February 2013 Edition
Defining the Legal Role in Contract Management
By Tim Cummins, CEO, IACCM
A future edition of Contracting Excellence will focus on defining and describing the role of a contract or commercial manager – a topic that remains of strong interest.
In anticipation of that edition, this month we focus on some of the trends, ideas and questions that are influencing the contracts and commercial role. For example, what is the legal role in contract management? What qualifications should a contract manager have? How might we identify someone with the skills needed to flourish in this role? And is it a good job to have – does it have a future?
IACCM's blog, Commitment Matters, has featured numerous articles that dive into these questions. This month we feature a few recent articles that offer readers some answers and perspectives into what the future may hold. For anyone interested, you can read much more on a wide array of contracts, commercial, legal and procurement issues at http://contract-matters.com/
Career Choice: Contract Manager or Lawyer?
Posted November 21, 2012: Category: Legal & Regulatory
A quick look at the Appointments pages, or a glance at salary surveys, would seem to provide a rapid answer to this question. Being a practicing lawyer is clearly a far better career choice than contract or commercial management. Right?
Not according to two senior in-house counsel that I interviewed yesterday. Both come from large international corporations that employ several hundred legal and contract management professionals. And both – one a General Counsel, the other a VP of Legal – told me that they believe the contract management role is steadily becoming far more important than that of the lawyer.
Of course, neither was suggesting that the law profession is about to go into massive retreat. And both see contract management as a future direction for many qualified lawyers. But their observation of business needs and trends has led them to conclude that Contract Management will be a critical function for 21st century business, ensuring not just the integrity of pre-award processes, but ensuring the delivery of commercial benefits.
But if you are a contract manager, don't start celebrating yet. You can't simply sit back and wait for that promotion or increased recognition. The role that is being described is broad in its skill requirements and demands a role and contribution that only a few would match today. Legal understanding is certainly part of it; but as was demonstrated in IACCM's recent 'Future of Contracting' study, the role must encompass solid financial and risk awareness, a grasp of project management disciplines, market and business intelligence as well as softer skills such as communications, analytical, problem solving and negotiation. It demands true 'solution providers' who are not focused on transactional 'fixes', but are bringing sustainable improvement to business performance and competitiveness.
Both of the organizations that I interviewed are investing heavily in building and developing these capabilities. They see an urgent need for greater engagement by the university sector, so that contract and commercial management are seen as viable career paths by the school leaver and the graduate.
With so many lawyers now entering the market, a growing number are converting to contract and commercial management roles. But in future, I believe we can expect a real choice, where individuals train to become contracts or commercial professionals, rather than falling into the role from another business discipline.
Who is best qualified to be a contracts professional?
Posted April 30, 2012 Category: Legal & Regulatory
A recent blog resulted in the following comment by B R Srikanth (an IACCM member from the oil and gas sector and based in the Middle East): “the more important question should be “Who is best qualified to be a Contracts Professional?” Is it someone with a law background, or Finance or technical or project management or a bit of all. “Is a Contracts Professional suitable across industries like an Accounts or Finance professional; if not, is it industry specific?”
In order to answer this question, we must address whether those in contracts and commercial management can truly be called 'professionals'. And if they can only be defined in relation to other professions, the answer is no. A hallmark of professional status is a distinct body of knowledge which includes widely used techniques to undertake the diagnosis and remediation of problems. If contract managers are simply amateur lawyers, accountants, project managers or engineers, they cannot be deemed 'a profession'. And of course, by defining the role in this way, it guarantees that it is seen as a sub-element of another functional discipline, with relatively low status and value. It also means that the role is performed inconsistently, depending on whether an individual or company sees its primary purpose as legal, financial or project-management oriented.
Of course, this is not to suggest that contract and commercial managers do not operate with professional standards – principles of ethics, integrity, a commitment to learning – but that is in no way the same as being 'a profession'. And at this time, the contracts and commercial community remains on a journey towards professionalism because, while there are several thousand who are now certified practitioners, many are not – and therefore still define themselves in terms of a quite different professional background and qualification (or indeed have no formal qualification at all).
The syllabus for contract management does indeed include elements of finance, law and project management. But it also incorporates elements of marketing, economics, business planning, quality management and business development. And it molds those fields of knowledge and understanding to create unique value propositions that support successful business outcomes. Therefore the real question should be more focused on the skills and aptitudes required for excellence in this role – and there we start to focus more on communications, analysis, negotiation, time management and a range of other personal attributes that ensure effective application of the knowledge supplied through the learning syllabus.
IACCM has defined the skill and knowledge requirements for contracts and commercial professionals and developed a body of knowledge to support their work. Through this, we are steadily observing the emergence of a profession that can define itself on the basis of its unique characteristics. It is also increasingly supported by extensive research in areas that are not addressed by other functions and professions – for example, the connection between contracts and relationship management; the impact of selected terms on behavior and trading outcomes; the effect of cultural variations on approaches to contracting.
For now, the lack of undergraduate programs in contracts and commercial management means that most will come to this role with other qualifications or background experience. In that case, they should be measured on the basis of aptitude (skills) as much as they are for knowledge. And while finance, law and project management may each be relevant, none of them is in itself enough; each is a component of the syllabus for a high-performing contracts professional.
Identifying Skills: A Key To Successful Recruitment
Posted October 4, 2012 Category: Legal & Regulatory
Are you by nature suspicious, incisive, critical, exacting, organized and of high standards?
According to an expert writing in Workforce, these are traits often associated with people who have strong analytical skills. These skills are widely considered to be of increasing importance. In part that is because routine jobs can be automated; and it is in part because automation itself enables more analysis since it generates so much additional data. Those in contract and commercial management are not immune from this trend. Indeed, creative professionals have always needed strong analytical skills in order to resolve problems. That need is growing and the potential we have to analyze contract content, performance, the inhibitors to good relationships, the factors that damage value delivery are all potentially there for the taking.
One of the major distinctions within our community has been between three classes of practitioner:
- the administrator – people who simply follow the process, monitor and report, oversee compliance
- the reviewer – people who are able to check, validate and identify problems for others to take action
- the solution provider – people who examine the problems and identify ways they can be fixed or turned to advantage
It isn't hard to guess which of these categories is most valued. But a challenge for recruiters is how to identify the people who are either in, or have the potential to join, that class of 'solution provider'. How do you identify analytical capabilities? The article provides some useful ideas. For example, you might ask:
- Describe a situation when you anticipated a problem. What, if anything, did you do about it?
- Give an example of when your diagnosis of a problem proved to be correct. What approach did you take to diagnose the problem? What was the outcome?
- Describe the most difficult work problem you've ever encountered. What made it difficult? What solution was implemented and how successful was it in solving the problem?
- What steps do you take toward developing a solution?
- What factors do you consider in evaluating solutions?
As a more extreme, but perhaps more revealing approach, I recall having dinner with Seth Godin some years ago. He described an interview approach where he asked candidates to tell him how many gas stations there are in the US. Of course he did not expect them to know the answer. He was simply interested in their reaction. Most professed to ignorance and would not even venture a guess. A couple were so upset that they either walked out or burst into tears. Just a few sat back and thought through an answer. It was those few who were of course of interest to him; and his next question was to understand the process they had gone through in reaching an answer.
If you want analytical skills, it probably isn't a bad way to assess them. What do you think?
Trusted Advisers or Compliance Officers?
Posted July 26, 2012 Category: Contract / Commercial Management
“Problems are not the byproduct of unpredictable events, but arise from a wrong turning in the culture of an industry that has come to prioritize transactions and trading over trust relationships.”
This comment comes from an analysis of what is wrong with the financial services sector by leading economist John Kay. It might have come from this blog, or the observations of many commercial practitioners, and it might also be applied to many other industries. For the point that Kay is making is that corporations have lost sight of their purpose and of social expectations.
He highlights the challenges of short-termism, of distorting incentives and of the resultant behaviors of executive management. In particular, the pressure for instant results means that business leaders no longer behave as the custodian of hard-built assets, but see themselves as risk-taking entrepreneurs – the difference being that entrepreneurs take risk with their own assets, while corporate executives do not. (And a further irony is that entrepreneurs who fail lose their assets; executives who fail receive a lump-sum pay-off).
It is this environment that is making life so hard for contract and commercial negotiators. It has driven erratic behavior at the top and destructive behavior at the bottom (in groups like Procurement, where the switch to 'transactions and trading over trust relationships' is most evident).
Kay also makes the point that regulation has switched from a system that sought to address conflicts of interest (e.g. separation of activities) to a system that seeks to regulate behavior. Yet that is incredibly hard to achieve – as the banking industry is proving. “The outcome,” he observes, “is regulation that is at once extensive and intrusive, yet ineffective and largely captured by vested interests.” He goes on to lament the growth of a 'regulation industry – an army of compliance officers, regulators, consultants and advisers with an interest in the regulation industry's expansion'.
A risk for contracts, commercial and legal staff is that they become sucked into this regulation racket and lose sight of their true role in value delivery. I agree with John Kay that the current environment cannot survive, because it is so far out of line with the public interest. We must ensure that we are active in defining and implementing the improved solution and do not find ourselves caught as the protectors of the old, inadequate risk and compliance regime. Because one thing is certain – top executives will very quickly move on to the new world and rapidly forget the people who were their friends in the former system.
An Opportunity For Commercial Managers & Lawyers: Understanding The Impact Of Contracts & Their Terms
Posted July 24, 2012 Category: Contract and Commercial Management
Once again, contracts and commercial judgment have proven their value and importance, this time in the successful delivery of the London Olympics 'megaproject'.
Andrew Davies leads research on innovation in infrastructure projects and systems at Imperial College Business School in the UK. He has investigated the performance of the Olympic Development Authority in delivering the required infrastructure on time and within budget – and undertaken comparison with similar projects, such as the redevelopment of Wembley Stadium (four years late and substantially over budget) and Heathrow's Terminal 5 (highly successful development but flawed implementation).
His conclusions represent valuable insights for anyone involved in the design and delivery of contracts for complex projects:
- avoid traditional fixed-price contracts unless there is a clear and collaborative mechanism to resolve issues and changes.
- avoid parceling out the risk to contractors. Risk must be shared by the client and the contractors, driving a collaborative approach.
- avoid disjointed testing and acceptance. A coordinated approach that allows adequate time for full system tests must be built into the agreement.
- avoid unrealistic budgeting. A cooperative approach with transparent data means that the relationships between the client and delivery partners are positive from the outset.
Interestingly, Dr. Davies observes that 'heavyweights in project management' are the people learning from these experiences – surely, if true, a condemnation of the commercial and legal profession who should above all have a sense of which contracts work best and what terms and practices are needed to support successful delivery. Or once again, are we focused only on the situations that go wrong and ensuring we have the right penalties in place?
Making the Business Case For Contract & Commercial Management
What percentage of annual revenue should a company spend on its contract management support? Is it right to think of contract and commercial managers as low-cost replacements for lawyers?
These are two of the questions that IACCM has been asked in recent months and they reflect the overall trend for executives to expect answers that relate to both the efficiency and effectiveness of their organizations.
This article summarizes the findings of research that looked at both these questions. It illustrates the wealth of data accessed by IACCM – so if you have similar questions, get in touch!
1. Contracts, Commercial & Legal: Are they worth investment?
Posted May 30, 2012 Category: Legal & Regulatory
For those who wonder whether contract and commercial management really make a difference, current research by IACCM is revealing interesting trends in the outsourcing and IT / telecoms services sector. These developments will be of interest to the wider contracts and legal community.
Across the industry, there has been significant growth in the resources applied to contract and commercial management. In recent times, the relationship between Legal and Commercial resources has also clarified within the provider community, though remains less clear for many buyers. This reflects the growing appreciation by executive management in supply-side organizations that the contract and its effective management are critical to business performance. Similar understanding of the need for investment on the buy-side is often lacking, with a greater readiness to assume that the supplier is responsible for performance and that existing resources will somehow be adequate. This is reflected also in the buy-side reliance on external law and advisory firms.
However, the nature of the investments made – and the way resources are deployed – show significant variations. For example:
- Industry leaders have been developing a more coordinated approach to shared services within both Legal and Commercial / Contract Management. These include growing use of offshore resources, with some outsourcing, but a general preference for captive centers.
- Technology and systems tools are playing a much larger role in the management process. This has moved beyond the creation of contract repositories and obligation management tools and is increasingly reflected in investments in applications such as Sharepoint and others offering advanced risk management analysis. For some, there is growing integration with relationship management software to support improved proposals and better focused negotiation.
- The role of Legal and Commercial Management pre-award has become far better defined; smoothing the transition to post-award delivery teams remains an area for focus. On average, pre-award Commercial resources outnumber those in Legal by approximately 2:1. The post-award organizational model varies, but across the industry it outnumbers pre-award resources by a substantial margin.
- There is growing alignment between Commercial teams and the finance and risk organizations, with the focus of negotiations reflecting this improved balance of interests.
However, in several of the poorer performing providers, contract management remains fragmented or is seen as primarily an operational resource focused on compliance, administration or risk containment. This results in higher levels of inefficiency (e.g. up to 20% more time expended on contract / commercial issues by sales and delivery teams, more frequent disputes etc.) and increased 'value leakage' (up to 30% more claims, higher proportion of under-performing contracts).
In terms of funding, the high performers are typically spending approximately 1.5% of revenue on their contracts and related legal services. This represents a significant increase over the last 5 years and also a widening gap between the companies that have been growing and those which are generally struggling to maintain market share. This divide reflects in other data assembled by IACCM relating to the ROI (return on investment) from contract and commercial capability. Overall, the data provides a compelling business case for top management – and of course, it is data such as this that we will be sharing and discussing at the IACCM regional conferences this year, as well as at our many local member meetings around the world (see https://www.iaccm.com/events/ for those which are currently scheduled).
2. Legal Controls, Contracts & Organization: Cutting the cost of Lawyers?
Posted January 18, 2012 Category: Legal & Regulatory
The most recent Association of Corporate Counsel survey shows that Chief Legal Officers have growing concerns about their ability to maintain business oversight and prevent potential legal exposures.
The 2011 survey confirms growing workload, but also reveals that many law departments have been able to increase hiring. The percentage feeling under pressure to cut budgets has dropped, from 74% to 54%. However, most continue to push for greater value from their external law firms and have introduced new charging models (though it is interesting that these new models appear to represent a low proportion of overall spend).
A majority of law departments (78%) include some number of non-legal staff. The survey does not address specifically the extent to which contract or commercial managers are coming under the wing of the General Counsel, though IACCM benchmarks show that this has increased in recent times and is now the typical situation in the largest corporations. This appears to be a result of the concern that General Counsel have over their ability to have insight to the business, plus the challenge of workload. By consolidating the contracts teams within legal, they tackle three issues:
- They gain control over one source of potential legal risk which can arise from contracts staff making unauthorized or (legally) unwise commitments;
- They gain increased visibility to the business deals and trends;
- They obtain incremental resources that are typically lower cost than hiring lawyers and can offer some relief to growing workload.
On this last point, recent benchmarking by Rees Morrison indicated a fully-loaded hourly rate of $193 for the average in-house lawyer. The equivalent average for an experienced contract manager (not administrator) is approximately half that number (based on the 2011 IACCM salary survey). Since commercial contracts work represents 40- 50% of total workload in many in-house legal groups, there is significant potential to cut costs through more effective use of qualified contract managers. Case studies suggest that law department costs can be reduced by up to 15% through this means.
The benefits and the dangers of this consolidation have been the subject of previous blogs. If the General Counsel appreciates the differences between contract management and the role of the lawyer, it can be an effective partnering. However, if the motivation is primarily to increase legal control or eliminate an alternative source of commercial support, the long-term effects are more likely to damage business results.
Don't be Fooled by Supplier Intimidation
By Nicola D'Amato, Account Executive for Network Hardware Resale
This article raises important questions about the balance between fair and ethical behavior, versus the need that any business has to drive sales. Using the network hardware industry as an example, our author illustrates the fine line that often exists in business practices and urges the commercial community to give thought to the anti-competitive issues that can be intensified in today's tough market conditions. Fair or unfair competition? You be the judge - and we will welcome your comments as well as your examples.
Focusing on wise decisions during the economic slump
We witnessed the bursting housing bubble in the US with the resulting Lehman Brothers bankruptcy sparking lack of trust between banks. The rest happened like falling dominos: The credit crunch spawned the recession and increasing government deficits worsened the trend. Greece, Ireland and Portugal appealed to the European Central Bank (ECB) for assistance. In Italy, the effective tax rate increased alarmingly, as noted by Confindustria, the Italian employers' federation. Spain and France followed suit; the United States appears to be on the same path.
Today – as an example - the Italian tax rate has spiked record levels. Italian companies therefore operate in a new and challenging environment requiring new kinds of actions, and above all, wise ones. In this, they share a challenge with businesses across the Western world – how to cut costs without damaging performance.
One factor that makes it more difficult to reach wise decisions is widespread, potentially unfair, business practices that lure uninformed customers into paying more for products than they should. This paper addresses those issues in the context of one industry, but the questions it raises are far more widespread.
The lure is a worldwide epidemic
Research has surfaced three common blind spots of unsuspecting customers:
- Buyers and decision makers have no idea about how vendors rule the market or mislead customers for their own interest.
- Many product users are falsely led to believe that breaking the rules may have legal consequences.
- A sales technique commonly known as raising Fear, Uncertainty and Doubt (FUD), encourages manufacturers to misrepresent the facts during transactions with customers that keep them ignorant of better pricing options, keep prices high and limit the competition.
Although different perspectives exist on fairness, the larger issue is what is ethical and represents integrity? What tactics and techniques are acceptable today? As we wrestle with eroding trust and lack of confidence in ethical standards, what levels of honesty should large corporations pursue? Is the age of FUD coming to an end – or will overall uncertainty lead to an increase, unless regulators stop it?
The purpose of the following essay is to show why it is important for buyers to ensure that they test supplier statements and policies. This particular case study uses the example of alternative distribution channels that can be used in strategic sourcing. The article also discusses a new direction: the heightened awareness of both customers and suppliers who are starting to focus on better alternatives that are more soundly based on cost of ownership, rather than purchase price, and sustainability, rather than short-term security.
Read more (essay by Nicola D'Amato)
Fast-changing markets mean that each of us is called upon to make greater individual effort to understand the risks and the opportunities available. In the context of this paper, 'risk' means evaluating the actions of producers of goods and services that may be designed to confuse clients or limit their sense of competition. Opportunity means taking action or gathering information that allows customers to regain bargaining power.
The market and the strategies
To better understand how the strategic choices of vendors affect the level of competition in any market, consider how the business model commonly known as Porter's 5 forces work.
This model studies the so-called "micro-environment", omitting "external" factors that limit the company's chance for intervention (i.e. state laws, government policies, global economic trends, interest rates).
The target market in this case study applies to network hardware vendors – a market that, despite the economic crisis, most analysts still predict to grow globally in the coming months.
According to Porter's model, forces influencing competitiveness of the market are:
- Direct competitors: those who offer the same type of product.
- Potential entrants: those who have money and knowledge to enter adjacent markets and the like. Example is a truck manufacturer, which decides to produce sports cars by competing with a high-end car manufacturer.
- Suppliers: those who sell raw materials and semi-finished products to companies needing to carry out the production process, who may decide to integrate downstream to the end user, thus becoming direct competitors. For example a manufacturer of sofas, integrates downstream with its own direct sales force, becoming a competitor of independent retailers who were customers before.
- Producers of substitute goods: the manufacturers of products that fulfill the needs of the customer / consumer. For example, barley and coffee or butter and margarine.
- Customers: the recipients of the output produced by the company that may eventually decide to integrate upstream. A common example in food distribution is a company that sells under their own brand (private label).
Actions of network hardware manufacturers that could be a threat to customers
- Direct competitors
Vendors tend to believe the most important threat is the reduction of their market share and the possibility of a price war. Historically, in a market with few competitors, this has even driven the creation of "cartels" which allow competitors to avoid price wars and then count on higher margins. Competition authorities worldwide are constantly on the look-out for such anti-competitive practices.
Unlike the markets of the "commodity" -- where the product is undifferentiated (raw materials, grain, gold ..) or perceived as such (commoditization) and where the only distinguishing feature is the price -- the market of network hardware lacks a high average level of competitiveness.
This is due to the low number of economic operators, and the nature and complexity of the traded goods (durable goods). The product itself requires specific knowledge, delivered through trained partners and managed by the vendors through a certification system.
Thus, for example, if changing manufacturer of personal computers does not involve a customer in significant incremental cost, moving between suppliers of networking equipment would probably include the cost for retraining staff. Another factor might be industry practice with regard to maintenance contracts. Many suppliers push the purchase of long-term contracts which would increase the total costs (TCO) for the customer in the case of switching to another brand at a time when the maintenance contract is still valid.
In addition, the vendors limit competition by applying restrictive rules of 'partnership'. Channel and distribution programs, for example, may prohibit those they deem 'competitors' from getting certifications.
- Potential entrants:
To guard against potential new entrants, major hardware manufacturers often acquire companies that have developed a new technology that could pose a future threat. The network hardware industry is not alone in having adopted a policy of wide-scale acquisitions that support market acceleration, market expansion and new market entry.
In the network hardware market, suppliers of accessories could present another threat. A very important class of product is a switch or router, because, by selling accessories, suppliers often get very high margins. For example, optics are not produced directly from the vendor but can be purchased, branded with a supplier's own logo and sold with a surcharge of almost 100%.
- Producers of goods / services replacement
Again like other industries, much profit is generated by the large vendors' maintenance services. These services are often sold in a bundled form with the purchase of hardware and linked to a discount on the price of the hardware.
Sometimes manufacturers provide access to software updates, even for bug fixes and patches, only when signing a maintenance contract that also covers hardware replacement.
- FUD and Customers
To protect the installed base and drive customer loyalty, vendors may use what in jargon is defined as FUD. It means Fear, Uncertainty and Doubt. FUD is a real communication strategy based on spreading negative information knowingly. Vendors can give vague or inaccurate information on a competitor's product to discourage the buyer or consumer from considering another option, even if it is cheaper or qualitatively better.
There is often a subtle difference between opinion and misinformation. Here are three techniques that may be used by manufacturers:
- Authoritative sources.
- Figures submitted as results of scientific tests, but which may lack scientific basis.
- The term "intellectual property."
Professor Mark Lemley (Stanford Law School) says that it has become fashionable to refer to copyright, patents, and trademarks as "intellectual property." This fashion did not arise by chance - the term systematically distorts and confuses these issues, and its use has been promoted by companies that benefit from this confusion.
FUD also allows the manufacturer to develop a set of practices that many customers may actually see as deeply unfair, but which are widely adopted and therefore difficult to change. For example, in an article, Tim Cummins, founder of the International Association for Contract & Commercial Management (IACCM) reported that contractual conditions which limit the rights of a customer and the options to choose a different service provider are often imposed in the following ways:
• Buyers are actually not the real owners because they cannot sell, transfer, or otherwise redistribute without the approval of the OEM (which often requires the payment of additional charges and recertification)
• Products are often equipped with an operating system "embedded" but because of the "license" the product is not truly the property of the purchaser and is not transferable.
• OEMs seek to prevent the development of independent and parallel market by restricting the conditions of the warranty and so forcing the customer to buy on the local market and not abroad, where the price conditions could be better.
Producers also try to control the used market of their products and to 'tie-n' maintenance services to protect their margin. This situation, said Tim Cummins, will likely be resolved through new international standards or by new market entrants who offer conditions that are much more "user friendly".
The truth about licenses
Many users are led to believe that breaking the rules included in a user license may have some legal effect. Their fear is understandable, given the wide extent of audit and litigation related to misuse of software.
Some manufacturers claim that those who buy the hardware also buy the software and the license to use it. (Hardware arrives with licensed software.) But they may also state that the license is not “transferable.”
If this is were not the case, many users could purchase products used, refurbished or otherwise from an independent market at lower costs than the official channel.
In truth, much of this 'software' has now been established through the courts to be transferable. It belongs to the customer, who can therefore purchase used or refurbished equipment without risk. The legal consequences customers might fear likely do not exist.
For example, section 109 of the Copyright Law of the United States of America  states in part:
“…the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.”
This doctrine, which allows the existence of eBay, said that a computer program that is embedded in a machine or in a product can be rented or sold to any rightful owner.
Each Court has also repeatedly stated that a single payment for a license without a clear expiration date is in fact a sale of goods, and courts thus recognize all rights of use of this software to the buyer.
The legitimacy of buying and selling used products without incurring any penalty or obligation to repurchase the license is legally granted with in the European Union too.
This is mentioned in Article 28 of Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 It states in part, "…28 Copyright protection under this Directive includes the exclusive right to control distribution of the work incorporated in a tangible article. The first sale in the Community of the original of a work or copies thereof by the rightholder or with his consent exhausts the right to control resale of that object in the Community.
So once a product is sold in the European community, the rights are exhausted and no manufacturer can then restrict or prohibit the free movement of the product, nor is it legitimate to require an additional fee for a license that has already been paid by the first owner and on which the manufacturer no longer has any right.
Risks and opportunities for buyers
We have outlined in this case the actions undertaken by producers of goods and services that pursue their interests at the expense of the client.
Of course producers must make a profit, otherwise their would be no production. But the question is at what point actions become anti-competitive and falsely maintain higher prices.
Main risks – there are three:
- Prices influenced by partnership agreements
- Maintenance contracts
- Disinformation and misinformation on the secondary market
Prices and Partnership
In the network hardware market, given the complexity of the product and the need for pre-and post-sales, the distribution channel is costly and composed of a few official distributors who sell to smaller distributors or system integrators.
Different levels of partnership (tiers) exist. They are based on various criteria defined by the manufacturer, but in general, the common criteria are volume of business, "service capabilities" and skills certified by the vendor.
Basically, the level of partnership is connected to the discount, so those who enjoy a high partnership also enjoy best prices.
In addition, the producers, who often have direct relationships with the largest clients, may influence the final price the end-user is going to get and the partner who will install and maintain the infrastructure.
As a hypothetical example, assume that a large firm invests a large sum of money in network products and asks for a quote from three 'independent' suppliers (each of which is an approved remarketer). These three ask the vendor for a "special price", referring to the final customer. By following this process, the customer may believe it has the best market price, but because the manufacturer knows the final customer, the manufacturer will select the most important partner to get the best price. This distorts the level of competition among partners and is designed to meet standard procurement rules of competitive bidding, rather than to actually deliver the best price that the customer might have achieved.
It is very difficult for customers to defend against this type of practice unless they ensure they have asked the right questions and insist upon transparency.
- Purchase abroad Customers could purchase the same products abroad if lower prices are offered. Then organize internally the installation, configuration and support. The drawback is time and energy compared to the discount obtainable.
- Use a Multi-brand The official distribution channel is controlled by each vendor. Vendors are understandably more likely to agree a higher discount when they know they are fighting against a competitor for a deal.
- Use independent distributors The right distributor should be able to offer not only a better price but also provides a maintenance service equal to that of the manufacturer. Customers may also benefit from a wider choice, because independent distributors also offer products that have been discontinued by the vendor.
Maintenance contracts and production downtime
As we all know a CEO receives bonuses based on factors such as revenue or profit growth and the performance of the shares. These measurements tend to drive continuous introduction of new products, rather than depending on maintenance of past products. Withdraw al of maintenance is one way to encourage customer migration.
Many customers decide to update the network when they can no longer rely on the maintenance service, but it is obviously the producer who decides when to stop the service.
Except for those who are upgrading for technical reasons, it is important to evaluate the unreliability of the products that no longer have support, because if they were still reliable, for example, the client might decide to hedge the risk with another service provider or buy spares instead of being forced to upgrade.
The confidence parameter applicable to mechanical, electric and electronic equipment and software applications is the so-called “mean time between failures” (MTBF)
Example: How long can a switch operate?
Some have a mean time between failures of 20 years, or even more than 30 years. How long is a switch kept on the market, before a substitute is being pushed? Time varies. In one case the stated MTBF is 21.5 years, but the product was placed on the market in 2004, removed in 2009 and supported until 2010 for the software and until 2014 for the hardware. Other similar examples exist, too numerous to cite here.
What is happening?
Quality decreases, prices do not To boost the sales of new products, one vendor stopped the sales after about 5 years and after about 10 years stopped the hardware support for a product that has been designed and built to operate properly for 20 years!
Customers should understand that the variation over time in the quality or duration of service is not always reflected in the price.
Replacement parts waste money, offer less value In practice, many customers, who bought a particular service and support contract in the first year, will probably renew it without considering that after the sixth year they are practically paying a simple "hardware replacement" service since there is no software support.
For companies with an extensive network, this means a significant waste of resources, especially considering that approximately 80% of the IT of one supplier's budget is used for the maintenance and support of existing infrastructure, and only 20% for strategic initiatives and innovation.
Go outside the official channel The practice of going outside the official channel is used increasingly in the world, especially by multinationals where a small percentage still adds up to lot of savings in terms of absolute value.
Use the official services of the producer only where there is a real need, for example, to have access to updates, but for the remaining part use the services of independent suppliers.
Buy used products More companies in the world buy used products as spares. The same producers do not always make the replacement of a defective product with a new one. Replacement parts provided to you might be new or functionally equivalent to new.
The independent distribution - the parallel (gray) market vs black market
First we must distinguish the black market from the gray ( or parallel) market. The black market indicates an illegal market that affects trade in counterfeit goods, stolen or otherwise violate national laws.
The gray market refers to the flow of goods through distribution channels other than those authorized or those designed by the producer or manufacturer, often at lower prices than the official channel.
Unlike black market products, products within the gray market are perfectly legal and sold outside normal distribution channels by companies that may not have any direct relationship with the manufacturer (independent).
Independent distributors buy the product where it is cheaper, will import legally on the final market and sell at a profitable price, but still generally lower than the normal market price. In some cases importing is not needed, because the price differences of the same product in the same market are so significant that this operation make it convenient to arbitrate.
It is legitimate to say that the pricing and contractual policy of the producer creates the parallel market (e.g. by application of volume discounts). However, the same producers may later spread doubts, fears and uncertainties to their customers to disincent the use of alternate channels.
Customers are making better choices
In recent years, more customers are informed and are able to verify the truthfulness of the information they receive from manufacturers. They can compare data with other professionals, check the quality of products from the independent channel both in original box and sealed by the manufacturer (new in box) or examine products used and recertified (refurbished).
More brokers (agents)
The market for refurbished products has experienced an authentic explosion recently. From the demand side, more customers are looking for better conditions than the official channel, or they need discontinued products. From the supply side, the number of independent agents (brokers) are increasing.
A few organizations can now handle large volumes of stock, offering pre-and post-sales services, and warranties equal, if not better, than the official channel.
In the last decade, specialization of some operators has reached global dimensions. The market therefore has greater legitimacy and professionalism, In fact, refurbished network hardware is no longer just restricted to information technology, it is also studied by the major business media such as CNBC.
Suppliers are changing
Realizing the value possible to customers and the importance of the market, many vendors have developed their own business units to manage recertified products. These business units deal with the recovery of used products from customers and the subsequent selling on the market through the same distributors. This practice is actually used in different areas, even in the auto industry.
Selecting an independent distributor
It is necessary to consider a few critical points when selecting an independent distributor.
Does the distributor…
- Have a management system for quality that includes controls on the authenticity of the product?
- Document their tests?
- Use a dedicated and trained staff and infrastructure to test the products?
- Is Quality management using personal criteria (ISO) or industry standards (TL9000) defined by a third party? The certification of quality is equal to that held by the official producer?
- Offer a warranty? What kind? How are the related logistics costs managed?
- Have tech-support with certified personnel within easy reach 24x7 hours, year round?
- Show financial stability?
- Release its financial statements easily?
- Have a good reputation?
- Have verifiable references?
- Use an account executive who is a professional able to advise and share insights on the market, or simply set a price?
- Own equipment stock and will send a stock list or pictures of the products they intend to sell?
- Is able to provide on-site services?
In order to achieve value for money when procuring products or services, buyers should give attention to the following:
- It is essential to be informed about the existence of alternative distribution channels that can be used as part of a strategic sourcing strategy.
- The partnership or a direct contact with suppliers is clearly a source of benefits for the customer, but it requires the ability to understand when the relationship with the supplier is balanced and reciprocal. Now, more than ever, it is important to adopt new partnerships with suppliers who deepen their knowledge of international best practices and alternatives.
- Some suppliers operate with a gross margin of around 60% by exploiting both their ability to satisfy the market, and the ignorance of the customers who are then vulnerable and easily manipulated. Is that the case with any of your buying?
- Even some of the most trusted and largest corporations worldwide have been cited in the courts for malpractice relating to millions of unsuspecting consumers. Are you actively monitoring such activity?
- All professionals within the decision-making process of an investment and who can influence the use of economic resources should be motivated to research and evaluate the new opportunities offered by supply markets and use these resources to achieve the business objectives of the company.
ABOUT THE AUTHOR
Born in Palermo, Italy, Nicola D'Amato holds a degree in Marketing from the University of Urbino. He began his career in Italy, first engaging in his family's business and hotel. Later he moved to the Netherlands, where he developed the Italian market for several multinationals in different markets from digital printing to consumer electronics and finally networking.
He is currently an Account Executive for Network Hardware Resale, the largest independent distributor in the world, where he continues to develop the Italian market.
Passionate about NLP and Self-Development, he collaborates with AreaNetworking.it writing articles on the networking market.
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Failure to Manage Contracts is Costing Organizations Billions of Dollars Worldwide Each Year
By James Misterman, Managing Consultant, Mainspring Consulting Group
Maximizing Your Return on ContractsTM - Overview
This is the first in a four-part series that will explore best practices and leverage case studies to show organizations how they can optimize bottom line value out of contracts.
Considering that today's contracts support transactions worth billions of dollars per year, it should come as no surprise that hundreds of millions of dollars are being left on the table by organizations' inability to maximize their Return on Contracts TM (ROC). Examples of ineffective contract practices include:
- Spend discounts not realized
- Payment on expired contracts
- Spend outside of contracts
- Late penalty fees
- Payment penalties and fines associated with regulatory non-compliance
- Miscalculation of existing market share impact on contractual arrangements
These and other ineffective contracting practices stem from three primary business functions: Operational, Legal, and Financial, referred in this article as Pillars of Success. The subsequent articles in this series will address each in detail and how they impact the overall goal of optimizing bottom line value, but to briefly introduce the three:
- The Operational function of Contracts Management addresses how organizations are able to prepare, negotiate, execute, and analyze contracts efficiently. It comprises components across five dimensions of a Best Practices Contracts Management Framework: Strategy, Organization, Process, Functionality & Enabling Technology, and Metrics.
- The Legal function of Contracts Management addresses how organizations minimize risks of any business transaction through the legal language that make up the agreement. It explores negotiation tactics, clause inclusion, and clause analysis.
- The Financial function of Contracts Management addresses how organizations improve effectiveness of agreements, particularly those agreements with longer term durations. This component reviews scenarios financial deal structures and the impact on business performance.
Because of the interdependencies and criticality of each business function, it is extremely important that all three pillars are in synch and operate cohesively in order for companies to confidently progress up the maturity curve towards best-in-class, as noted in Figure 1.
Fig. 1 - Mainspring's Return on ContractsTM Maturity Model
The pace in which organizations wish to pursue improvements in Effectiveness, Efficiency and Risk, will largely determine the right balance of Operational-Legal-Finance for moving along the maturity continuum towards maximum business value.
For instance, an organization may be preparing for an acquisition anticipating a spike in contract volume and so it desires to bolster its contracting function to scale and increase efficiencies while mitigating risk. This places a greater emphasis on an Operational-Legal mix, saving Financial improvements for a later phase. But in order for that same organization to maximize ROC, it needs to include improvements with contract compliance and performance measures as part of the financial function to achieve greater effectiveness and maximum business value.
Years of practical Contracts Management experience suggests that when one of the three pillars falters, the Program stalls and fails to meet expectations. To overcome this inertia, organizations sometimes place a singular focus on the Operational function by continuously refining the People-Process-Technology model which by itself is incomplete and only scratches the surface for Contracts Management. We find that the real challenges experienced for implementing a best-in-class contracting function and really maximizing ROC is actively engaging the Legal and Financial functions of an organization.
This was illustrated at a multi-national organization where months were spent defining and designing an enterprise program. It included a best-in-class people-process-technology model leveraging a best-of-breed Contracts Management solution, a centralized, shared services team of attorneys and paralegals, and an overarching policy and process that was comprehensive yet flexible for the Business.
This model was developed and vigorously championed by stakeholders representing all the business units across the organization. The 18-month, multi-phase Program was executed exceptionally well, having been completed on time, under budget.
However, despite the best laid plans and well-executed Program, fatigue set in and the Program failed to achieve its ambitions to optimize the bottom line in contracts.
Why? The main culprit is the myopic view and overemphasis on the Operational component of the Contracts Management program. This myopic view and success of the Operational component created a blind side towards the other two critical components – Legal and Financial. Although the Program languished, there were enough delivered benefits and support to not abandon the Program altogether.
The Program continued with a renewed sense of vigor by instituting a new Governance model that encompassed periodic reviews of legal language effectiveness. The Finance and Procurement organization were engaged through a contract audit and compliance exercise in support of the organization's Supplier Performance Management initiative.
As a result, the Program's direction is heading towards the “holy grail” of contracts management and compliance, ensuring that their transactions match their contractual obligations while improving performance measures focused on profitability metrics, risk thresholds, and total contractual spend.
The first step of the journey to maximizing your ROC is to understand and assess one's own organization against best practices across all three pillars of Contracts Management success – Operational, Legal and Financial.
Often by analyzing a sampling of agreements from a Legal and Financial perspective, the results lead to a business case supporting additional investments in Operational improvements. When significant dollar savings and/or additional revenue can be made on just reviewing a handful of contracts manually, consider how much more money can be realized and “taken off the table” by expanding the scope in an automated capacity. It should come as no surprise that the greater the scope of contracts being managed, scrutinized, and improved, the greater one's Return on ContractsTM.
The next set of articles will explore each of these Contracts Management “Pillars of Success”, in more detail to show organizations how they can optimize bottom line value out of contracts.
ABOUT THE AUTHOR
James Misterman's 10-year background in Contracts as both as a consultant and within industry has included developing a Contracts Management deployment strategy for a bio-pharmaceutical manufacturer. There, he advised on solutions, policy and process design, and operational governance controls. His implementation experience has included Project Management for a global enterprise-wide application for a major pharmaceutical manufacturer, deployed to over 20 countries, 2,000 users, and leveraged to create over 50,000 transactions annually. â€¨
Mainspring Consulting Group is an Implementation, Consulting, and Manage Services partner focusing on Contracting Excellence. Major responsibilities include delivery on strategic and significant engagements and quality assurance and oversight for Mainspring's Contracts Management Managed Services.
Mainspring Consulting Group LLC
m: 215.867.9002 | www.mainspringcg.com
Take a Closer Look: Are you a Commercial Manager Without Portfolio?
By Ben Arguile, Director Arguile Search, Commercial Contracts Recruitment Firm
Historically the norm for a commercial manager was to oversee one deal or manage one account day-to-day. It wasn’t unheard of for people to manage a portfolio of deals, but it was unusual.
The market has changed. Mega deals are rare. Organisations want flexibility and don’t want to be tied down to one supplier for an extended period. Deal terms are shortening and deals are being broken up into bite sized pieces which are then awarded to multiple suppliers.
As a commercial contract management recruitment business, we have seen what that change means for candidates. Commercial professionals are now expected to have accrued a far wider range of functional and business experience than ever before.
Who is in demand? Inevitably, as the number of very large contracts has reduced, so too have the number of heavyweight commercial manager and director roles. Conversely, the job market at the junior to mid-level remains very competitive. Outstanding commercial professionals with a strong grounding have never been in higher demand.
While the rest of the commercial and contracts employment market is slower than it was prior to the downturn in 2008, several factors make these candidates the most sought-after:
- Businesses are winning more smaller contracts that can be managed by fewer senior personnel than previously required;
- While most defence companies have mature commercial contract functions, some IT and telecoms are newer to the market and are investing heavily in building their departments, increasing competition;
- Budget constraints mean many commercial directors will opt to make two junior appointments in the place of one ‘expensive’ senior appointment.
- In an under resourced department, it makes sense to hire someone who is experienced enough to work independently without close management, and who fits into the existing pay structure.
Another shift in the market
In the past, clients have typically asked us to identify pre-signature specialists or contract management specialists.
Today those lines have become blurred. Increasingly, we are asked to identify individuals with portfolio skills. This does not translate simply as ‘all-rounders’, but rather people who have experience of balancing the demands of being the commercial lead on a group of accounts and/or deals simultaneously. As deals become increasingly fragmented, the need for people who can demonstrate the dexterity required is set to become even greater.
Tips for candidates In light of these changes
What can you do as a candidate to ensure your skill set is as marketable as possible?
- Demonstrate broad experience. Avoid labelling yourself too definitively as a pre or post-signature negotiator. It might be a real area of expertise, but you need to demonstrate you can be effective across the lifetime of a deal.
- Be proactive. Position yourself for commercial leadership roles on smaller deals or accounts that are complimentary to your current position. This helps you expand your skill set.
- Get your name on the deal. Don’t be too concerned with contract size. In today’s climate, breadth is key. Having a quality portfolio of smaller deals that you have led from start to finish will be more desirable than having spent time as a member of a team that handles bigger deals.
If you are a commercial leader, potential employers look for a trusted advisor to sales and operations. Having worked successfully in a portfolio setting suggests you have the mental acuity, flexibility and political nous required to bring real value to their business.
Ben Arguile is a Director of Arguile Search, a leading commercial and contract management recruitment company. www.arguilesearch.com
CONTACT THE AUTHOR:
Ben Arguile, Director
07870 185 340
0161 445 3947
Welcome two new IACCM staff members!
Carina Kuhl – VP Events & Partnerships, IACCM
As VP of Events & Partnerships, Carina manages the overall development and execution of IACCM’s Annual Member Conferences in The Americas, Europe & Asia. Her mission is to increase member engagement and satisfaction with IACCM interactive content offerings (conferences, workshops, webinars, ‘Ask the Expert Calls’). She plans to focus on enhancing strategic partnerships and alliances with external organizations from both a co-marketing and sponsorship perspective.
Over the past 12 years, she successfully developed, maintained and, at times, revived a varied portfolio of high-profile industry exhibitions and conferences, with attendance between 150 – 3500 persons and revenues ranging from $300.000 to $3 Million at WBR USA (Worldwide Business Research), Institute for International Research (IIR) Exhibitions, IIR USA & IIR Amsterdam.
Commenting on her role as a dedicated head of events for IACCM, Carina explains, “To mitigate risk, IACCM had been working with a third party conference organizer for the past four years - and this worked well. But although business conditions remain unpredictable, we feel it is time that we take full ownership again of our annual conferences. This way, we can fully control all content and execution to better serve our members.”
Joanne Needs - Director, Global Professional Development
Jo provides the lead role in defining and implementing learning and development best practice for IACCM learning programs to ensure high customer satisfaction and learning effectiveness by working closely with the relevant Regional Sales Lead and customers of IACCM.
Living in South Wales UK, Jo has -- over the last 30 years -- worked in both public and private sectors in a variety of administrative and management roles. Since 1996 she has worked within the learning and development profession as a trainer, and as a learning and development consultant and manager. She is also a qualified executive coach and a mentor within local schools.
She has significant experience of the whole training cycle and has spent many years designing and delivering a wide range of learning solutions. Her passion now lies within training needs analysis and evaluation and ensuring the learning experience provides maximum effect for both individuals and organizations.
Outside of work she enjoys many sports including running and triathlons. She looks forward to working with IACCM and supporting the organization and its members on their learning and professional journey.
Announcing the 2013 IACCM Board of Directors
Many IACCM members voted in the recent elections for our new Board of Directors. We want to take this opportunity to introduce the successful candidates, while also reminding you of those who remain in place from previous elections.
At the annual Strategy and Planning Meeting, the Board also elected the Association’s officers for 2013. These are:
- Margaret Smith, Chair: Executive Director Contract Management, Director of Operations-Legal Senior Executive Accenture, US
- Dave Barton, Vice Chair, Americas: Vice President, Customer Contracts, Agilent Technologies, US
- Monu Iyappa, Vice Chair, APAC: Executive Vice President, Legal; GMR Infrastructure Ltd, India
- Gianmaria Riccardi, Vice Chair, EMEA: Global Director Commercial Business Mgmt, Cisco Systems, Italy
- Coen Wilms, Secretary Treasurer: Group Contracting Discipline Manager, Shell Global Solutions International, Netherlands
Welcome to the four newest members of the IACCM Board!
Lucy Endel Bassli
Assistant General Counsel, Microsoft Legal and Corporate Affairs
Lucy is a licensed and practicing attorney in the legal department of Microsoft Corporation specializing in drafting and negotiating contracts for a variety of commercial transactions, with particular focus on outsourcing and procurement agreements. Before joining Microsoft, she practiced law with a large regional law firm, Davis Wright Tremaine, in Seattle.
A member of IACCM for three years, she been a speaker at the Americas conference in 2010 and 2012. She spoke on Legal Process Outsourcing (LPO) and the evolving nature of legal support roles in contracting. She is also a speaker at LPO conferences and has participated in Webcasts about the LPO industry and changes in the legal professional.
Global Process Manager & Head of Global Contract Management Services, SAP AG
Kai is an attorney-at-law. At SAP, Kai’s team is responsible for overseeing SAP’s entire contract management process as well as its new internal Contract Management Solution (CMS).
He began his professional career in 2004 at Lufthansa Systems where he was quickly elevated to the Head of Contract and Provider Management. In 2008, Kai joined SAP in the role of Senior Legal Counsel in Global SME. Kai led the SAP Project team responsible for evaluating SAP’s global contract management process. In 2010, he was announced as the Global Process Manager and in 2011 established the Global Contract Management Services team at SAP. As a result of Kai and his team’s successful global implementation and deployment of CMS at SAP, they secured 1st place for Strategic Development at the Inaugural 2012 IACCM Innovation Awards.
Global Process Advisor for Contracting at Chevron Corporation, Houston, TX
He leads the contracting function at the enterprise level for Chevron. Having begun his 31 year career in Canada, he consistently delivered high quality results in a wide range of Contracting and Supply Chain Management positions of increasing responsibility in Canada, Angola, Nigeria and the United States.
Jerry has an extensive understanding of the growing complexity of contracting in a global environment and the increasing demands this complexity places on contracting professionals. Jerry has a personal passion for growing contracting organizational capability and ensuring the growth and development of contracting professionals keeps pace with the challenges they face.
Vice President, Procurement and Supply Chain, Marina Bay Sands Pte Ltd
As a senior management executive with more than 20 years of diverse professional experiences as the Global Procurement / Sourcing and Supply Chain leadership roles in the High Technology and Services industry, Peter leads the procurement and supply chain teams for receiving, warehousing and distributing of goods to diverse businesses, ranging from hotel, casino, retail, theater and museum operations.
Peter has a Bachelor of Engineering from the National University of Singapore , MBA from Nanyang Business School and postgraduate diploma in Marketing from Chartered Institute of Marketing, UK. Prior to this role, Peter was based in Europe as the Director for Global Procurement (Head of Procurement) for the SOITEC Group of companies. His previous professional experiences include being the Director, Global Sourcing for Agilent Technologies and General Manager for Modus Media International in South China.
ANNOUNCING ALL IACCM BOARD MEMBERS FOR 2013
- Margaret Smith, Chair: Executive Director Contract Management, Director of Operations-Legal Senior Executive Accenture, US
- Dave Barton, Vice Chair, Americas: Vice President, Customer Contracts, Agilent Technologies, US
- Monu Iyappa, Vice Chair, APAC: Executive Vice President, Legal; GMR Infrastructure Ltd, India
- Gianmaria Riccardi, Vice Chair, EMEA: Global Director Commercial Business Mgmt, Cisco Systems, Italy
- Coen Wilms, Secretary Treasurer: Group Contracting Discipline Manager, Shell Global Solutions International, Netherlands
ETHICS AND AUDITS COMMITTEE
- Lucy Endel Bassli, Assistant General Counsel, Microsoft, US
- Jerry Jacobson, Global Process Advisor, Contracting, Chevron, US
- Lucy Endel Bassli, Assistant General Counsel, Microsoft, US
- Diane Homolak, Global Legal Operations Quality and Strategy Manager, Hewlett-Packard, US
- Kai Jacob, Head of Global Contract Management Services, Global Process Manager, SAP, Germany
- Jerry Jacobson, Global Process Advisor, Contracting, Chevron, US
- Dan Mahlebashian, Chief Contracting Officer, General Motors, US
- M.C. McBain, Vice President Global Business Development, IBM, US
- Tim McCarthy, Director, Contracting and Negotiations, Rockwell Automation, US
- Steve Murphy, Vice President, Contracts, Raytheon Integrated Defense Systems (IDS), US
- Alan Schenk, Vice President, Common Process, Contracting and Compliance, BP, UK
- Craig Silliman, Senior Vice President, Public Policy & Government Affairs, Verizon, US
- Peter Woon, Vice President, Procurement and Supply Chain, Marina Bay Sands, Singapore
Who are we at IACCM?
This is the second in a series of Q&A articles profiling, every month, one staff member of IACCM.
Featured this month: Katherine Kawamoto, VP Americas, who lives in Columbia, South Carolina. Katherine heads up our Americas region which includes corporate membership sales, managed learning, research and advisory services.
She loves seeing IACCM members grow in organizational skills and competencies. “We work very hard to bring together the buy and sell side perspectives to create a balanced view of contracting and trading relationships... Member support is deeply ingrained in the IACCM culture.”
Her response to potentially embarrassing moments on stage during IACCM conferences, she comments, “…sometimes you just have to go with the flow and allow yourself to be laughed at! Yes, not very dignified but it taught me to not take myself too seriously.”
Find out more about Katherine…
Q: Where were you born / spent the biggest part of your childhood?
A: I grew up in New Jersey. We also had an old farmhouse in the Endless Mountains of Pennsylvania where I spent many fun summers pretending to be a country girl. I still consider the Endless Mountains my personal refuge and try to get up there at least once a year to totally decompress. To get a cell phone connection I have to walk to the very top of the mountain a ¼ mile away or into the middle of my neighbor’s pasture across from our property.
I also lived in Los Angeles for 15 years prior to moving to South Carolina in 1996 where I have raised a ‘southern’ family that includes my husband and three children.
Q: Describe one highlight about your earliest years that you remember the best – something humorous or best learned?
A: One thing I learned early was a lesson my father taught me. He insisted that if you make a bet and lose, you got to pay up. We would bet on sports games all the time and he always took my money if I lost. Even if it was only a quarter, he insisted I paid up. He also taught me to play golf at an early age. …He taught me that you don’t cheat on the golf course. You count every single stroke even the ones you whiff. That was a hard lesson but one I’ve taught my children. When they played golf in high school they complained that some of their teammates and competitors were a little less than honest on their scorekeeping. I encouraged them to hold the standard their grandfather set and I believe it made them better golfers. You don’t whiff as many balls when you know each one counts!
Q: Regarding your education, what aspect of school do you remember most vividly?
A: Prior to college I focused mostly on the social aspects of school. In high school I was involved in field hockey, softball, cheerleading, clubs, etc. The academic standards were not particularly challenging but I sure enjoyed the networking and socializing! In college I loved cultural anthropology, politics and literature. I graduated undergrad with a Liberal Studies degree because I couldn’t stay focused on a single course of study. Business without politics and geography, or literature without art and science sounded too boring. I still have a wide range of interests and enjoy learning new things. I am currently studying Strategic Communications and Leadership at Seton Hall University.
Q: Describe your career path and name one thing you loved the most.
A: I started my career as a paralegal working for a small law firm in Westwood while I was attending UCLA. From there I was hired into an entry-level contracts job at Hughes Aircraft Company in Los Angeles. At Hughes I worked in the Special Programs Division of the Radar Systems Group. I joined Hughes at the BAFO stage of the B2 Stealth Bomber program. As I look at career highlights, one was certainly the time I got to visit the Northrop hangar that housed the mock-up of the Stealth Bomber. Seeing the massiveness of the aircraft and its unique flying wing design was awe-inspiring. After about 6 ½ years at Hughes I moved on to Teradata to expand my contracts experience beyond aerospace/gov’t contracting to commercial contracting. In 1992,Teradata was acquired by NCR who had recently been acquired by AT&T. I spent a total of 14 years at NCR in various roles on both the buy and sell side and ended my career there as the Worldwide Director of Contract Management.
Q: What prompted you to join IACCM?
A: I had been involved with IACCM as a Board Member for a few years when Tim approached me to explore a possible staff position. As the saying goes, ‘timing is everything’ and that was definitely the case. Even though I loved my career at NCR I was ready for a new challenge. As a non-lawyer in a Law Department organization, my opportunity for further advancement was limited. I was not interested in starting a whole new career but one that could utilize my years of contracts experience. As a member of IACCM I was always interested in the research and benchmarking the association performed. The prospect of getting involved in an organization I respected was very attractive to me. It was easy for me to see how my past experience could be used to help the association.
Q: What do you like most about working with IACCM? What has been most challenging?
A: I love what IACCM stands for. We work very hard to bring together the buy and sell side perspectives to create a balanced view of contracting and trading relationships. I enjoy working with members as they look to develop their personal and organizational skill levels and competencies. I am always amazed by the fact that we are not as well-known as we should be. Without tooting the IACCM horn too loudly, I think we do an incredible job supporting our members. Member support is deeply ingrained in the IACCM culture.
Q: What contribution to IACCM are you most proud of and why?
A: I am proud of the work we do particularly around research and our learning curriculum which we continue to grow and improve. I would like to see all of our members achieve IACCM certification. That would mean as professionals, we are recognized for our distinct knowledge and capabilities. I firmly believe that in order for senior management to value contract management, we as leaders and practitioners must demonstrate our unique skills and competencies which can be validated by professional certification.
Q: Would you share one incident you remember the most in in being part of IACCM? It might be something unexpected, humorous or a valuable skill set you developed, or a skill that helped you the most when you first started.
A: I have personally embarrassed myself (took one or two for the team) on stage at our IACCM conferences. I recall several years ago I was forced on stage to participate in an air-guitar playoff. That was nothing compared to being sawed in half by a magician at our last conference. Whether the act of playing air guitar or getting sawed in half is a skill is somewhat debatable, but what I did learn is that sometimes you just have to go with the flow and allow yourself to be laughed at! Yes, not very dignified but it taught me to not take myself too seriously.
Q How did you go about marketing IACCM internationally?
A: We do not have a formal marketing plan, per se. Much of our growth has been organic through our members and other contacts. Everything we do is with an international focus. A year ago we realigned our senior staff to have a more regional focus because we recognize that will help with our overall growth plans. With that said, the three region leads work together closely to coordinate activities and IACCM offerings. We try to be mindful of regional, as well as industry uniqueness without losing an international perspective.
Q: Can you describe briefly your office surroundings when you began the company and where you are now?
A: Hmmm, my office situation has not changed much since 1999 when I first became a ‘virtual’ employee. I pretty much continued doing what I had been doing when I joined IACCM in 2006. From a virtual office standpoint I suppose I am a pioneer in making it work for me and the organizations I worked for. I am very comfortable working anywhere / anytime but I must say I love my office which is good thing because I spend a lot of hours in it! Being a knowledge worker I am quite happy as long as I have an internet connection and a charged up cell phone.
Q: If there is one thing you could change about your world, what would it be?
A: I am a happy camper, really. I have a challenging job that I enjoy. A family I love. Plenty of interests that keep me busy and excited about life. From a macro standpoint, I’d love to see more tolerance and peace in our world. Also, it would be nice to see the ocean more frequently and maybe play a few rounds of golf.
Q: What do you want most for readers of our website or from Contracting Excellence?
A: I want them to understand that IACCM is here to help. We offer answers to their questions through our research, offerings, and network of experts. As a staff we don’t claim to have all the answers but what I hope we do is inspire people to ask the right questions, contribute to the answers and help us discover the future of contracting.