chaired by the sponsor. Often this is in truth a token group – it may never meet – but its existence can be critical. It increases the risk for those who don’t comply; it suggests a level of power and influence; and in the last resort, it offers access. Keep the Board informed of your progress so they remain aware of what is happening. Use them sparingly – but don’t hesitate if you know that objectives dear to their hearts are threatened.

Considerations on Contract Automation

Contracting is one of ‘the next big things’ in the world of business. That is because it is a critical contributor to the management of complexity and risk. Economic conditions are pushing organizations towards new sources of savings, revenue and project funding; into new and emerging markets; to dealing with unfamiliar cultures and business practices; growth in Asia is shifting the power of businesses to impose their way of working; companies are dealing with increasingly complex, interdependent systems. CEOs are struggling with how to understand, make sense of, and manage ‘interconnections and interdependencies’.

In this environment, the analytical and disciplined approaches that a high-performing contracting process brings are fundamental to business management and controls, plus they then provide a firm platform for the management of change (which today is inevitable during the lifetime of every relationship).

More than 60% of organizations see automation of their contract management process as a priority; indeed, it emerges as the number one priority for 2012 in the latest IACCM global benchmarking study. There are several reasons why automation is seen as key to improved performance:

  • Management is demanding ‘greater value’ from the contracting process, which includes improved cycle times, improved controls and improved management information
  • Resources applied to contract management are stretched; workload is increasing and hiring is generally not an option
  • Increasing regulation is imposing growing pressure on compliance, which is frequently achieved through contract management. Without automation, the necessary visibility and controls cannot be achieved

Acquiring the right automation is critical. For example, most Procurement groups have invested heavily in technology in recent years, including in many cases some rudimentary tools for contract management. Yet many are finding that what they acquired is not ‘fit for purpose’. A simple repository and a system that supports transactional management of standard forms of contract are inadequate to deal with today’s volatile, fast-changing market conditions. Far from enabling the business, such systems act as a constraint.

To become effective at managing contract risk, organizations need to focus on business and market intelligence that will help steer them towards improved decision making and will safeguard planned contract outcomes. To do this, we need to be far more thoughtful about the nature of the data needed for analysis and how to combine this with forecasts based on likely market trends and directions. Through this combination, the quality of risk management would improve and result in increased bottom-line contribution.

Some Key Considerations When Selecting Your System

It is critical to remember that contracts are instruments of economic value, in which legal considerations are of fundamental importance, but not their primary purpose. Contracts represent an economic arrangement and the underlying system should be designed and managed to maximize the probability of a successful outcome

Second, contracting is a life-cycle activity. Businesses must have a system that supports their contracting strategy and allows appropriate flexibility during the opportunity or needs evaluation, negotiation and post-award environments. The contracting process brings cohesion across these phases of activity and provides a framework for clarity over requirements and goals, roles and responsibilities and on-going relationship governance.

Third, because of this scope, contracting has many stakeholders - Legal, Finance, Operations, Project Management, Sales, Procurement (not to mention the external trading partner). Each has areas of policy or resource interests which make them sensitive to authorities and review and approval processes. Therefore a contract management system must address their needs and be seen to deliver benefits and advantages consistent with their interests.

Together, these factors mean that gathering requirements and building consensus will be key to success. The right vendor will have the experience to assist you in developing a business case and will be able to offer a solution that not only addresses your perceived needs of today, but also has the flexibility to adjust to the fast-emerging needs of the future.

Cyril Jankoff thanks Tim Cummins, International Association for Contract and Commercial Management (IACCM) CEO, for his assistance with this article and also the reference resource in the IACCM Manged Learning syllabus.

Electronic Contracting Case Study – Did I get what I wanted?

Facts: Purchaser needed an electronic contracting system. The purchaser hired a consultant to assist. The system was chosen by the consultant and was rushed in. The implementation was very difficult for both purchaser and vendor.

Why did it not go well?

There are a number of reasons why the project did not go well:

  • The purchaser’s Vendor Management (VM) team wanted to work on the contracts and then prepare detailed requirements for an RFQ to select an appropriate system. However, the consultant left the VM group out of the process, leading to significant conflict between the consultant and the VM team. The lack of VM involvement resulted in the implementation being very difficult for both purchaser and vendor.
  • The system itself was very good but it had a XYZ industry base so was not really suited to an ABC environment without further development.

Reflection:

  • The Purchaser advised: “I must say the vendor’s team were very good and it would have been just as difficult for them as the conflict was unfortunately robust during implementation.”  
  • Clearly the vendor has a vested interest in ensuring the project runs smoothly.

 

Summary

Things to keep in mind when considering an electronic contracting project:

  1. A successful and cost-effective initiative requires specific contract management experience from the start.
  2. Without strong support from senior management the project will struggle to move forward.
  3. As the project will impact on multiple areas of the organisation (for example legal, IT, procurement) a cross-functional team must be defined and incorporated from the start.
  4. Lack of clearly identified and documented requirements will have a direct impact on long-term project costs, timelines and milestones.
  5. Establish a mechanism to fully and accurately evaluate software solutions to ensure they align with the organisation’s requirements.
  6. As the potential for misunderstanding or no understanding is substantial, communication and its planning are vital. It must be regular, to the point, and avoid ambiguity by using commonly understood terms and phrases.

January 2012 – Issue 2012-1 – Commercial Contract Risk e-Newsletter Featuring 'Electronic Contracting'.

 

Dr Cyril Jankoff,   www.TheRiskDoctor.com.au

 
 

Contract & Commercial Management: Operational Guide

The Definitive Guide to Commercial Contracting

We are excited to announce that IACCM's groundbreaking commercial contracting guide - the first global work of its kind - is now available.

Secure your copy of Contract & Commercial Management: The Operational Guide today - and find out why this highly recommended title is being called 'a great catch all book that can be referred to by both sell and buy side for worldwide contracts', that will 'serve as a reference handbook throughout a career'. The definitive work on contracting and commercial best practice provides a comprehensive overview of the entire contract life-cycle over more than 500 pages of detailed insight.

The Operational Guide is a unique work, addressing contract and commercial principles on a worldwide basis, for both buy-side and sell-side practitioners. Invaluable for training, as a reference work, or simply to update your understanding of current practices, this is a volume that you really must own!

For more details and to order online, please go to:
http://www.iaccm.com/store/?vp=10

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Contracts As Instruments Of Innovation

 
At the IACCM Global Forum in Arizona (October 28th, 2011), there were several executive roundtable discussions. One theme that the groups tackled was the question of contracts and their role in enabling innovation. The overall session was led by Professor Tom Barton from California Western School of Law and here is his summary of one part of those discussions. I reproduce it because it may inspire ideas – or perhaps even on-going discussion. Please add your comments or experiences below.
 
 

February 8, 2012

At the IACCM Global Forum in Arizona (October 28th, 2011), there were several executive roundtable discussions. One theme that the groups tackled was the question of contracts and their role in enabling innovation. The overall session was led by Professor Tom Barton from California Western School of Law and here is his summary of one part of those discussions. I reproduce it because it may inspire ideas – or perhaps even on-going discussion. Please add your comments or experiences below.

Five tables reported back their respective thoughts on the topic “Contracts as Instruments of Innovation.” The items covered at each table had limited overlap, demonstrating the breadth of the topics that can be considered.

I am grouping the thoughts in a way that hopefully could make them a bit easier to process, rather than table by table. In general, people reported back some particular immediate innovative ideas; thoughts related to improving the processes leading to ongoing creation of innovation; and reflections on the organizational and attitudinal barriers to innovation.

I. Immediate Ideas

A. Some tables adopted the framework about contracts consisting of three circles: (1) the economic exchange relationship, or content of the bargain; (2) the personal relationships that accompany the exchange; and (3) the legal relationship. These same tables seemed to agree that the legal circle has come to dominate contracting, creating barriers to innovation.

1. Those who spoke this way brainstormed various ideas for bringing the three relationships back into better balance. Ideas included the following:

a. enlarge the exchange and the personal relationship circles, especially if the other circles could grow so as to overlap once again with each other and with the legal circle.

I. This could occur, for example, by having someone from the legal side participate regularly and early in the exchange negotiations, as part of established teams. One person reported using this structure, saying it had the effect of helping the lawyers understand the business needs better, as well as building far better internal personal relationships.

ii. The personal relationship circle could also grow through a systematic personnel exchange, at a middle-management level, between counterparts in strategic contracts. Two different tables suggested this as a way to advance trust and mutual understanding between the contracting parties. Obstacles to this idea were possible disclosure of internal policies/trade secrets, and the fast turn-over of personnel. One person reported successful experience with the idea.

b. another idea was to approach lawyers on their own terms, so as to persuade them to shrink their own domain. The thought was to tell the lawyers that their desire for a “zero risk” contract was not only a fantasy, but that in addition to raising transaction costs it actually generated a significant new risk: that an otherwise desirable contractual counterpart would ultimately refuse to do business with the lawyer’s company. If that happened, the company is shrinking its alternative contracting partners, potentially ceding bargaining power to an oligopoly. A second sort of new risk that ironically grows out of the unrealistic “zero risk” mentality is what happens when an ongoing contract encounters some completely unforeseen occurrence or change in background environment. Legal departments, it was suggested, must understand that their job is to cope with not only current risks, or “unknowns,” but also those risks which cannot currently even be imagined: the “unknown unknowns.” Only a contract with some flexibility and discretion built in could handle the unknown unknowns. And if that flexibility is absent, the parties could experience significant costs that otherwise could have been prevented by the more flexible contract.

c. putting together thoughts from two tables, a third idea was to have contracting parties always disclose their strategic interests, as well as their immediate transactional interests, in initial negotiation sessions. Doing this would generate risk profiles for each party. Contracts could be crafted so as to acknowledge both of these risk profiles, to meet the interests of both parties. Through presenting the risk profiles to the legal departments, the exchange personnel would be taking a stronger role than simply abdicating issues about risks for the lawyers to resolve on their own.

d. another idea was to move U.S. business practices, at least with respect to strategic contracts, toward the Japanese model in which top management from both sides to an agreement personally work out the agreement in private meetings. And then they specify that their agreement should be memorialized and formalized. This would, clearly, expand the exchange relationship circle and perhaps also the personal relationship circle.

e. a dramatic fifth idea was to make some contracts, or parts of some contracts, explicitly not legally enforceable. Hence they would in whole or in part look more like informal letter agreements. Obviously this would significantly reduce the importance of legal rules, and correspondingly increase the importance of the exchange and personal circles. When asked what would ensure the dependability of the undertakings, one suggestion was that perhaps both parties could supply insurance bonds–to guarantee performance on one side, payment on the other. Gradually, the risks of non-performance by a given company would raise insurance rates for that company, thus making it in the best interest of that company to keep its promises. One person did express skepticism, however, that insurance companies would issue bonds on contracts that were not legally enforceable.

f. finally, one table suggested that a fourth circle should be added to the existing three that had been identified, because this circle–sales–had significant influence over the other three circles. By controlling the sales teams more carefully, the legal circle could be diminished.

 
 

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Supplier Relationship Management: Program Launch

 
IACCM Launch Accredited Qualification in Supplier Relationship Management (SRM) Pioneering program will equip SRM practitioners with the core skills and knowledge they need to develop successful, collaborative customer-supplier relations We are delighted to announce the launch of the IACCM SRM program. The first learning group will start at the end of January 2012, and we are taking pre-registrations (contact pmallory@iaccm.com for further details and to reserve your place).  
 
 

Be one of the first to achieve the world’s only internationally recognised and accredited qualification in supplier relationship management (SRM).

The pioneering program is designed to equip practitioners with the skills and knowledge they need to implement SRM practices effectively within their organisations. Completion of the program will lead to individual certification and a “licence to practise SRM”.

SRM is emerging as both an important business activity and a professional discipline within major organisations around the world. Research evidence suggests that SRM can deliver significant tangible benefits in addition to those achieved through world-class strategic sourcing, negotiation, and contract and performance management.

You will join a group of practitioners as they work through the learning program, in a virtual environment of e-learning modules enhanced by message board interactions across the group and webcasts to enhance the learning materials and provide a forum for interactive discussion of best practices. The skills assessment tool will enable you to do a gap analysis on your current level of skill and capability, enabling focus on personal learning goals for greatest development impact.

This comprehensive training program recognises that relationship management requires a blend of technical capabilities – for example, in process and organisational design, and structuring of appropriate contracts and future-facing measurement systems – and key behavioural competencies such as communication, influencing and trust building.

Participants on this e-learning programme, will learn how to:

  • Prepare convincing SRM business cases
  • Design an effective governance structure
  • Create and implement a communications plan
  • Engage key stakeholders and supplier executives
  • Develop metrics that drive successful behaviours
  • Encourage positive approaches to change
  • Collaborate with strategic partners
  • Devise appropriate contractual arrangements
  • Track and report SRM benefits
  • Resolve conflicts and issues collaboratively

The SRM Program has the following priced elements, all prices are quoted in US dollars:

Skills Assessment: $150 per person

e-learning program: $750 per person

Certification assessment:

(note that skills assessment is a requirement of certification)

Practitioner - Member Level (intermediate): $150 per person

Expert – Certified Member Level (advanced): $250 person

IACCM membership is an additional $150 per annum per person

Please note that we are able to run the SRM program as an in-house corporate program for your company, with a minimum of 6 participants.

The corporate program is facilitated by means of a bespoke learning portal created for your company. An additional $1500 set up charge applies.

The above per person charges may vary for a corporate program, to enable us to meet your needs for webcast interactions, on site interventions, message board participation. Further details of corporate programs are available on request: pmallory@iaccm.com

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