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

November/December 2015

 

 

 
Editorial Comment

Top negotiated terms: no news is bad news

 
We live in a time of rapid and often unpredictable change, yet the contracting terms we spend most time negotiating remain constant. And that, I suggest, is bad news. Limitation of liability, indemnification and pricing continue to head IACCM's list of the Top 30 Negotiated Terms as they have done since polls began in 2001 - with other defensive terms close behind.
 
 

As always, the question what terms are most important in contributing to success produces quite different responses. Heading this list we see value-building terms such as “responsibilities of the parties, scope and goals, service levels and the management of change.” It seems that negotiators are well aware of the real risks that occur – but rather than trying to tackle them, focus instead on dealing with their consequences.

Why do we devote so much more time to building defenses than to laying foundations for future success? The answer is complex, as you might expect, but it's worthy of some timely reflection.

Prioritizing defense over value building and supporting relationships is in part due to the dominance of legally-driven standard templates, which are designed in a way that ensures contention. Many are unintelligible to the non-lawyer, which discourages their involvement in the process and adds further to the probability that the business terms will receive limited attention.

  • Standard forms of agreement are still driven by procurement processes that undermine value for the sake of compliance.
  • Sales organizations don't see the relevance of contracts except as a route to revenue goals and commissions.

The right commercial conversations are still not happening, trapping organizations in a world of contention and confrontation, when they could be building a framework for co-operation. Latest IACCM benchmarking data suggests we are moving backwards on the extent of engagement with Statements of Work and Service Level Agreements, which support relational aspects of contracting.

Perhaps we are simply seeing contract negotiators fearing failure more than they anticipate success. Having decided the issues are too complex to be readily resolved, or as a result of being involved late in the process, they presume things are quite likely to go wrong and focus on protection of assets. Effectively, the negotiation produces negative incentives to perform.

Let's ask ourselves…

We need to shift from risk allocation to improved understanding of risk likelihood and problem resolution. To improve standards we need to ask ourselves these questions:

  • How does our contracting performance compare with competitors?
  • What percentage of our contracts under-perform – and why?
  • Does our contract and choice of terms impact project success – and if so, how?
  • What is the economic impact of different contract models or terms?
  • What are the relative probabilities of risk and does our contract protect against them?
  • What are the best models for performance-based contracts?

Contracts and legal staff are good at fixing problems, but this ignores the point that with better contract management, we could avoid many of those problems in the first place.

Business today is increasingly digital, services-based and driven by intangible assets, yet over the last 15 years, the terms we spend most time negotiating have not altered. Because of this most contracting today generates the wrong reviews, conversations and behaviors. It also misses opportunities to drive mutual performance and added-value. If organizations actively monitored the extent of value lost through poor contracting, they would become relentless in the push for change.

Our latest Top Negotiated Terms survey indicates that we still have far to go in delivering better contracts. The evidence from the wider world suggests that the need for reform is becoming rapidly more urgent – and that if we do not take action through stepping up to ownership, others will. The report is based on surveys by IACCM between May – August 2015. More than 10,000 negotiators located in over 100 countries responded. Comparisons are shown for the years 2007 – 2014.

To view the survey report go to:
https://www.iaccm.com/resources/?id=8637&cb=1448013893&

If you would like to contribute to IACCM's on-going analysis of the top negotiated terms (and thereby benefit from the more detailed industry and geographic reports), please visit info@iaccm.com.

 
 

Your negotiation toolkit: a planning checklist and much more

 
How confident do you feel going into a cross-cultural negotiation? Would the way you negotiate pass the "family" test of ethical standards? With its checklists and planning tools, this new, free-to-access negotiation app will help you and your business partners get the very best out of a new business relationship.
 
 

‚ÄčAsk yourself…

  • Are you equipped to conduct a gap analysis when preparing for a cross-cultural negotiation?
  • Are you able to assess your personal negotiation style?
  • Do you use a checklist to review your company's performance after a negotiation has been completed, or after a contract has been performed?

Comprehensive app covers all - Developed with assistance from IACCM members, the free-to-use Negotiation Planning Checklist now comes with a set of ten supplementary tools that will enable you to answer “yes” to these and other questions that can lead to negotiation success. Available in a new, free-to-access app1 the checklist and tools have all aspects of the negotiation process comprehensively covered – including critical areas such as ethical standards, which can be tested in a negotiation scenario perhaps more than any other human activity.

Most companies rely on individual skills

Planning is critical to negotiation success – but most companies rely more on their negotiators' individual skills than on formal planning tools, as the IACCM/Huthwaite International benchmark study revealed in 2009.2 That study began the process of developing the Negotiation Planning Checklist, now the key tool in the app, with encouragement from IACCM and conference feedback from IACCM members.3  My 2014 article published in Contracting Excellence gives more detail about the development of the planner.4

Using the “Negotiation Planning Checklist”

The checklist has four sections, and also includes an example of a completed checklist.

Section 1: Negotiation goals  

This contains seven questions about negotiation goals and your Best Alternative to a Negotiated Agreement (BATNA). For example, under what circumstances will you disclose your BATNA to the other side? Other questions emphasize your ability to look at a deal from the perspective of the other side, a trait that distinguishes great negotiators from good negotiators. One question, for instance, prompts you to think about your counterpart's goal and BATNA.

Section 2: Issues likely to arise

This covers issues likely to arise during a negotiation (excluding price, which is covered in the third section). The questions encourage you to decide whether these issues are tradable and how they can be used to create value, taking into account the importance of your relationship with the other side.

Section 3: Price

This covers the price questions familiar to every negotiator: reservation price (your bottom line), target price, stretch goal and zone of potential agreement (the zone between the two reservation prices). This section also provides guidance on whether you should be the first to state a price.

Section 4: Negotiating authority?

This final section is useful when agents are involved in a negotiation. The questions remind you of the importance of determining the limits of your and the other side's negotiating authority.

Benefits of the checklist

An American CEO of an automotive manufacturing company based in Asia provided the following example of the benefits the checklist provides:

“I received a quote from a key supplier that was very good and I was going to accept it as is, [but first] I filled out the planning checklist and called in the supplier. We had a great meeting, expanding the pie, and learned tons about what each other wanted. In the end we renegotiated everything, set up yearly pricing reductions and a two-tier pricing schedule that allows me to cover depreciation expenses on any expansion, and provides my supplier the long-term commitment from me he wanted: Win-Win. The projected saving over the next five years is over $4 million USD!!!”

Reviewing performance key to improvement

Negotiation is a key capability essential to company success. You should develop this capability through post-negotiation reviews.5  The results can then be compiled and shared with negotiators throughout your organization. 

The free app provides a list of questions for this in the Company Negotiation Performance Review. Questions are linked to the checklist, creating a feedback loop and enabling you to use your negotiating experiences to improve your planning process. Perform your review immediately after negotiations, regardless of whether an agreement was reached. If you did reach agreement, revisit the review following performance of the contract to determine whether any implementation problems could have been avoided during the negotiation process.

You can also complete a self-audit of your negotiation ability by using another tool, your personal Negotiation Performance Review. The results will help you focus your skill development on areas that need improvement. The questions are linked to other tools described below. For example, one of the questions asks you to identify the psychological tools that were most effective during the negotiation.

Other negotiation planning tools

The free app includes other simple tools and checklists that can be used at any point during negotiations:

  • Assess Your Negotiation Style
    Based on the work of Jeswald Salacuse, former Dean of the Fletcher School at Tufts University, this ten-factor assessment enables you to understand your negotiation style and to analyze the style of the other side. For example, on a five-point scale, is your (and the other side's) goal in the negotiation a binding contract or the creation of a relationship? This tool is especially useful in cross-cultural negotiations because it allows you to identify gaps between your and your counterpart's style. You can then use this gap analysis for style switching—adapting to the other culture's style.6
     
  • Developing Your Negotiating Power
    This “power tool” asks questions designed to improve your BATNA, your source of power in a negotiation. Key questions include: How can I weaken the other side's BATNA? How can I improve my BATNA?
     
  • Psychological Tools: Traps you should avoid
    At an “Ask the Expert” session last year I discussed the use of decision trees to make negotiation decisions and also mentioned behavioral tools that are useful during negotiations.7 When used by the other side, behavioral tools become traps that you should avoid. For example, the way your counterpart frames a choice between two alternatives as either positive or a negative can have a huge impact on your decision. Along with framing, this checklist includes other psychological tools and traps such as anchoring, reciprocity and the contrast principle.
  • Negotiation Ethics
    Perhaps more than any other human activity, negotiation tests our ethical standards. This Checklist of Ethical Standards and Guidelines is in two parts. The first part includes guidelines required by law such as fraud and fiduciary duty. The second part covers guidelines that are voluntary. These include practical questions like the newspaper test: How would you feel if an article in the local newspaper described what you did during a negotiation? Another practical guideline is the family test: How would you feel if someone described your negotiation tactics to your family? You can combine these two tests, as Warren Buffet did.  He said, “I want employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper, to be read by their spouses, children, and friends.”
  • Contract Law Checklist
    Negotiations take place in the “shadow of the law.” The Contract Law Checklist asks seven key legal questions that you should keep in mind during a negotiation. For example, are you using a preliminary document such as a letter of intent or an agreement in principle? If so, have you stated in the document that it is for negotiating purposes only and is not intended to be binding?
  • Agent Test
    This list of factors helps you decide whether to negotiate through an agent. The factors relate to your negotiation skills, expertise in the subject matter of the negotiation, opportunity costs, and relationship with the other side.
  • Life Goals Analysis
    This checklist enables you take a big-picture perspective during negotiations. Based on the work of Australian John Wade, one of the world's leading mediators, the checklist is especially useful when you are negotiating a personal dispute. But it can also be helpful to think about life goals when you are involved in challenging, deal-making negotiations. For example, someone recently emailed me that he used the life goals analysis when successfully negotiating for a lead role in his company—a negotiation over salary and title that took many rounds.

When using these tools, please keep in mind two caveats. First, planning tools are not a substitute for clear thinking about negotiation goals and strategies for achieving them. The tools should supplement your independent analysis, not replace it. Second, the tools are a work in progress and I would welcome your feedback after you have tested them.

To contact George Siedel gsiedel@umich.edu

END NOTES

  1. Negotiation Planner  - Simple and Effective Tools for Negotiation Success (I suggest first reviewing the tools by clicking on Using the Tools at the top.) 
  2.  IACCM and Huthwaite International's benchmark study Improving Corporate Negotiation Performance.
  3. The checklist was refined based on results from research on negotiation planning and feedback from IACCM members at conferences in Phoenix (2013) and Copenhagen (2014).
  4. Contracting Excellence article, May 2014 If you want to risk negotiation failure, skip the planning stage 
  5. IACCM speaker Danny Ertel noted the importance of post-negotiation reviews in his article on “Getting Past Yes” https://www.iaccm.com/resources/?id=5115&cb=1444848991 
  6. Style switching was advocated by IACCM speaker Karen Walch https://www.iaccm.com/resources/?id=7682&cb=1444850157 
  7. January 2014 IACCM “Ask the Expert” session Contracting Tools: Decision Trees and a Negotiation Planner

OTHER RESOURCES

ABOUT THE AUTHOR

George Siedel teaches negotiation at the University of Michigan's Ross School of Business and in Europe, Asia and South America. He completed graduate studies at the University of Michigan and Cambridge University and has served as a visiting professor at Stanford and Harvard. He has received several national research awards and many teaching awards, including the 2014 Executive Program Professor of the Year Award from a consortium of 36 leading universities committed to international education.

 
 

A must-have conversation: the secret of dispute-free contracting

 
It's a common scenario ... your contract's been signed, everyone's anxious to start. But are all parties really clear about what's required, and when? This article reveals why it's vital to agree on what's expected before work begins - or trouble will be just around the corner.
 
 

Day one – and already there are urgent tasks that can't wait. You scan the contract for the answer, but it's not conclusive. You make the decision anyway … Welcome to the world of contracting where definitions of tasks, obligations and deliverables are unclear, creating ambiguity and misinterpretation that often leads to issues and claims. Deliverables and acceptance criteria are the second most common cause of contract claims and disputes, IACCM's 2013-2014 Top Terms study and report identifies1 - second only to price, charges and pricing changes. In every case, research showed that the buyers and sellers had failed to discuss and agree on one or more of the following:

  • key definitions, and what constitutes a deliverable vs an obligation or task;
  • a list of all deliverables, tasks and obligations within the contract;
  • acceptance criteria for each deliverable; and/or
  • a process for managing the identification, submission, or approval of deliverables.

There should be no surprises or rejections if everyone knows the acceptance criteria and due dates. That's why discussing this early, and well before the due date of each deliverable is important. It gives you time to work out any differences of opinion before schedule and money are on the line.

The best way to avoid these claims and disputes is to make sure both buyer and seller have a common understanding of the terminology. Provide crisp definitions for tasks, obligations, deliverables, acceptance criteria, and milestones that don't leave any room for ambiguity. In this article I'll share an example of a dispute that arose because of ambiguous language, a list of suggested terminology and definitions that you can use, and a plan of actions you should take immediately if you find your contract is lacking.

Here's what can go wrong

On a global IT outsourcing contract an issue arose that quickly turned into a claim. The contract defined the deliverable as “the first draft of the Policy and Procedures Manual.” The service provider delivered it on time – but it was rejected by the buyer.

  • Here's what the buyer expected
    … a draft of each of the 30 policies and procedures in the manual.
  • Here's how the provider interpreted it
    … that only the table of contents listing all of the policies and procedures was needed, not all of the content for each one. To make matters worse, there was a $100,000 penalty for missing the deliverable due date.

You can avoid situations like this by having both parties discuss and agree on each deliverable's requirements and acceptance criteria before they're due. If this has not been achieved before work starts, it's very likely that deliverables will be rejected. Once rejected, you're facing issues and expensive claims and disputes, unless you are able to agree and rework the deliverable promptly.

Understanding the terminology and definitions

More than half of the contracts that I have worked on have not defined what was meant by a “deliverable” – and acceptance criteria are rarely specified. Because industries, professions, and the buyers and sellers don't have a standard definition for these terms, you'll do well to find common ground and agree on what each term means.

Here are some suggestions to help you arrive at a common and logical understanding of the terms and definitions to be used in your contract:2

Term

Definition

A “deliverable”

Products, results or capabilities produced during the execution of a contract, or project delivered during the execution of a contract.

Acceptance criteria

Set of conditions that must be met before deliverables can be accepted.

Accepted deliverables

Products, results or capabilities produced as above that have been validated or accepted as meeting the customer or sponsor's acceptance criteria.

Deliverables list

Complete list of “agreed” deliverables (as defined above).

Deliverable owner

Person responsible for producing or providing the deliverable, (including any obligations or tasks required to achieve it), and reporting on its status.

Deliverable approver

Person authorized to approve satisfactory completion and delivery of the contract deliverable or achievement of a milestone. (This person is not necessarily the deliverable recipient, see below).

Deliverable recipient

Person responsible for receiving notification of completion of a deliverable. If not the deliverable approver (as defined above), this role is responsible for coordinating reviews and response.

Obligation

Something that must be performed, completed or provided from one party to the other. It does not require an approval like a Deliverable does, only notification of its completion and delivery.

Milestone

A significant point or event in the execution of a contract, project, program, or portfolio.  Often, there is a payment or penalty associated with a milestone.

 

Task

A clearly defined, scheduled portion of work or activity, performed during the course of a contract or project, and assigned to or expected of a particular team or individual. May be of short or limited duration.

 

The illustration below shows how deliverables, obligations and tasks relate to each other, and may be delivered within an organization – descriptions and examples are as locally defined.3

An ounce of prevention is worth a pound of cure

Once work begins, tasks always remain that need to be carried out immediately. If you can agree on the definitions of tasks, obligations and deliverables early, you've already done a lot to mitigate the risk of misunderstanding and disagreements that lead to issues and sometimes, significant penalties. The key therefore is to “begin with the end in mind,”4 and ensure these things are agreed as soon as possible after contract signature, if not before. Ideally, discussions should take place during the negotiation and drafting phase and drafted into the contract. However, this rarely happens in practice so, if you find yourself in this position, be prepared to discuss and start the activities described in this article as soon as possible after contract signature.

Steps you'll need to take quickly

If the signed contract does not contain adequate definitions, it's important to complete steps 1 - 4 below quickly, to avoid the risk of issues, claims and disputes. Steps 5 - 8 will ensure effective management of the deliverables. The best practice process set out below and “lessons learned” will help you with your next contract:

ACTIONS 1 - 4 TO BE TAKEN IMMEDIATELY:

  1. Extract all tasks, obligations and deliverables from the contract and agree on definitions for each category

Extracting all the buyer and seller “wills and shalls” from the contract will produce the list of all tasks, obligations, and deliverables. After you've defined and agreed on the differences between them you'll be able to decide which is which, and categorize them accordingly. It can be helpful to use a three-tier organizational approach for categorizing these “wills and shalls,” i.e. think about the organizational level at which the activity will be managed (operations, management, or executive). Once you have your deliverables list defined and agreed, you'll need to review each deliverable to see if any acceptance criteria are specified in the contract.

  1. Review and agree on the list of deliverables and assign owners/recipients/approvers for each

It's very important to define and assign the roles of owner, recipient and approver, because without them you have no way to effectively manage the definition, development, submission or approval of deliverables. Deliverables can be due from either the buyer or seller, but 95% of the time they are owned by the seller or provider. The responsibility of each deliverable owner will be to meet with the deliverable recipient/approver as soon as possible to discuss, review and agree on their deliverable's definition, acceptance criteria and due date, if not already specified within the contract.

  1. Ensure all agree on their deliverable's definition, requirements and acceptance criteria

Once the definition, requirements, acceptance criteria and due date are agreed for each deliverable, you should ensure these are agreed with all deliverable owners. This information should be documented in the deliverables list and stored in a central repository for both parties to access.

  1. Develop and implement a process for managing tasks, obligations and deliverables

Every contract administration system should have a method or process for managing deliverables and documenting the roles and responsibilities for executing the process. I recommend using a form for deliverables that can also document all the information and approvals.

Do all deliverables require approval? This can be a contentious point which requires discussion and agreement before you'll be able to move on. See “Do all deliverables require approval” below.

ACTIONS 5 – 8 TO BE TAKEN SOON AS POSSIBLE:

  1. Document the agreed deliverable requirements and acceptance criteria for each deliverable

This should be included within the deliverables list and any repository or systems where status is recorded. A good contract has a glossary or definitions section. Hopefully, the same or similar items we're discussing here are included!

  1. Communicate the deliverables list and process to all stakeholders

Ensure contract managers, PMOs and account teams of both parties understand the process and their individual roles and responsibilities.

  1. Use a contract repository, or project control book-type database for storing all information relevant to the contract

This should include documents, administration processes, contract-related communications, submissions, approvals, and artifacts. There should also be a record with status and artifacts for each deliverable.

  1. Meet regularly to review deliverables status and outlook for the next 30-60 days

This will detect any potential problems on meeting the due date, and allow time for corrective actions before it's too late.

Do all deliverables require approval?

Every “will or shall” is not a deliverable requiring formal approval, so why treat them all in the same way? Let's not add expense to our administration system by spending time and money reviewing and approving something when it's not needed or warranted. A best practice approach is to manage both types by separating them into two categories, those that need approval and those that don't. Start with the requirement and purpose of each deliverable. Is it:

  1. something I need to do internally in order for me to fulfill my contractual obligations?;
  2. something I need to do externally for the other party so that they can fulfill their contractual obligations?; or
  3. something tangible and physical that I need to give, or produce and provide to the other party? (that may or may not require approval depending on the nature of the item).

For example:

No approval required:

“Supplier shall provide the buyer their current disaster recovery process.” This example illustrates a physical and tangible “deliverable,” however it doesn't make sense to require an approval because the provider is only giving the buyer a copy of their policy. No approval is specified in the contract, or required, as it is a common sense agreement by both parties.

Approval required:

“Supplier shall provide the buyer with the final draft of the Policy and Procedures Manual, including full content of each policy or procedure by (due date) for their review and approval.” In this example, the contract states that approval is required. However, you'll want to discuss other deliverables that may warrant approval based on their importance, even if this is not stated in the contract.

An ounce of prevention is worth a pound of cure

We've reviewed the activities required and critical success factors for effective management of deliverables. The key is to conduct these activities as soon as possible after contract signature, if not before, because there are always immediate needs for tasks to be performed, obligations to be fulfilled and deliverables to be provided. Ideally, much of this should have been discussed and drafted into the contract during the negotiation and drafting phase, though this rarely happens in practice. While this requires a little more time, effort and therefore cost, a preventative approach will reduce the likelihood of expensive claims and disputes later.

IACCM has an initiative underway called the Common Contract Project to develop a more standardized contract that is easier to use, interpret and administer. Wouldn't it be nice if, as an industry, profession, and organizations we all spoke the same language? Perhaps that would reduce the issues, claims and disputes that come up because of lack of clarity and understanding.

END NOTES

  1. IACCM's study titled, 2013-2014 Top Terms in Negotiation.  See further commentary and analysis below:
  1. Sources of definitions provided include: The Project Management Institute's Project Management Body of Knowledge (PMBOK), Merriam-Webster Dictionary and Dictionary.com
  2. Diagram definitions as adopted by CMS Group, Inc.
  3. Stephen Covey's 2nd habit from The Seven Habits of Highly Effective People is “Begin with the end in mind."

ABOUT THE AUTHOR

Steve Olson is the founder and president of Contract Management Solutions Group, Inc. (CMS Group). He previously served 15 years as IBM's lead Contract Initiation Services Manager with 114 BPO and IT outsourcing contract startups for many of the leading Fortune 500 companies and U.S. federal and state government agencies.  Steve was recently published in the IACCM's October edition of Contracting Excellence, titled Troubled Contracts: Why Missing These Steps May Trip You Up, and also recently spoke at the IACCM's Americas Forum on the subject of contract startup success. He's been published in NCMA's August edition of Contract Management magazine, titled Start Your Contract off Right with a Post-Award Kick-Off Meeting. Steve has been commissioned by the NCMA to write a new book and develop a National Education Seminar course due out in July 2016. He also provides articles and educational webinars for PMI. Steve is a member of the IACCM, IAOP, NCMA, NOA, SSON and PMI.  Contact information: steveolson@cms-groupinc.com 

 
 

What is contracting excellence? Time to join the debate

 
Contracting Excellence has been IACCM's theme for 2015, and exploring it has been a fascinating and rewarding journey. Now it's your turn! Author and IACCM member Buddy Broussard begins a debate which we hope you will join by responding to what follows...
 
 

Business leaders seem to intuitively understand that better contracting is a key to being competitive in difficult economic times. With a sense of urgency, they beat the drum of “contracting excellence” to improve the bottom line.  But what does this mean? What is contracting excellence? More importantly, do leaders and their procurement teams share the same view of what contracting excellence means?

It means many things to many people …

In my experience, contracting excellence is one of those phrases we all use freely without taking the time to develop a common understanding. Some say it means negotiating the best possible commercial terms, while to others it means effective post-award contract management. Others think it's all about tightly-drafted terms and conditions, and some think it's all about the scope of work. Using a catch-all, ambiguous term to loosely describe everything to do with contracting is much easier than debating and defining what we really mean. As a result, it is nearly impossible to turn contracting excellence into an executable action plan, which is necessary to deliver on leadership expectations of creating value through contracting.

I believe, however, that contracting excellence can be clearly defined, and this article is an attempt to do just that. My intent is to start a dialogue within the community of contracting and commercial management professionals, with the goal of arriving at an industry standard meaning for this elusive phrase. By aligning on a common meaning, we should be able then to turn our attention to developing an action plan that will deliver on the promise of improved competitiveness through contracting excellence.

On the right track – but is something missing?

Before proposing my own definition, however, I asked fellow lawyers and contracting specialists to describe what contracting excellence means to them. I received a variety of predictable responses:

  • Contracts that identify, fairly allocate and manage risk
  • Contracts that clearly describe the scope of work to be performed and the compensation to be paid
  • Fully-integrated contracts where all of the parts work together and do not conflict with each other
  • Robust terms and conditions that are legally compliant and properly implement the company's risk policies
  • Rigorous contract management to ensure compliance with the contract.

I agreed that each of these aspects of contracting is important, but I wondered if this list was overplaying the importance of risk management and compliance. While my colleagues were on the right track, I still felt something was missing.

Challenges to costs and efficiency are not going away. No one can afford delivering the wrong materials to the wrong place at the wrong time. Scope creep and change orders will destroy a project budget and schedule. And disputes with contractors and suppliers are a huge distraction that erodes profitability. Contracting relationships are expected to not only mitigate and manage these and other risks, but also to deliver tangible value to the operation.

If it doesn't deliver, we've wasted our efforts

The missing element for me, therefore, is a proper focus on delivering the desired business outcomes. We engage suppliers and service providers to help us achieve a specific commercial objective; if the contract doesn't facilitate and promote achieving that objective, then all our risk management and compliance efforts are wasted energy. With that in mind, I propose the following definition of contracting excellence:

Contracting excellence is the practice of leveraging suppliers and contractors to support the achievement of defined business objectives, while managing the risks inherent in such relationships. We do this in two ways:

1.  By entering into contracts:

  • with competent, safe, financially healthy, and legally compliant  suppliers and contractors;
  • to provide goods and/or services that meet all business requirements and are clearly described;
  • for a price that is competitive and commercially appropriate considering market conditions, supply management strategies, and the certainty of the work to be performed; and
  • under terms and conditions that clearly define the roles and responsibilities of the parties, meet all legal and business policy requirements, and fairly allocate risk.

2.  By ensuring that the negotiated benefits and desired outcomes of the contract are achieved through:

  • continuously monitoring contract performance;
  • regularly communicating with the supplier about performance expectations and results;
  • diligently managing changes to the contract; and
  • completing and closing the contract in a timely manner.

My point here is that contracting, by definition, can only be excellent if it achieves its intended purpose. For example, a contract might have the best terms and conditions, a well-defined scope of work, and competitive commercial terms, but if the contractor is not competent to perform the work, then a successful outcome is not likely. Alternatively, a terribly drafted contract might be deemed highly successful if the work is carried out by a competent contractor who is carefully performance managed. In the end, only the business outcome matters.

I accept that this last statement might be a bit controversial to readers of this article, but I stand by it whole-heartedly. Contracts are a means to an end, not the end in themselves. We simply cannot know whether or not we have achieved contracting excellence until the project or the work is completed.

If we can agree, the rest will follow …

If we can agree that contracting excellence is the development and management of contracts that achieve their intended purpose (while managing associated risks), then we can focus on building the infrastructure necessary to deliver those things. The tasks necessary to achieve this objective become clear. We need to develop the skills, processes, systems, and tools required to effectively and efficiently:

  • qualify and select suppliers;
  • communicate our scope requirements;
  • establish appropriate commercial incentive models;
  • draft and negotiate robust terms and conditions; and
  • manage the contract post-award.

But we must do so in a fit-for-purpose manner with our eyes always on the business objective. If our organizations are only designed to build the perfect contract, then we've missed the mark. Instead, we should keep our focus on meeting (or exceeding) the purpose for which we're entering into the contract in the first place.

I don't for a moment think this definition of contracting excellence is perfect, but I do believe it's a good start.

The opinions expressed in this article do not necessarily represent the views, intentions or strategies of my past, present or future employers. They are my own opinions, offered in the spirit of professional debate to help make the commercial world a better place to do business. Feel free to share and use the ideas presented here as you see fit.

What do you think? Your feedback is welcomed; to respond go to https://www.iaccm.com/network/contract-management-forum/?post=1117&cb=1448958261

For further information:

  • Ask the Expert webinar Contract and Commercial Management - what lies ahead? - CEO of IACCM Tim Cummins discusses the meaning of commercial excellence 
  • To learn more about the ongoing IACCM debate go to IACCM's Commitment Matters blog, where this topic is frequently discussed - Commercial excellence and how it can keep you in business
  • For further information about developing approaches to Commercial and Contracting excellence, visit IACCM's recent Ask the Expert Webinar Developing Commercial Excellence, in which Jonathan Cooper-Bagnall (EVP & Commercial Director, Proxima) discusses how to elevate commercial capability across your organization and strive for commercial excellence to achieve your business objectives.

About the author

Buddy Broussard is the Contracting Manager for BP's Upstream Procurement & Supply Chain Management organization. In this role, he is accountable for the maintenance and governance of standard contract templates, for the improvement of contracting processes and systems, and for providing subject matter expertise to category management teams negotiating contracts around the world. Buddy has a law degree from the University of Texas at Austin, and undergraduate degrees in English and Philosophy from Rice University. His 20+ year career includes both legal and non-legal roles primarily focused on drafting and negotiating contracts in a wide variety of industries. 

 
 

CCM role misunderstood in your organization? You're not alone

 
If, as a contract or commercial manager you feel you are operating "outside the loop," undervalued within your organization, you're not alone. Can you and others within the CCM role rise above the status quo? Beebe Nelson thinks so. Keynote speaker at IACCM's Americas Forum in October, she reflects on the experience for her as a participant and speaker, and shares her insights as our guest editorial writer.
 
 

Misunderstandings about the contracting profession can make it difficult for managers to participate in a way that really boosts a project's innovation. “We are different from any other role in the company,” participants told me. “Our profession is still misunderstood in many parts of the organization. Why can't we contribute to the real value of a project?”

Invited to give a keynote talk at IACCM's 2015 Americas Conference in Las Vegas October 6-8, my assignment was to help the participants – some 300 of them – become more aware of their differences and more ready to engage others across these differences.

I chose the title Me, Myself and You, and explored the sources of our differences – including cultures, functions, and simply our own individual personalities. The session ended with an invitation to participate in a networking break, using the “active listening” tips I had shared, and focusing on their two top contracting challenges.

Integration melts the barriers

Contracting is not an aspect of corporate life that I am at all familiar with. I told my audience this, and confessed that when I have to sign a contract I skip all the paragraphs that look to me like boilerplate! But a major part of my work with innovators has been about communication, across the different functions and levels of the company, and with customers. Contractors are aware of their isolation within the company, and the profession is still misunderstood in many parts of the organization.

According to many speakers and participants, the issue they face is to become capable of contributing to “commercial excellence.” The barriers are linked to the contracting professionals' lack of integration with the commercial experts, as well as the problems caused by multiple handoffs during the contracting process, when responsibility for the next activity passes from one person or team to another.

I was reminded of new product development when I first came to Polaroid in the early '90s. We would talk of “over the wall” handoffs when marketing would pass an idea on to engineering, who would give their solution to manufacturing, whose reaction would often be “no way – we can't make this.” And even if the “product” survived that crisis there was a good chance that sales would have no interest in getting behind it. Product developers addressed this problem by bringing the different functions together into cross-functional teams which would work jointly throughout a defined phase/review process. This process -- one that many successful companies implement today -- lays out the work to be done as a sequence of phases separated by reviews at which management can question, approve, or cancel the project. To make this process work, product developers had to learn to communicate across the functions and levels of the company, and with their customers.

Could the answer be a “flipped bell curve?”

At the IACCM Conference I was particularly struck by the “flipped bell curve” one speaker introduced as a possible antidote to the issues that contracting faces today. It is similar to the logic of the product developers' phase/review process.

According to the speaker, in the bell curve that describes today's role of the contracting professional, little effort is put into contracting issues at the beginning of a project. The curve which defines the participation of contracting begins to rise as the project gets into its middle period, and the contracting issues assume an obvious importance for everyone on the project. Then the curve begins to descend and flatten out as the details of the contract are agreed to.

The problem is that the contracting professionals arrive after those working on the project have already collaborated to figure out what they are doing and why, who will be doing what, what the advantages and difficulties are, and so on. They leave before the issues that might occur when the project hits the outside world have a chance to appear.

The flipped curve shows much greater participation by contracting at the beginning of the project. If projects were organized in this way, contracting professionals would get to participate in the early discussions – what are we doing and why? What are the potential difficulties? How might we be able to improve the project's value? They could be a part of the team, contributing their insights and their skills in much the same way as the engineers, finance experts, IT professionals and manufacturers do now, working with marketing and sales, both in the early days and throughout the product development process.

As the project evolves, the contracting professionals can go on to other work – and of course they can be kept “in the loop” as the project continues, and called back in if difficulties emerge. The curve then descends to nearly a flat line in terms of actual hours put in. As the project reaches maturity and the agreements and contracts face the challenges of the “real world,” the contracting professionals renew their involvement and the curve rises again.

Contracting –three choices in your hands

One last thought. Many of the speakers at the conference talked of improvements to their approaches to contracting, purchasing, and legal. It seems to me that there are three choices:

  • Make what you are doing now work better. For example, improve communication to make handoffs smoother.
  • Use a model like the inverted bell curve to create a transformational basis for how contracting works.
  • Come up with a vision of cultural change that could profoundly alter the role of contracting and legal. For example, what if our super-litigious culture began to adopt negotiation and arbitration practices?

I am very glad that I had the chance to visit the unfamiliar but energizing world of contracting. If you'd like to contact me to learn more, please do. If you'd like to know more about the product development/innovation models I am drawing on, take a look at my books below…

My published books

  • New Product Development for Dummies (Wiley 2007; co-authored with Robin Karol).  http://www.amazon.com/New-Product-Development-For-Dummies/dp/0470117702;
  • Innovation Governance: How Top Management Organizes and Mobilizes for Innovation (Wiley 2014; co-authored with Jean-Philippe Deschamps) http://www.amazon.com/Innovation-Governance-Management-Organizes-Mobilizes/dp/1118588649/ref=sr_1_fkmr1_1?s=books&ie=UTF8&qid=1446212995&sr=1-1-fkmr1&keywords=Governing+Innovation%3A+How+Top+Management+Organizes+and+Mobilizes+for+Innovation.

ABOUT THE AUTHOR

After teaching philosophy for some 20 years at the University of Massachusetts at Boston, Beebe moved to the corporate world.  Her first assignment was to work with Polaroid's New Product Delivery Center, where she and her colleagues researched and implemented a world class system for the organization. The system became a key player in helping companies build and improve their innovation practices. Beebe worked for many years with the IAPD (International Association for Product Development) as a director, helping the member companies share insights and improve their innovation practices. 

 
 

Did anyone define contract scope and goals? Look back and regret at your peril

 
When it comes to delivering your contract, does it feel like you're muddling through, constantly "firefighting" and trying to resolve the challenges? If "yes" is your answer, it could be you've fallen victim to IACCM's number one pitfall of contract management - lack of clear scope and goals.
 
 

Not being clear enough about the scope of your contract or your goals may be the reason every day feels like a struggle - a gap identified consistently as the top issue by contract managers1/2.  

In this, the first of a new series of articles on IACCM's top Ten Pitfalls of Contract Management, author Fayola Yeboah looks at what can so easily go wrong and the very positive consequences of giving this key stage in your contract negotiation the top priority it deserves.

What was the deal, exactly?

What were the parties actually requiring and committing to do to for each other? Not surprisingly, lack of clarity about contract scope and goals becomes the biggest cause of claims and disputes, as parties try to resolve their differences. Misaligned expectations causing disputes are the “carbon monoxide” of a business, whatever its size. They can often go unnoticed until it's too late - disrupting relationships, consuming management time and eating away at the bottom line. New business wins may be celebrated, but no one seems to notice the many challenges and persistent firefighting going on behind the scenes because of the ambiguous or poorly scoped contracts that are already in place. Muddling through service delivery with an ill thought-out contract with scope and goals not clearly defined is not the smartest way of doing business!

Noble intent … but here's what frequently goes wrong:

Example 1  You are a supplier. Only a few months into the contract your customer requests that you do something – but your business thinks this was not part of the deal. So, what was part of the deal? A lack of consensus exists on this point:

  • Looking at the contract you find there's no well-documented scope of services.
  • You need to preserve the relationship with your customer, so you have to find middle ground.
  • Your processes just aren't set up to do what the customer requires, so the business designs and implements a work-around.
  • The extra time to implement and deliver this work-around has just eaten into your bottom line.

Example 2  Again, you are a supplier. You have a contract in place with a customer's contract that has a rolling term. The contract lacks any defined mechanism for increasing the charges, not even by the retail price index (RPI). Instead it was verbally mentioned during initial negotiations that the parties “would work together to review charges from time to time.” Albeit noble intent, here's what happens:

  • The contract has been in place for a number of years. As a supplier you would like to review the charges and agree to a reasonable increase to cover the increased cost of running your business operations.
  • The customer rejects all attempts to increase the charges. Will this result in litigation or a claim? No. Will this eat at your bottom line, impact the financial benefits realized by your business and possibly disrupt relationships? Absolutely.

Ensuring that the scope and goals are accurately reflected in a clearly drafted, well-defined contract is a crucial part of good contract management, which will minimize any opportunity for dispute. Clear expectations and detail that you can point to in times of uncertainty will also minimize the need for difficult conversations and really support good business relationships.

See your contract as a “business enabler”

A contract builds a solid bridge between two or more organizations. But while contracts are necessary for control and compliance, just as importantly contracts are business enablers. This is the game-changing message beginning to take root in many organizations as more and more focus is placed on aggressive strategies to increase market share, revenue, and reduce inherent risks associated with service delivery.

As simple as it sounds, it's really important that each contract you enter into contains a clear, complete and detailed scope. Your business should also:

  • take the time to define the goals and outcomes expected from the business relationship;
  • ensure that the terms of the contract reflect your company's vision and the contract contains the right mechanisms to enable success; and
  • make sure these important tasks are allocated to resource(s) with the skill-set and experience to get this right.

Avoid problems at the outset

“We've never had to litigate and no-one has ever made a claim against our company based on the contract.” A perspective we often hear, which may well be accurate! But are litigation and court proceedings the best way to judge whether the business has a “problem” with its contracting practices and processes?

Although indemnities and liability remain the top areas of focus in contract negotiations,3 IACCM's survey of contract and commercial managers' top concerns indicates that commercial terms such as the scope of services, obligations of the parties and change management may have the biggest impact on the health of your business.

IACCM research tells us that fewer than 15% of businesses have an integrated approach to commercial excellence. There is value (quite literally) in formulating an approach that takes into account CCMs' top concerns, putting your organization on the side of the minority 15% that are achieving it.

We will return to Focusing on the wrong terms and risks, IACCM's top pitfall number 5 later in this series, when we will look at this and the other common pitfalls arising in contract management, including the engagement of stakeholders, protracted negotiations, risk allocation, relationships, technology, post-award governance and more. Use this information to ensure that your organization always has its best foot forward. Much is in store!

END NOTES

  1. Pitfalls to Attributes: Turning Contact Management Weakness into Strengths - AMERICAS 2015
  2. Ten Pitfalls to Avoid in Contracting and Commercial excellence: Ten Pitfalls to Avoid in Contracting, Sally Guyer, COO IACCM
  3. 2015 Top Terms - IACCM EUROPE FORUM 2015 and 2015 Top Terms in Negotiating - Review & Analysis - AMERICAS 2015  - Jim Bergman, VP, Asia, ME & Strategic Projects

ABOUT THE AUTHOR

Fayola has worked as a commercial contracts professional throughout her entire career. Recognized for her work in the IACCM's Global Innovation Awards 2015, Fayola built and led the commercial contracts function for Europe for a global $20 billion company before starting the Commercial Contracts Consultancy (CCC), a UK based consultancy. The CCC provides practical contract management services to organizations of all sizes. As a trusted business partner, the CCC provides hands-on support in areas including, but not limited to, contract drafting and review, contract negotiations, support with overflow work, assisting with standard forms, the design and roll-out of efficient processes such as contract renewals processes, and the implementation of technology solutions to facilitate proactive post-award management.

 
 

Cloud infrastructure services - are providers still in charge?

 
Cloud infrastructure as a service is becoming increasingly mainstream - but do big providers still call the shots when it comes to contracting for such services? And what are the implications for organizations' ability to protect personal data?
 
 

Cloud infrastructure services offer accessible automation and innovation, with technology that is cost effective and easy to implement and use. But cloud services contracts are often “light,” with standardized terms that offer little or no scope for changes.

Businesses are increasingly turning to cloud brokers and enablers to bridge any gaps, and enable them to integrate cloud with traditional managed IT services. But these customized packages are making supply chains even more complex, blurring visibility of the use of sub-contractors and even sub-sub-contractors - and the flow of data.

This article opens the door to a better understanding of this “next-generation” hybrid cloud services environment, and how this is changing contracting best practices. It also reveals the implications of the ruling on Safe Harbor1/2/3 for the safety of personal information.

Standard contracts – the new era of cloud

When thinking of cloud computing, we often associate the term “cloud” with data location, but this is not the case. Cloud relates to the way services are delivered and used (“your data stored on a remote server, enabling you to access and use it anywhere”, as Steve Jobs4 foretold in his visionary 1997 speech). The underlying infrastructure is now provided through a range of basic cloud service models such as:

  • Infrastructure as a Service (IaaS)
  • Software as a service (SaaS)
  • Platform as a service (PaaS)
  • Business process as a service (BPaaS)
  • Housing as a service (HaaS)

Standard contracts leave residual risk

A large proportion (36%) of cloud infrastructure services provider contracts are signed using light standardized contracts, according to Gartner research - partly because users are buying services directly, and partly because some providers dominate in their field. Among these providers, often referred to as hyper-scaled cloud providers, are Amazon, Microsoft, Citrix and Google, to mention just a few.

These contracts are also “light” because the drivers of hyper-scaled cloud services have shifted, and they are increasingly customer-user focused:

  • Migrating to cloud infrastructure is now much more likely to be a business-customer centric decision, than one driven by IT departments; and 
  • Managed IT services in the cloud tend to be commodity standard services driven by users.

The light standardized delivery contracts used to establish these services leave little scope for changes – resulting in residual risk.

Devastating consequences of what may be missing …

The price we pay for using standardized commodity services is contracts that are often in favor of the provider, when compared with traditional managed IT services contracts. Many see these contracts as inadequate. The consequences can be devastating if safe and fair contract terms are not in place - with potentially enormous consequences if you place business critical data in the cloud.

For enterprises, it can lead to matters of great concern if critical and high priority areas such as the following are not included or sufficiently covered in the contract:

  • Limitation of liability
  • Warranties
  • Term and termination
  • Confidentiality
  • Use of subcontractors
  • Service description and SLAs
  • Governance
  • Exit and post-termination arrangements 
  • Security
  • Backup and disaster recovery.

For example, standard cloud contracts often include 30 days termination notice on both sides, however transition of infrastructure to a new service provider in 30 days would be highly challenging for most enterprises.

Cloud brokers are able to provide more structured governance and service delivery management on top of the provider standard contracts, and are more flexible in the exit and post-termination arrangements they can offer. However, on SLAs, security and backup and disaster recovery they are more limited, but they are able to add other additional services on top of the cloud service.

The rise of cloud brokers – and implications for data

The big rise seen recently in the market for cloud brokers and enablers is making “cloud” much more accessible for businesses. As we have seen, cloud brokers bring more flexibility to the way services are deployed and in their contracting. They are able to piece together different cloud services from several providers, and offer customized packages by delivering additional services on top of the underlying infrastructure.

This chain of cloud providers has matured the adaptation of cloud services, enabling the integration of cloud with traditional managed IT services in a hybrid environment. But it is making supply chains even more complex, and providers' use of sub-contractors and even sub-sub-contractors is blurring the visibility of who is actually delivering services and the flow and safety of data. However, contract and commercial professionals within sourcing have greater contracting flexibility in terms of deciding the data processing and flow when contracting with a cloud broker.

The Safe Harbor ruling has consequences – is it still safe?

The Safe Harbor agreement established between the United States Department of Commerce and the European Union (E.U.) in November 2000 regulates the way that U.S. companies handle the personal data (such as names and addresses) of European citizens.

The European Court of Justice's recent landmark ruling on Safe Harbor,1 declaring it invalid, has a direct impact on the way US companies operate overseas, with major consequences for cloud services based on Safe Harbor and delivered from and/or through USA. All stakeholders are affected by the ruling and await further clarification. This ruling and the Article 29 Working Party press release,5 does not come as a surprise for most cloud service professionals, as concerns from at least two sources had been raised about the Safe Harbor program, for reasons almost identical to the concerns raised in the ruling.6,7

Existing contracts and services have to find other ways to ensure an adequate level of protection of personal data. Enterprises will most likely seek to use the Standard Contractual Clauses on processing of personal data approved by the EU – but will that be enough to ensure an adequate level of protection?

Are cloud providers still calling the shots?

So does the rise of the cloud brokers and enablers mark the end of hyper-scaled provider's dominance? Definitely not! Are cloud providers still calling the shots when it comes to contracting? Consider these facts:

  • The business models of infrastructure as a service are changing, becoming increasingly mainstream.
  • Cloud brokers have established their relevance on the market by being more flexible in services and contracting. 
  • The rise of cloud brokers and enablers is maturing the market making cloud adoption more accessible for enterprises. 
  • Cloud brokers are more flexible in services and contracting when it comes to clauses such as SLAs, governance, exit and post-termination arrangements etc. 
  • Cloud brokers offer greater contracting flexibility on data processing and flow.

Does cloud spell the end of costly governance?

Although standard contracts from hyper-scaled cloud providers are often seen as being inadequate, some might argue this goes hand in hand with the new cloud era's business and customer IT centric focus. Might they also argue that long, extensive contracts with 50+ SLAs -- where contract governance cost the same as the infrastructure itself -- belong in the past?

I do not believe that cloud is the end of extensive contracts and governance costs. But I do think that 'light' contracts on cloud services will inspire enterprises to revisit the way contracts are designed, especially using a hybrid model that combines both traditional managed IT services and cloud.

As contract and commercial professionals, our ability to design contracts that enhance innovation, cost effectiveness, automation and ease of use – as well as bridging any gaps - is becoming increasingly important.

END NOTES

  1. Safe Harbor home page titled export.gov.  See also articles relating to Article 29 that appear on this website.  (Also, recent news includes the article, The real impact of Safe Harbor ruling by Scott Semel, Intralinks, October 11, 2015
  2. Network World article dated Oct 19, 2015, titled, How tech vendors are reacting to the Safe Harbor ruling
  3. EU source titled, Unleashing the Potential of Cloud Computing in Europe
  4. Youtube source - interview of Steve Jobs in 1997
  5. http://ec.europa.eu/justice/data-protection/article-29/press-material/press-release/art29_press_material/2015/20151006_wp29_press_release_on_safe_harbor.pdf
  6. EU source online article: Future of the Safe Harbour Agreement in the light of the NSA affair
  7. http://www.bfdi.bund.de/SharedDocs/Publikationen/Entschliessungssammlung/ErgaenzendeDokumente/PMDSK_SafeHarbor_Eng.pdf?__blob=publicationFile

ABOUT THE AUTHOR 

Christian Buch is contract and commercial professional at ATEA specialized in outsourcing and cloud services.

ABOUT ATEA

ATEA is the leading Nordic and Baltic supplier of IT infrastructure with approximately 6,800 employees. ATEA is present in 90 cities in Norway, Sweden, Denmark, Finland, Lithuania, Latvia and Estonia. It delivers IT products from leading vendors and assists its customers with specialist competencies within IT infrastructure services with its approximately 4,000 consultants and 7,500 technology certifications. ATEA had revenue of more than NOK 25 billion in 2014 and is listed on Oslo Stock Exchange.

Contact details: Christian.Buch@atea.dk

 
 

IACCM's Forum - discovering stronger relevance within our contracting world

 
During IACCM's Americas Forum in October, the nearly 300 cross-industry executives who gathered in Henderson, Nevada discovered several topics particularly challenging. Two in particular: 1. Only companies that remain innovative and strive to achieve commercial excellence will remain relevant in the years ahead. 2. The contracting, procurement and legal roles are in a state of well-developed and increasing transformation.
 
 

Themed the “Year of Commercial Excellence,” the three-day forum involved intense networking, active participation in workshops and roundtable discussions with industry leaders.  They united to exchange ideas and gain key insights on what's ahead for the contracting community.

HIGHLIGHTS attracting particular participant interest:

Panels

  • How to make sense of commercial excellence  Panelists1 discussed the importance of collaboration in achieving commercial excellence, emphasizing that even the best relationships need guard rails and to be successful, and organizations must be forward thinking in their approach to collaboration.
  • Evolution of contract management  Three additional panel discussions surrounded this topic and focused on legal and procurement roles.  To stay relevant and drive greater outcomes, organizations and individuals must be willing to evolve with the times and adapt to changing technologies, along with changes to company culture.

Key messages 

  • Keynote Tommy Spaulding, author of The Heart Led Leader, focused on how investing in relationships can improve your business and your bottom-line. 
  • Renee Scatena of Intel shared her company's journey in cementing the contract management role within the organization.
  • IACCM CEO Tim Cummins and COO Sally Guyer set the tone of the conference by illustrating how you can turn common contracting pitfalls into attributes.
  • Beebe Nelson of Working Forum, in keeping with the theme of cross-functional collaboration, focused on the need to understand not only yourself and your function, but also the role and function of others you work with. 
  • Mark Harris of Axiom Founder explained how the legal community must begin to shift from an artisanal to an industrial model to improve cycle times and achieve better outcomes.
  • Robert Prieto of Fluor said that by establishing a clear message and understanding the medium and who you are communicating your message to at the outset of the project, organizations can improve their success rate.

COMMERCIAL EXCELLENCE THEME

Tim Cummins, IACCM CEO, defined commercial excellence as "a visible and vibrant presence in the realm of contracting, saying, “It is – quite correctly – a market management and sales enablement role, drawing widely on the development of standards and the use of technology… The goal is quite clearly to improve sales and raise margins. Hence responsibilities frequently include contracts and pricing."2

Tim Cummins and Sally Guyer shared five simple qualities of commercial excellence that organizations should infuse into all business operations:

  1. Reputation of an organization is important.  Teams that cooperate and work collaboratively will stand out from the crowd.
  2. Transformation - The contracting community is in a period of transformation and those that embrace it will lead us into the future. 
  3. Innovation -  organizations that innovate must be proactive about sharing their accomplishments to help move the industry forward and drive better outcomes.
  4. Collaboration is and will continue to be a key to the future, to improve your organization's success.
  5. Technology is vital to transformation, but technology alone is not enough.  How we embrace it and utilize technology will differentiate us from the crowd.

INNOVATION AWARD WINNERS

During the forum, IACCM announced the 2015 Global Innovation Awards Winners. To win an Innovation Award, members must prove that they have driven innovation that markedly improves the contract and commercial function in either their organization or their customer's business. Winners were...

  • National Grid in the UK - Operational Improvement - Runners up: Dell and Microsoft.
  • Dell & Axiom - Outstanding Service Provider - Runners up: Kaiser Permanente and Mainspring Consulting.
  • Samuel Tricoli - Personal Initiative
  • Sharon Zachariah - Personal Initiative - Runners up: Fayola Yeboah from Enterprise and Melanie Moore from Lockheed Martin.
  • UK Cabinet Office & Crown Commercial Service (CCS) - Program of Visionary Change Innovation
  • NetApp - Strategic Direction - Runners up in this category are Chevron and Land Information New Zealand.

To view the winner case study summaries: http://www.iaccm.com/iaccm-innovation-awards

EUROPE FORUM COMING IN MAY  

Don't miss out on IACCM's Europe Forum on May 9-11 in Rome, Italy, where we will keep the conversation going.  2016 will build on the momentum from the year of commercial excellence as we focus on continued transformation to shape the direction of the contracting role going forward.  You can learn more about the Europe Forum here: www.iaccm.com/europe

END NOTES

  1. Panelists:
  • Daniel Mahlebashian, IACCM's Chairman of the Board and Global Executive Director of Purchasing Services, General Motors
  • Robert Metzger, Consultant, Rogers Joseph O'Donnell 
  • Bonnie Keith, Faculty, University of Tennessee
  1. Commitment Matters, January 7, 2015, titled, Commercial excellence – from concept to reality – Tim Cummins 
 
 
 

This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License. Based on a work by Revitas, Inc. at www.revitasinc.com/blog.

 
 
 

EDITORIAL BOARD 2015 - 2016

IACCM recognizes the members listed below as being crucial to the continued improvement of IACCM's Contracting Excellence online magazine over the years.  Their behind-the-scenes work in reviewing articles and proposals from prospective authors has been immeasurable throughout 2015.