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

Contracting Excellence Magazine - Oct 2010

 
 

 

Ethics & Reputation: Defining Our Role

 
Some years ago, I led a team that was exploring ways to improve the quality of business decision making. Our work sought to develop an approach to risk management that was based on comprehensive stakeholder analysis. It resulted in a coherent and easily understood process for reviewing commercial practice and policy, ensuring close attention to issues of ethics and reputation.
 
 

The focus of the working group was on contracts and commercial issues, and it was charged with developing a method to improve risk assessment and management in both policy and for individual deals and negotiations.

The output was 'A Guide To Balanced Business Decisions'. It provided a simple, but structured, approach to diagnosing business issues and ensuring that the response was appropriate and well-managed. In particular, by a thorough assessment of stakeholder views and interests, this approach resulted in far better understanding of the potential consequences of specific actions.

I am frequently reminded of this work when I see or hear about highly publicized incidents that impact corporate or organizational reputation. There is a regular stream of high-profile cases - for example, recent months have seen companies such as BP, Pfizer, Verizon, Serco, GSK and Toyota featured in stories that I am sure they would have preferred to avoid.

The problems that underlie many of these incidents are often systemic. They may go to the heart of organizational design or corporate culture. Yet in each case the issues are related to external business relationships and therefore have a commercial / contractual element. The question I ask is this: 'Who was responsible for ensuring a balanced business decision?'

The answer, of course, was in many cases that no one was responsible; that there was a collective decision (which often means no conscious decision at all). And so, when I discuss incidents like these with commercial, legal or procurement groups, they generally agree that it would have been a good idea to have avoided the problem, but do not feel it would have been their responsibility.

Of course I sympathize with this perspective. But also I question it, from two points of view.

  1. As a community, we are anxious to raise our status and offer incremental value to the business. When we see policies and practices being implemented, or commitments being made, is this not a golden opportunity for us to step forward and advise management regarding risks they may not have considered?  As the complexity of business continues to grow, is this not the leadership and initiative which our executives would welcome?
  2. As professionals - which we like to consider ourselves - should there not be a clear moral and ethical element to our work? Commercial practices cover a wide portfolio of risks and consequences. If we do not make ourselves expert in understanding these, then who will? Leaders do not wait to be invited to fill this role - they assume it because of their specific expertise and sense of business and moral judgment.

In the wake of the financial crisis, the G20 leaders met to discuss ways in which such events could be avoided in the future. Their final communique contained a call to action - a call that in my opinion demands our response. They said:  

“Staff engaged in financial and risk control must be independent, have appropriate authority, and be compensated in a manner that is independent of the business areas they oversee and commensurate with their key role in the firm. Effective independence and appropriate authority of such staff are necessary to preserve the integrity of financial and risk management ....”

As we prepare for 2011, are you equipped to step forward and address some of the fundamental commercial judgment issues that your company or organization will face?

 
 


 

Are You A Good Communicator?

 
Earlier this year, IACCM partnered with a new organization - CCIL - to commission a series of podcasts that address communication and intercultural skills. It is widely recognized that 'soft skills' are critical to the performance and contribution of contracts and procurement professionals. Our ability to understand and relate to others is fundamental to our inclusion and influence within the business.
 
 

The concept for CCIL was born in November of 2009 when John Chetro-Szivos met Sandra Lewy of the International Association for Contract and Commercial Management (IACCM) at the Intercultural Management Congress in Lodz, Poland. Sandra shared IACCM was looking for training opportunities for its membership that addressed the “soft side” of management. By this Sandra meant ideas about culture, communication, and more. John called together a small group of people he had worked with to see if they were interested in putting a proposal together for IACCM and by March of 2010, the group had successfully engaged its first “client” – IACCM - to deliver a series of communication related podcasts.  CCIL conducted a user topic preference survey with the IACCM global membership.  Based on the feedback from respondents, 12 topics were identified.  To date, 6 podcasts have been delivered to IACCM.  CCIL now has an agreement with the Society of Professional Communicators in Worcester, MA and the first podcast now appears on their website too. CCIL is working to initiate relationships with, Project Management Institute (PMI), UMass Medical, Unum Insurance, and the International Claims Associations (ICA).

As CCIL’s mission is to provide a wide range of high quality   learning opportunities, the organization will sponsor a free “Fall Seminar” to the communities around Clark and FSU. The seminar “Generational Communication Preferences – Tools, Technology and Time” will include a topic overview as well as a panel discussion with 3 experts in the field of HR.   The seminar will also be an opportunity to promote CCIL, gather information on future topics of interests for the community, and to establish CCIL mailing list.    Based on the feedback from the seminar attendees – future seminar topics will be chosen for the Winter and Spring of 2011. 

A website was developed during the summer of 2010, but has been redesigned and should be re-launched by October 14. This is a critical part of CCIL’s efforts to reach out to professionals and offer them free and low cost opportunities for education and professional development. With the commencement of the 2010 Fall Semester, CCIL has provided opportunities to Clark and FSU students.  Graduate students from both campuses have written “Book Reviews” for the CCIL website and this opportunity will continue in the coming semesters. 

During the next few weeks, FSU and Clark, will be sponsoring campus wide “marketing blitzes” to inform students and faculty of the offerings of CCIL.

 

The Coalition for Communication and Intercultural Leadership ccilonline.com

 
 


 

Doing Business: The Ethical Dimension

 
This article, from the Commitment Matters blog, builds on our introductory editorial, posing examples of the major impact of commercial policy and practice. It draws on some of the latest initiatives in finance and treasury management and also highlights the findings of a recent book on the desirability of offshore outsourcing.
 
 

The news that US economic recovery is faltering comes at the same time as data showing that the biggest US corporations are wealthier than ever and have unparalleled cash reserves.  This inequality of distribution is mirrored at a personal level, where income disparities continue to increase. The wealthiest 1% of US households now receive a higher share of total income than the combined total for the bottom 40% (which means that in the last 30 years it has roughly doubled its ratio). But the US is not alone; in China, it is estimated that the top 1% now controls more than 60% of total wealth. And of course, when we look at other markets such as India or Russia, there is further evidence of increasingly dramatic disparities between rich and poor.

In one sense, it has always been this way – the privileged elite and ‘the rest’. But it appears that the extremes are becoming far greater, not less – in fact the reverse of what we might expect in a supposedly democratic, increasingly egalitarian society.  Indeed, it is concerns such as these that have led to the growing debate about the size of executive compensation packages and their apparent disparity not only to performance, but also relative to all the workers who make it possible. So why is this happening – and what impact is it having on the chances of economic recovery?

 A recent edition of Harvard Business Week alerted me to the work of Paul Lawrence and in particular a recent book, Driven to Lead: Good, Bad and Misguided Leadership. In this, he makes the statement, ”Humans have evolved a leadership brain. Good leaders are people with a conscience who respect and reward all the four drives of other stakeholders [the drive to acquire, to defend, to bond, and to comprehend], even as they respect and reward their own drives.”

Of course, not everyone may accept that these are in fact the characteristics of a good leader. Throughout history, people have shown a strong propensity to follow leaders who represent their own narrow interests or moral codes, regardless of wider social or human impact. The imperatives that cause them to do so may be economic, but can also be driven by issues of security or distorted moral values.

 However, we would in general probably agree that leaders who promote and demonstrate fairness and respect for others are more desirable than those who do not - and certainly are more likely to preside over a peaceful and harmonious society. Lawrence’s work is interesting to those in the world of contracts and commercial management because he looks at this question from the perspective of global trade – and in particular, the impacts of outsourcing.

 Applying classical trading and economic theory to today’s global business environment, Lawrence concludes that win-win exchanges occur ’when both trading partners are either (1) industrialized nations with modern impulse/check/balance governments, no excessive unemployment, and reasonably effective control of corporate abuses or (2) less-developed nations roughly equal in power and with some control of corporate abuses.’

 However, he goes on to demonstrate that much of today’s international trade does not meet these conditions.  Colonialization – both physical or economic – is one form of such trade and generally leads to abuse of the weaker or less knowledgeable party, unless there are very strong governance procedures in place. Outsourcing is another approach that comes under scrutiny and Lawrence’s research leads him to say: ‘Transnational outsourcing, as when a U.S. auto company builds a parts plant in Mexico, has come into prominence only in the past few decades. Cutting costs is fair enough, unless it is done by paying less-than-living wages, creating unsafe working conditions, or causing environmental damage which would be prohibited in the United States. But because most American corporations are currently designed and mandated to fulfill ‘the drive to acquire’ exclusively, both top management and shareholders might object to incurring any costs in Mexico beyond those that are legally required, so transnational outsourcing is frequently a win-lose exchange between nations which are unequal either in their power or in their willingness to enforce basic standards of human rights, worker safety, and environmental impact. Another golden opportunity for people without a conscience.’

The evidence certainly suggests that today’s trade flows and contractual frameworks are indeed adding to the disparity of wealth distribution. But even if true, does this really matter? Economist Benjamin Friedman has researched the question of rising and relative living standards and he concludes, “Broadly distributed economic growth creates the private attitudes and public institutions that foster, not undermine, a society’s moral qualities…. Any nation, even one with incomes as high as America’s, will find the basic character of its society at risk if it allows its citizens’ living standards to stagnate…. At the outset of the twenty-first century, America’s problem is not unemployment. It is the slow pace of advance in the living standards of the majority of the nation’s citizens.” And of course, this ‘slow pace of advance’ is now preventing any consumer or domestic demand-led economic recovery. As big corporations and wealthy individuals hoard wealth to protect their narrow interests, the chances of economic upturn for the majority are reduced.

So if we want a world at peace – and people who live at peace with themselves – then these questions really do matter. Of course, in the end it is not international trade or outsourcing that are the guilty parties - they are just a symptom of the true underlying problem, and that is the greed that drives far too many of our leaders, propelled and validated by the social admiration for wealth and celebrity, rather than more sustainable and worthy human values. Even those who then become philanthropic with their wealth perhaps miss the fundamental point about the inequity of a process that gave them such riches in the first place; or the humility that might lead them to question their right to determine ‘worthy causes’.

 Lawrence is not in any sense against world trade or globalization. He ends with the comment: ‘Globalization need not work this way. Its benefits can be steered to all nations and to all levels in each nation in a more equitable manner. But a free-market, laissez-faire process will not do this automatically. It will require governmental regulatory action with guidelines and incentives that can best be established at the world level.’

As you negotiate your next contract, are there moral questions you should be asking? As a community, should we care about the wider social impacts of our actions, or should we simply accept the crumbs that are thrown our way as a reward and rely on someone else to worry about moral and ethical principles? For example, we could rely upon our leaders to give this matter their attention, in between working out how to acquire more money!

 
 
IACCM BOARD ELECTIONS

IACCM is currently inviting qualified applicants to stand for election for the 2011 IACCM Board of Directors. There are 6 vacancies open for election (for current Board Membership, please see
http://www.iaccm.com/about/board/ ).
 
Details regarding these positions appear below.
 
THE CUT-OFF FOR CANDIDATES TO THE IACCM BOARD OF DIRECTORS IS TUESDAY NOVEMBER 16TH. If you would like to discuss these positions informally before making a decision, please e-mail tcummins@iaccm.com.
 
To be eligible as a candidate for the Board, you must be a fully-paid member of IACCM at the time of election and you must be in compliance with the IACCM Code of Practice (see below)*. When elected, Board Members must also sign the IACCM Conflicts of Interest Policy. ( http://www.iaccm.com/downloads/Conflict%20of%20Interest%20Form.doc )
 
As a registered not-for-profit association, Board Members are accountable to the membership (our 'owners') for the standards of governance and compliance with the by-laws. Board members (or their employer) are also responsible for travel and related expenses associated with their term of office.
 
Participation as an IACCM Board member offers the opportunity to be at the forefront of change and influence in today's complex negotiations and relationship environment. You will join a team of senior Contracts / Commercial, Legal and Procurement executives from some of the world’s leading corporations.
 
IACCM is one of the fastest growing international associations and the only professional grouping focused on the emerging importance of contract and relationship management for both buyers and suppliers. With members from more than half the current 'Global 500' corporations and located in over 120 countries, you gain unique and privileged access and insights. In return, IACCM requires strong commitment to advancing our profession and promoting the work of the Association.
 
IACCM Board positions are for a period of up to 3 years. They are subject to election and all eligible IACCM members have a right to vote. The election will be undertaken on-line over the period November 29th – December 10th. Candidates must submit notice that they intend to stand, together with a brief biography and statement of goals, by 12:00 midnight GMT on Tuesday 16th November, 2010. Candidates must be able to travel internationally in order to participate in the face to face meetings which occur three times each year (once in the US, once in Europe and once in Asia).

If you are not already a member or would like to extend your membership - please click on this link http://www.iaccm.com/membership/individual/


 

Risk Maturity: Calling All Experts!

 
Several years ago, an IACCM working group produced a Maturity Model for commercial risk assessment. It was led by Dave Scarbrough, from Fujitsu, with expert advice from Dr David Hillson. The model is available for the use of IACCM member companies and recently it was reviewed by Professor Jean Cross in an article for Risk Management Today.
 
 

Rather flatteringly, Professor Cross compared the IACCM model with more comprehensive business risk assessment tools. Inevitably, given the more specific focus of the IACCM assessment, she found some significant differences. Those findings prompted Dr Hillson to write to Risk Management Today to explain our original goals - and also to suggest that it may be timely to review the original work, which was completed in 2002. His letter (reproduced below) was published this month - and we invite IACCM members to respond with their interest in reviewing and updating the Maturity Model.

"The recent article by Jean Cross comparing three risk management maturity models was interesting but misleading (risk management today, August/September 2010 issue, pages 42-45). While I agree that these models vary in their scope and approach, some of Prof Cross's criticisms of the IACCM model are inappropriate in my view. I speak with inside knowledge, since I facilitated development of this model for IACCM in 2002. I also produced the first ever published risk maturity model (RMM) in 1997, which we used as a basis for the IACCM model.

Jean Cross seems to have missed one important fact about the IACCM model. It was produced for a very specific purpose, as indicated by its full title: the Business Risk Management Maturity Model, or BRM3. So the criteria against which organisations are measured are specifically aimed at management of business risk in the commercial arena. This is consistent with the scope of IACCM (the International Association of Contract and Commercial Management). BRM3 was never intended to assess generic risk management maturity, so it cannot be compared directly with the other two models described in the article.

Prof Cross also says that “the IACCM model appears to provide ample room for self-deception.” But this ignores the way BRM3 is meant to be used. Self-assessment via questionnaire is certainly part of the process, but this is supplemented by structured interviews with an assessor (“Tell me”) and forensic audits of implementation (“Show me”). This allows any subjectivity to be exposed and challenged, resulting in a robust and objective assessment of business risk management capability.

Finally the detail of the BRM3 attributes and scoring scheme are not described accurately in the article. For example the allocation of criteria between the four main attributes is 32% for culture, 26% for process, 19% for experience, and 23% for application. The development team felt that this reflected the relative importance of these attributes as contributors to the maturity of business risk management capability.

I welcome the renewed attention that Jean Cross has brought to this important area of risk maturity models. Risk management is too important for us to do it poorly. We need to assess and monitor our risk management capability, compare ourselves with best practice, identify areas of shortcoming that require improvement, and keep developing. I believe that risk maturity models can play provide a valuable framework for such assessments. American statistician George Box famously said “All models are wrong, but some are useful.” In my view the IACCM BRM3 model is robust and fit for purpose as an indicator of an organisation's capability to manage business and commercial risk effectively. It is certainly not perfect, but I believe George Box would count it as useful."

Dr David Hillson, The Risk Doctor

Petersfield, UK

 
 

IACCM will run two major conferences in the US next year. The first, in March, will be in conjunction with the Shared Services and Outsourcing Network (SSON), March 01 - 03, 2011 - The Peabody, Orlando, FL.

The second event will be a "traditional" IACCM Americas Conference and is planned for October 2011 in Arizona.

IACCM will also have an EMEA Conference in 2011, which will be in conjunction with the Shared Services and Outsourcing Network (SSON) in Amsterdam, May 9 - 12, 2011.

IACCM is pleased to announce the IACCM APAC Conference in conjunction with the SSON Shared Services Exchange Asia-Pacific, in Singapore, September, 2011 - we will have dates soon!


 

 

 

Collaborative Change

 
Earlier this year, a collection of practitioners from varying walks of life came together to write a book about the importance of teaming and partnership to achieving successful results and implementing change. The results of their efforts have now been published in a new book, 'Collaborative Change'. It has great relevance to the IACCM community.
 
 

This book describes the underlying concepts and models that can be applied in developing and managing relationships, and draws heavily on personal experience to shed light on how effective change can be executed through high performing partnerships. This 'experience' is related in many case-topical studies which include war-fighting in Iraq, team management on a husky sledge and operating global, virtual teams in the British Civil Service. It also addresses the role of contracts and negotiation - and how these can either contribute to, or undermine, the necessary spirit of partnership and shared responsibility.

Contributing authors include: Tim Barnsley, Tim Cummins, Andrew Downard, Graham Haines, Peter Hunter, David Hawkins, Anthony Kesten and Chris Markey. Dr Richard Gibbs and Dr Andrew Humphries were also authors and overall editors of the book.

For further information, or if you would like to purchase a copy of the book, please visit https://www.createspace.com/3483267
 

 
 


 


 

Manchester University and IACCM Announce Collaboration

 
Manchester Business School (MBS) and IACCM today announced their formal collaboration on learning programmes for Commercial and Contract Management professionals.
 
 

The key features of this collaboration are:

  IACCM members who have an IACCM certification will be exempted the requirement to complete the first module of MBS’ MSC and Diploma programmes, a saving of 3 months work for the student.

  MBS MSC graduates will be granted an IACCM Member/Certified Member level certification (as appropriate), in recognition of their achievement.

  MBS students will receive guest memberships to IACCM at the start of their course and will be encouraged to become full members as part of their learning and career journey.

  IACCM and MBS will work together on IACCM delivering webcasts/on site sessions for MBS students, to supplement the MBS learning content.

Dr. David Lowe, the Senior Lecturer in Commercial Management at MBS, and Programme Director of the MBS MSc in Commercial Management, said: “This exciting announcement represents the next logical step in Manchester University’s long-standing relationship with IACCM. We’ll be working closely together to benefit both the MBS students who want to join the global association for their profession, and IACCM members who have demonstrated their ability through the IACCM certification programme, who want to take their academic studies to the next level. The IACCM learning programme studies many areas of the MSC curriculum, so there is great synergy for those who want to participate in a degree programme.”

Commenting on the announcement, Paul Mallory, IACCM’s VP of Training and Development said: “I’m delighted that Manchester University has formally recognised IACCM’s learning and certification programmes in this way. We have over 4,700 individuals currently participating in our programmes, and 70 major corporations are running these in-house. We can now offer a transition path for our many certified IACCM members into the MBS MSC programme, with an exemption from the first part of the course. IACCM has been singing the praises of Manchester’s Commercial Management programmes for some time, and we hope that many of our members will choose to experience the programme with them.”

MBS is ranked 1st in the UK and 7th in the world for internationalism by the Financial Times in 2010. On this MSc programme, MBS demonstrates its internationalism as delegates are able to develop a powerful network of peers whose knowledge and experience of different sectors and countries makes for a valuable and engaging learning experience.

IACCM’s managed learning and certification programmes are now available for IACCM members worldwide to participate. They utilize web-based e-learning to provide a flexible and affordable way to become immersed in the best practices of the profession, across the entire contract lifecycle, for both sell-side and buy-side practitioners.

In September Gartner Research Director Richard Fouts, hosted a podcast (‘Trends in Online Learning: Part II’), which asked whether universities should be concerned about online trends in higher education or whether they should embrace them. The answer it seems is yes on both counts. Gartner went on to explore how universities are enhancing their brand with online learning. So IACCM has been ahead of the curve for some time, with its mature online learning programme. This way of delivering learning has a number of benefits, not least of which is that the materials can be constantly refreshed, and a range of supplementary materials linked in for access by students. The materials can be accessed at a time and place of the learner’s choosing, requiring only an internet connection and a login password. And IACCM foster interactive and collaborative learning by hosting webcasts for learners and encouraging debate on the application of best practices to the student’s real business environment, both in web cast discussions and on the electronic messaging boards attached to the learning modules.

One of the difficulties that senior managers encounter when undertaking executive education is the limited time that they can take away from their work responsibilities. MBS is recognising the increasing demand to be ever more flexible in its approach to providing not only business education programmes but all areas of education.

MBS use web-enabled tools (based on a core Virtual Learning Environment) to support delegates, provide distance learning, access to an enormous body of electronic literature via the John Rylands University Library, tutorial support and ‘community of practice’ and team communications and support facilities. This also encourages delegates to develop an external curiosity in seeking new ideas, and to be less internally focused to only what is happening in the classroom.

Continuing to meet these changing demands remains a priority for MBS and without such a provision universities could be under threat in a market of competitors offering a better service.

Online demonstrations of the IACCM learning and certification programme are run every 2 weeks and are open to all (enquiries to pmallory@iaccm.com).

The next MBS MSC and Diploma programmes start in September 2011 and enquiries in the first instance can be made to janine.may@mbs.ac.uk

Paul Mallory, VP Training and Development, IACCM, pmallory@iaccm.com

 
 

New! Questions & Answers

 
 
 
A member has requested help in obtaining sample agreements or templates that he might use as a starting point for establishing a “preferred” hotel supplier relationship for his company.

There was a high level interest in this question within the IACCM membership.

One member suggested that each property has their own standard agreements, and it would be best to contact any 5 star hotel and they would provide their standard contract template.  They would then negotiate corporate rates depending on occupancy and demand. Normally, the member pointed out, there is a xx% discount on their tariff rates offered to the company employees and guests for overnight and long term stay, banquet and other facilities.

Another member, however, stated that there is no standard form contract, other than individual hotel “rate agreements”. They use their own contract document, a standard form services contract, around which you must negotiate terms and conditions with the hotel property.  The member added that other hotels are done on the individual properties' “non binding” volume rate sheet agreements, and that most hotel chains have meeting and room rate agreements that are signed between the parties as binding agreements.

An experienced member added that they have been involved in many hotel contract negotiations and drafting, and have yet to have the negotiating power to get the hotel to use “our paper.”  Unless this purchaser has extraordinary negotiating clout, the member pointed out, he/she may have to settle for using the hotel’s paper and negotiate the best terms possible within that format.

If you are interested in further information on this subject, there are several samples available on internet - one of which is available at: http://www.cix.co.uk/~magician/afn/AFNhotel.htm

And as always, more information can be found in the IACCM Library at http://www.iaccm.com/membership/library

 
 
 
 

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