January/February 2015 Edition
Contract or commercial manager - is there a difference?
With continuing tough economic conditions, the CM role has developed far beyond simple oversight of performance and compliance. There is now a much greater focus on the post award phase to safeguard value from existing contracts.
Top performing CMs today have successfully developed their skills across both contract and commercial “disciplines,” and are highly valued in their organizations. They work proactively alongside project professionals to provide a winning mix of commercial and technical delivery expertise that will ensure successful delivery and bottom line results. They are also teachers and enablers, able to 'workshop' across the whole organization to ensure all aspects of its contracts perform well.
But should we really expect this exceptional mix of commercial and 'soft' people skills to co-exist as a matter of course in one individual?
Or, as being able to make good commercial judgements becomes increasingly critical, will we see the gap increase between the more strategic role of a commercial manager and the more tactical and operational activities of contract management?
Organizations that have recognized – and are realizing - the significant value that proactive commercial and contract management brings to the business are preserving and investing in their CM teams – bucking the trend of downsizing seen in other areas. IACCM surveys have shown that many organizations are doing just this – recognising also how much their CM teams' workloads have grown as a result.
Although in many organizations we still struggle to establish clear career paths for these changing and developing roles, our surveys also confirm the enjoyment that the vast majority of us gain from our work.
IACCM has been making significant progress in gaining recognition and awareness by senior management and academia not only of the differing roles, but of the value they deliver, and our work on the development of commercial and contract management as a career will continue proactively in 2015 and beyond.
Our major theme for 2015 is commercial excellence. One of my blogs dated Jan 7 covers this topic's relevance to our community. I welcome your comments and thoughts.
If you want to be a better contract manager think like a consultant
Being a contract “consultant” rather than a contract “administrator” certainly sounds more rewarding, but it includes myriad challenges. For one thing, it is the sheer volume and disparate perspectives of stakeholders that makes contracting so complicated to begin with.
So your mission as contract consultant is to engage the relevant stakeholders – internal collaborators and external suppliers alike – to ascertain the critical requirements and outcomes to be supported by the contract itself.
Zycus recently hosted a roundtable discussion on Contracting Strategies that Minimize Risk and Maximize Business Impact at our annual Horizon Procurement Conference in Amelia Island, FL, USA. We heard from two seasoned procurement directors, one from hospitality, and one from higher education. What follows is that rare combination of insights that not only reflect best practice but are also highly practical:
- Start with stakeholders
The director of procurement at a leading firm encourages CMs to first ask stakeholders: “What are the 10 business problems you are trying to solve? If the category is, say, 'room safes', what issues do you see with current sources of supply, or which new requirements have you been getting from guests or property managers that need to be addressed? Then ask suppliers during the contracting process how they intend to solve those 10 problems. The discussion needs to be on the business value - it is about much more than just cost savings.”
- Selling to stakeholders
Procurement teams seeking to gain better oversight and control in the contracting process often have to negotiate their way through internal turf issues. This is especially so in de-centralized organizations, where various business units are accustomed to operating autonomously in deciding how, and with whom they will contract. The advice of the procurement director in higher education is to start by offering a value proposition to business users: “Position yourself as a consultant who will make their lives easier by removing the 'busywork' of contracting that bogs them down.”
- Gaining visibility
Most consulting engagements include a data-gathering phase at the outset to develop an accurate assessment of the current state baseline. In the case of the higher education procurement director the starting point was contract collection, as opposed to contract management. “We didn't try to change the culture right away. The first objective was simply to find the contracts, figure out who is signing them, and what we are being committed to. It was a real eye opener to find that for office supplies alone, we had executed 'exclusive' agreements with as many as three different suppliers.”
- Finding the “root cause”
Any good consultant knows that finding the root cause of a defective process will be the key to implementing real process change, instead of focusing solely on the symptoms. In the higher education example, the procurement director wanted to understand why so many business users attempted to circumvent legal in the contracting process. The answer was simple: Legal review took too long. But in the course of interviewing the university's general counsel, the director was able to forensically determine the root cause. “Legal was being asked to review and comment on all 12 pages of each individual agreement, when in reality there were only three or four key paragraphs that needed a legal opinion. By changing our process to highlight the key legal terms to be reviewed, we have shortened the cycle time and improved compliance.”
- Focusing on strategy
Adopting a contract “consultant” role means looking beyond terms and conditions to the overarching strategy for the organization – or ensuring, at least, that terms and conditions support top-level strategic directives. For the hospitality director that means ensuring first and foremost that the contract protects the company brand. “That means everything from ensuring that our logos will not be used inappropriately to mandating a safe workplace. We have been incorporating responsible business clauses into our agreements for the past 10 years. We let these strategic concerns guide us on who we decide to do business with. The contract in turn needs to guide how we manage that strategic relationship through the entire lifecycle: First, how we plan to engage together and next, how we will operate on an ongoing basis and the SLAs and reviews that will govern our relationship. And finally, as and when we need to terminate, what is the exit plan and how will the business be transitioned to a new supplier.”
- Measuring and improving – continuously
Consulting methodologies all seek to define key metrics, which if rigorously measured, can help drive continuous improvements. In this context, the contracting and contract management process offers ample opportunity for continuous evaluation and assessment. For instance, one of the best practices espoused by the hospitality director is to always include two suppliers throughout the contract negotiation process, even when a clear winner has been chosen on their technical merits. The purpose is to continue evaluating potential partners based on their level of cooperation in the contract negotiations. “It is during this phase – not the sales process – when you begin to get a better picture of how it will be to do business with this supplier over the term of the contact.” Another word of advice when it comes to measuring is that everything in the contract has a value. “Find out which clauses in your contracts your suppliers find most onerous. If it is something like the indemnity clause, relax it if it is not needed, but determine what that value is and make sure it is part of the overall negotiation.”
ABOUT THE AUTHOR
Richard Waugh, Vice President - Corporate Development, Zycus Inc. leads strategic initiatives in the areas of new product introduction, market development, thought leadership, analyst relations, and strategic partner development programs. Richard has an extensive background in B2B e-commerce, going back to his early career at GE, where he helped launch GE'S Trading Process Network (TPN), the first on-line marketplace for sourcing and procurement in the mid 1990's. He was co-founder of B2eMarkets, one of the first SaaS (Software as a Service) sourcing suite providers and later covered the supply management market as an industry analyst for the Aberdeen Group. Prior to joining Zycus, he helped bring to market new innovations in P2P (Procure-to-Pay), helping global clients achieve world-class P2P system adoption and performance. Richard has a BA from Wake Forest University and is a graduate of GE's Financial Management Program (FMP) executive training.
Zycus is a leading global provider of complete Source-to-Pay suite of procurement performance solutions. Our comprehensive product portfolio includes applications for both the strategic and the operational aspects of procurement - eProcurement, eInvoicing, spend analysis, eSourcing, contract management, supplier management and financial savings management. Our spirit of innovation and our passion to help procurement create greater business impact are reflected among the hundreds of procurement solution deployments that we have undertaken over the years. We are proud to have as our clients some of the best-of-breed companies across verticals like manufacturing, automotives, banking and finance, oil and gas, food processing, electronics, telecommunications, chemicals, health and pharma, education and more.
TO CONTACT THE AUTHOR, please mail your question to Info@IACCM.com or connect using the IACCM Member Search (login required). To learn more about the Zycus, address e-mail to email@example.com or visit http://www.zycus.com/
Looking for a new Contract Management system?
It comes down to finding a better way to manage contracts. If you're considering a new system, it's essential to prepare yourself for the many challenges ahead – but where do you start?
Because contract management systems are new and unfamiliar to most leaders, they aren't sure of exactly what they are looking for, where to search or even what questions to ask. Online research is frustrating. Vendors are often reluctant to answer their questions and not all the information needed is readily available. Has that been your experience?
To help contract managers navigate through this complex process, Merrill Corporation recently conducted an in-depth survey of contract managers and higher-level executives, to identify patterns, insights and strategies that helped them succeed in implementing a new contract management solution. This article summarizes what survey respondents said.
Input of peers essential for best decisions
Successful contract managers reported being able to uncover answers to many of the questions you may be wrestling with, including:
- What's the right system for our particular business needs?
- Who can help us find it?
- Once we've identified the right system, how can we best make the case to key decision makers?
- How can we convince our finance department that a new solution is worth the investment?
- How can we identify if a new solution will be approved by our IT department?
Contract managers surveyed said the best sources for clear, unbiased information were peers and colleagues. They got that information via professional networks, trade shows, association events, mailing lists and forums. While the information was good, gathering it could be a slow process and yet, was an essential path to some of their best decisions.
Best practices for decision making
Advocates for contract management solutions reported several critical steps for good decision making in their organizations. After carefully defining their organizations' needs, they identified three best practices:
1. Be prepared
Get your “ducks in a row” before going to senior management. Anticipate executives' questions and have answers ready before opening the discussion. Because every organization has different needs, the information key decision makers will require will vary from company to company. However, the survey revealed a few universal topics and questions which should be addressed:
- Estimated budget range
- Impact on operations
- Time and cost to implement
- Background on the vendor
- Technical considerations
- Wide survey of vendor offerings
When the contract manager came prepared with answers to these questions, internal stakeholder meetings were more efficient and productive, and the decision-making process moved more quickly.
2. Evaluate people
During the sales process do not use the demo to evaluate the software or tool. Use it to evaluate the people with whom you will be working. Once a solution was chosen, contract managers who experienced successful implementation reported that it was more important to have a good working relationship with their vendor than it was to have exactly the right software.
Systems are difficult to evaluate until they are working in the environment, managers said. As a result, most used the demo portion of the sales process to evaluate the team they would be working with, rather than to evaluate the product. Some questions to keep in mind:
- Do I trust these people?
- Does the sales rep understand my issues and concerns?
- Did they send highly qualified people for our project?
- Did they show up in person or was all contact virtual?
Satisfactory answers to these questions gave contract managers confidence and most found that executives tended to ask similar questions.
3. Make your message clear to executives using language they understand
Make sure you can discuss the project in terms that executive leadership understands. Contract managers who successfully convinced their companies to invest in contract management solutions understood a common truth: To get the company to invest in a powerful tool to help them do their jobs, a business case needed to be made internally to executives, the contract management team and other stakeholders, particularly finance.
In addition, contract managers who won the investment indicated that one of their most important strategies was helping colleagues and executives understand the current system and how it links to performance in areas that they care about. Most people who don't work within the contract management function don't understand how complex it really is. Illustrating the process for their colleagues helped bring clarity to the challenges, business risks and the impact on primary business needs and any urgent problems.
Managers' four biggest concerns
Contract management is not only a centralized function, but is also integrated with other company functions. The biggest concerns are centered on the nature of those integrations. Contract managers asked: As we move to the new system, how will it work and how will we ensure that the core business processes we serve will not be interrupted? Managers shared four primary concerns:
- Integration with finance
- Distribution of information
- Technical compatibility
- Adoption and implementation
1. Integration with finance
When making a significant investment, one would expect it to require approval from the finance department. However, the survey revealed that the approval contract managers sought from finance was not an approval on the money, but assurance the new system would work and ensure timely issuing of customer invoices and vendor payments.
This is easy to understand: Any system implementation will create some kind of internal disruption. Managers whose activities drive invoicing and payments realize that the dangers of an internal disruption could be substantial. Supply chains could be interrupted, revenue flow could slow down and subscription discounts could be lost, causing the company to overpay for services.
For these reasons, many contract managers began by seeking a system that would integrate successfully with finance. But as they explored options, they found such integration was expensive, time consuming and probably overkill. Instead, most contract managers selected systems that mimicked or enabled their current processes - albeit much more efficiently. This approach reduced resistance and made the acquisition of a solution far easier to achieve.
- Distribution of information
Most companies have a current method of getting critical information to the people who need it. Finance is a special case. There were many other important touch points, some specific to certain industries, revealed in the survey. They included being able to get:
- Contract details to the sales force
- Insurance expiration flags to on-site project managers
- Renegotiation alerts to legal or procurement
- Rebate terms and details to relationship managers
- Indexed contract access to sites that are conducting clinical studies.
While the current system for sending information to the right people may or may not be elegant, it often works well enough. Contract managers reported the need to ensure they can continue to meet these needs in real time before they make a commitment to purchase.
- Technical compatibility
Participants consistently indicated the importance of technical compatibility; not understanding the technical operations of the various systems was a serious obstacle. In order to move forward, contract managers had to educate themselves on system technology. They discovered that not all technologies work well together: IT may have policies against certain solutions or software packages and integration can create a significant headache. In most companies, technical compatibility is a veto issue that is not easily negotiated. Participants reported it would have been far better to understand the framework of what was compatible and what was not before having higher-level discussions.
- Adoption and implementation
Savvy managers know that with all new systems, the biggest challenges can be implementation and adoption. These managers raised a number of important questions:
- How long will it take to implement?
- How many consultants and staff are needed and how much will it cost?
- How will we train people?
- Will people use it?
- Will people see it as an improvement?
- How long until we actually see the benefit?
Largely, these questions come from experience with Enterprise Resource Planning (ERP) systems. In ERP, both implementation and adoption have been major headaches for organizations - and those headaches sometimes last for years.
Many contract managers were aware of these issues and addressed them early in the process. Most of those interviewed indicated senior leadership also raised the questions as they considered the investment. Having the answers was reported as extremely helpful in getting the executive team to approve an investment.
In-depth findings from the survey are detailed in the report, “State of Contract Management: Merrill DataSite® 2014 Annual Report.” To access to this complimentary report, please contact Merrill DataSite at firstname.lastname@example.org
Think you know your CLM risks? If you're in a systems silo expect surprises
Although contracts are the foundation of any business, many companies lack tools and strategies to limit liabilities and extract maximum value from every agreement. Shockingly, in many cases, companies rely on Excel to track millions or even billions of dollars of annual transactions to bridge the gap between CLM and the other systems …
A problem with two sides …
Most large organizations maintain contracts on two sides of the business: the buy side and the sell side. Here's just one common sell-side scenario.
It's another great day in XYZ company's contracting department. The sales team has just closed another big deal with a customer after a tough negotiation. Joe, the contract administrator, is feeling good. The customer demanded some alterations to the agreement terms and conditions, and Joe did a great job tracking the changes through the authoring and review processes, and expediting legal review and all required approvals.
It looks like an example of contracting best practices in action, but is it? The final version of the agreement stipulates a number of volume-based pricing discounts. In other words, the customer is receiving a discount in return for promising to purchase a certain amount of product from XYZ. The contract is signed and active, but …
- Will the customer actually order the promised volumes?
- Does XYZ have the business processes, let alone the systems, in place to verify that the customer meets its commitments?
- Will XYZ have the ability to uncover any discrepancies and take the actions dictated by the contract?
Within most companies, the answer is a resounding “no.”
The fact is that most companies do not have an automated sell-side contracting solution in place to effectively manage contracting processes. But many of these same companies do have at least an entry-level system in place for managing buy-side contracts. So why are sell-side teams slower to adapt?
According to Tim Cummins, CEO of the International Association for Contract and Commercial Management (IACCM), the difference is that while buy-side teams have been “strongly focused on cost reduction, risk avoidance and compliance, their sell-side colleagues have to learn to balance a much wider set of factors in developing sustainable contracts and relationships.”1
One of the key problems of implementing effective sell-side contract management lies with the historically siloed nature of contracting, with contract information tending to be stored in its own insular system. For example, the terms of an agreement often reside with the contracting team in department-exclusive files, drives or repositories, but execution of the payment lies within the enterprise resource planning (ERP) system. This segregated approach creates a disconnect between the two processes (Figure 1).
Figure 1. Traditionally, ERP and CM systems operate independently—and inefficiently—in silos, unable to share pertinent data about contract terms and execution.
When departments are hindered from sharing critical information, the company is at increased risk of committing errors that can have lasting impacts. For example, if an amendment is made to the contract but the ERP system is not updated, the accounts payable department could end up inadvertently paying ineligible incentives.
The same applies to every related function. When contracting information is siloed, key stakeholders in legal or finance struggle to get the visibility they require into critical contract information, such as key milestones, pricing terms and conditions, legal obligations or amendments. These employees are limited in their ability to perform their jobs effectively.
True CLM must span the entire period that a contract is active. The only way to achieve this comprehensive and well-rounded approach is by implementing an integrated CLM solution that unites contracting with each related function throughout the entire lifecycle.
Powerful impact of integrated CLM on volume-based pricing calculations
An industrial gas manufacturer and distributor provides a classic example of the power of an integrated CLM and ERP solution. This company forms rigorous agreements with its customers, leasing equipment to them for storing their industrial gas products and stipulating the monthly volumes to be delivered. The company's sales contracts are complex, specifying volume thresholds and even the means for ensuring contract compliance.
Customer compliance with contract terms and conditions holds serious value for the gas company. In fact, a recent manual audit of customer compliance indicated that more than $10 million in pricing concessions and penalties were at stake. So the client took significant action to improve and standardize its CLM business processes, hoping that improved contracting would yield improved contract compliance from customers. These business process improvements accelerated contract cycle time by 80%. Yet the issue of contract compliance remained unresolved.
As a result, the industrial gas supplier implemented a purpose-built CLM software solution to simplify and automate its contract-creation process, institutionalize standard terms and conditions and establish a connection between siloed processes. In particular, the gas company's new CLM system captures customer volumetric commitments as contract metadata —ie data that is explicitly identified within the CLM system. Explicitly identifying key contract terms as metadata allows the company to use those terms to run calculations and analytics. Improvements in analysis enable the company to easily gauge the performance of its customer agreements and leverage that insight to continually enhance the development of new contracts.
Finally, the new CLM system integrates with the gas company's existing ERP system, enabling the company to more easily enforce terms and conditions of the agreement. For example, the CLM system contrasts actual shipment volumes and dates in the ERP system with the terms from the contract, assesses compliance, and generates a notification to the relevant parties if a customer is in danger of missing the volumes required by the contract.
Disconnects can be seriously problematic
Volume-based pricing is just one example of a business strategy that requires integration between CLM and ERP. Integration has benefits across many areas, including the management and execution of channel sales incentives. Many manufacturers stipulate the terms of incentive programs in their contracts. These agreements tend to exude complexity, often specifying complex volume-based tiers, brand eligibility, customer eligibility, bundles, rebates and billbacks.
Distributors' and resellers' incentive calculations are based on the sales that each partner achieves; matching those sales to the terms set out in the incentive agreement determines eligibility. For many large manufacturers that leverage indirect sales channels, the processing of incentive calculations is the single largest revenue-related calcuation that occurs outside of the ERP system (Figure 2).
Figure 2. In channel sales scenarios, incentive agreement terms are captured by the CLM system, while channel sales data is housed in other enterprise systems, breaking down communication and placing corporate revenue at risk.
Because of the significant revenue tied to channel sales incentives, the negative impacts from siloed processes and information become seriously problematic. Rebate and other incentive terms are locked within the contract, but compliance is processed via customer claims, point-of-sale system data or ERP sales data. Many companies attempt to unify these processes and outcomes through a series of data extracts, Excel spreadsheets, manual calculations, merges, and other non-automated, error-prone tools.
Shockingly, in many cases, companies rely on Excel to track millions or even billions of dollars of annual transactions to bridge the gap between CLM and the other systems. These types of manual entry processes can be cumbersome and inaccurate, leading to error-prone results. The risks are incalculable. One small keystroke error can have devastating consequences throughout an entire spreadsheet. Without a proper, integrated system in place, companies put signficant amounts of revenue at risk.
In fact, a typical pharmaceutical manufacturer might spend more than $800 million a year on chargebacks and incentives, of which 5- 10% is at risk of overpayment if contractual terms and customer sales data is not linked. That is upward of $80 million!
The next big thing in CLM is enterprise-wide integration. A recent study backed by the IACCM2 found that the real contracting risks for organizations are scope and goal changes, party responsibilities and pricing scenarios. Together, these are cited as frequent problems in more than half of all contracts.
For years, contracting departments have been enhancing their business processes and systems, aiming for standardized terms and conditions, better visibility, clear approval workflows, and faster agreement cycles. Those are worthy goals. But achieving the next level of contracting business value means breaking through the traditional concerns of legal departments and contracting administrators, and integrating contracting with the greater enterprise.
The author hosted with IACCM a video presentation, ATE “Beyond Traditional Contract Management: Measuring Post-Execution Contract Performance” (August 6 2014)
1. The Revitas Blog: “Buy-side versus sell-side contracting: Who's got it right?” Interview with Tim Cummins. May 16, 2012.
2. IACCM presentation by Tim Cummins from July 2014, titled: “Are your contracts fit for purpose? Driving improved contract outcomes.”
ABOUT THE AUTHOR
Andrew Sanford is a Senior Solution Engineer with Revitas specializing in contract management and revenue management solutions. Andrew has 25 years of manufacturing experience with an emphasis on supply chain and manufacturing optimization. He has implemented enterprise software solutions in the life sciences, refining and marketing, chemicals, food and beverage, and consumer packaged goods industries. Andrew has a degree in industrial and operations engineering from the University of Michigan.
Revitas accelerates revenue by delivering comprehensive, integrated solutions for contract, revenue, and compliance management. Revitas enables channel-driven companies to create, execute, and manage complex contracts and incentives effectively and profitably, both on premises and in the cloud. For more information, visit http://www.revitasinc.com.
Evolution of contract management in India - from lone ranger to business critical function
Authors Anupam Sharan and Srini Krishna examine what's needed to take contract management in India to the next level, tracking its evolution from “back-office” to the critical business function it is today – experience that will prove immensely valuable for countries that may similarly be experiencing rapid growth and transformation.
Contract management in India has come a long way. Not so long ago it was difficult to find funds for a dedicated contract manager, let alone for a contract management organization. But what was once a narrow commercial/technical specialty is now a much broader quasi-legal role.
Economic liberalization spurs culture change
Contract management in India has developed alongside the evolution of Indian business over the past two and half decades. Until recently, across all sectors and industries it was handled by a variety of departments, from supply chain management, commercial, procurement, planning to legal. After the 1990s it evolved into a broader role of enterprise risk management – but only recently has contract management come to be viewed as a potential source of revenue. To understand this transformation we must look at key factors in play at the time.
This change introduced new technology and products - but importantly spawned fundamental changes in organizational culture and the way businesses were run and managed in India. American Express, GE, Pepsi, GM, and Ford -- to name but a few -- have changed the face of corporate India, introducing previously unseen levels of organizational complexity. These organizations not only introduced a slew of new functions into Indian businesses, but also changed the way many viewed their primary role and how they interacted in their daily operations.
Complexity and risk demand diverse skill-base
This paradigm shift sharply focused on the need for transparent and enforceable contractual relationships among different market players and stakeholders. No longer was it sufficient to replicate a few contract templates and use them with minor modifications in almost any business situation and in complete isolation. Such may have been fine in a comparatively static world where few market changes existed.
But suddenly enterprises were forced to architect new contract structures to align with ever growing changes in business models with different permutations and combinations of products, services, markets, customers, geographies and legal jurisdictions. The interplay of these variables meant that risk was no longer a linear relationship between cause and effect. Instead, those responsible for contract architecture had to adopt a holistic view of a contractual relationship to identify and mitigate the impacts of a commercial relationship across the organization. The contract manager was no longer a lone ranger working in the back room.
Growth of the services sector in the 1990s and the 2000s, particularly IT enabled services and business process outsourcing services, introduced further complexity in demands made on the contract management function. The manufacturing sector was not far behind as India became a major manufacturing hub for companies like Ford, Nokia and GM.
As India grew, becoming the world's shared back office, companies were looking for innovative ways to launch new products and services from India. Co-development and alliances became commonplace. This brought a new dimension to the traditional contracts that Indian contract managers were familiar with; contracts were no longer just about documenting and formalizing the exchange of services between two parties. Contract managers now had to architect enabling contract structures to facilitate the design and development of revenue generating products and services in a future clouded with uncertainty.
Value increasingly recognized
Faced with these demands, contract management could no longer be an “afterthought”, patched up in isolation in an ad hoc manner using any available resources. Today, nearly eight out of ten companies have a committed contract management function, which has clarity, stability and direction in terms of its remit and expectations of it from the organization. They are required to add value to the contracting process. This meant leveraging discipline, rigor and due diligence, and taking an enterprise-wide view of risk, and reward both prior to and following the contracting event.
More importantly, organizations have recognized the value of the contract management as a function that combines a wide variety of skills and expertise, spanning a number of disciplines. Contract managers are seen as negotiators and dealmakers, not just contract drafters and reviewers. They are expected to appreciate the legal and regulatory landscape within their business context.
Raising awareness of the complex skill-set that professional contract management brings together is the biggest challenge – the tangible skills of law, metrics and costs coupled with the nuances of culture and leadership
Although creating awareness within individual organizations and departments is important, creating partnerships between businesses and industry associations will open the door to the wider awareness raising and institution-building necessary to drive the development of contract management in India.
More champions of contracting excellence are also needed – but building the resource pool of contract managers who can wear the mantle of driving contracting excellence will be the most difficult road to tread.
One possible way forward would be for each organization to audit its contracting function to identify any gaps and deficiencies. IACCM could potentially help here, through its commitment to helping companies understand the need for a dedicated contract management function. IACCM's various programs enable both public and private sector organizations and professionals to achieve world-class standards in their contracting and relationship management process and skills.
ABOUT THE AUTHORS
Anupam Sharan, Leader Contract Management for American Express, is an attorney managing strategic legal, contractual and commercial programs globally for contracts worth more than $1Billion per year. He has extensive legal and contractual experience in drafting, negotiation, IPR, corporate, commercial including International law, M&A, government affairs, risk, governance, compliance and privacy matters. He seeks to channelize business and operational insights to provide thought leadership within the industry and contribute to shape laws, regulations and public policies. He brings experience across multiple industries such as consulting, banking financial services, telecom, outsourcing, IT, ITES, steel, power and construction. He is a regular speaker at various conferences, with many articles and white paper published to his name. He has dual qualification of Bachelor in Mechanical Engineering (B.E.) and Bachelor in Legislative Law (LL.B.) with Masters in Business and IPR Law (LL.M) added with various certifications including IACCM Expert (CCME).
Srini Krishna, Director – Strategic Deal, Corporate Finance and Services, Microsoft. Srinivas brings 24 years of professional experience at and, working with, senior management and Boards giving him the breadth of perspective and depth of detail in designing and managing global businesses. He has held leadership positions specializing in Global Sourcing Strategy, business and deal architecting, governance and change management. In Microsoft he is responsible for architecting and negotiating complex strategic outsourcing deals that drive long-term value engendering collaborative relationships with key supplier partners. He is also a member of a core of professionals within Microsoft responsible for shaping and driving its shared services and outsourcing agenda.
A Sloan Fellow of the London Business School, Srinivas has Masters Degrees in Economics from the Center for Advanced Study in Economics at the Gokhale Institute of Politics and Economics and, in Management from the University of Mumbai in India. He is a frequent speaker at international conferences on global sourcing and outsourcing and has written several papers on this subject. He was awarded by the Shared Services and Outsourcing Network for his personal contribution and thought leadership to the global Outsourcing industry.
Strategic sourcing - the new career of choice
No longer a back-office function for transactional procurement, this field - once only rarely sought as a career choice - is now a highly coveted area. People in sourcing now hold strategic roles with insight at all levels of the company - the “strategic” is finally a valued part of “strategic sourcing.”
Though it's still new to many companies - and in fact some entire industries, strategic sourcing as a methodology has been around for decades. For those who may be unfamiliar, its basic components include:
- Understanding by category what a company spends with external suppliers;
- Understanding the marketplace of available resources;
- Developing a sourcing strategy for key categories and a Total Cost of Ownership (TCO) approach;
- Rationalizing the spend by negotiating with a small group of suppliers on price, service levels and other quantifiable items; and
- Implementing a contract and relationship from which the organization can measure its results.
Talent management is an ongoing challenge for sourcing professionals
Procurement may once have been a role people “fell into,” but not any longer now that undergrad and masters programs are focusing on preparing professionals for careers in supply chain management. Mostly because of the economic downturn in 2008, procurement is now run by a C-level executive (chief procurement officer) who often has a seat on the board.
In fact in a recent study SIG conducted with Oliver Wyman, 62% of respondents stated that procurement is seen as a key driver of performance by top management. CPOs are more involved in outsourcing decisions today and with the relationships they hold across lines of business (LOBs), no position or department is better suited to leverage all of a company's capabilities.
Many in sourcing now have top line growth initiatives
Cutting costs may have been the impetus for procurement gaining a seat in the boardroom, but it's not the only way this group is adding value. Many companies now have top-line growth initiatives. Supplier collaboration and goal sharing lead to innovation, which in turn leads to new product development and potential revenue.
Phones on airplanes? Wifi availability? Movies in-flight? All said to come from suppliers through the strategic sourcing function. Supplier collaboration is one of the best ways to create new value and top line growth. In addition, supply risk management is a hot item for companies. The relationships procurement professionals establish with the various LOBs give them a unique ability to identify and mitigate risk across the organization.
This insight has elevated their importance to the company, which now leans more heavily on procurement to help them locate and foster the talent that is most appropriate for risk and third party management programs.
So, what was once seen as a cost-cutting function has now matured into a department that has insight into all parts of the company, manages and mitigates risk, and contributes to growth.
This trend is great news for many of us involved in sourcing, procurement and outsourcing!
ABOUT THE AUTHOR
Sarah Holliman, Vice President of Marketing with the Sourcing Interests Group (SIG) has 13 years of experience in the sourcing industry. Prior to joining SIG's leadership team, Sarah was with AT Kearney, leading the marketing efforts for the AT Kearney Procurement & Analytic Solutions unit. She also spent five years at AT Kearney consulting primarily to financial services companies on topics that ranged from strategic planning to procurement cost reduction to back-office operations. Before joining AT Kearney, Sarah was in business development at one of the largest commercial banks in the US.
Sarah has held numerous leadership positions on non-profit boards promoting children, women, and educational issues, and has specific expertise in membership development, fundraising, and strategic development. Sarah has a BA from Furman University and an MBA from the Anderson School at UCLA.
US Federal Acquisition workforce can't be outsourced - so we need to get it right!
Anything that can be done to speed this up will be helpful to recruitment, retention and - most importantly - successful buying. (See End Notes 1-5 for further details on the above findings).
Vital industry training is lacking
Many about to retire have developed their knowledge of industry best practices over an entire career. Leaders of the next generation of contracting professionals need to be able to gain these skills much more quickly.
There is necessary training in place for federal acquisition and contracting, with on-the-job training to develop understanding of procurement law, public policy, and mission. But in most places there is nothing to help employees understand how industry does business, how to respond to the thousands of requests for proposals they receive every year, or concepts such as
- how companies determine whether to bid on a requirement;
- the best approach to minimizing proposal costs in order to maximize competition; and
- how to minimize or eliminate protests through effective communication.
At 'safe' seminars industry learns too!
Agencies can address this gap immediately by partnering with industry associations to develop industry-led seminars for the workforce. The cost is almost zero and the impact immediate.
We've tested this approach with excellent results for our contracting professionals, as well as an unintended positive result - people from industry also learned from being around our contracting professionals. Seminars create a safe environment away from the acquisition process for contracting professionals to learn about their potential industry partners and gain valuable experience before ever soliciting them for a requirement. Frank discussions are had on topics that typically nobody talks about until they are adverse in nature.
An approach any agency can adopt
Through a function I created at DHS called the Procurement Liaison office, we developed seminars on a range of topics we felt would develop our workforce's understanding of strategic challenges they and industry were facing in the current federal bidding environment. A sample list is shared below. We will employ a similar strategy at the Department of the Treasury.
- The importance of strategic communications to the industry base
- How industry assesses risk throughout the acquisition life cycle
- The challenge of competing as a mid-size business—how the acquisition process hurts mid-size companies
- Best practices of fortune 500 procurement organizations—best practices from the private sector
- Original equipment manufacturers distribution channels and the impact the acquisition life cycle has on business
- Industry challenges related to providing it as a utility and
- The strategic sourcing mandate's impact on the industrial base.
Industry knowledge – communication is the key
Through this kind of learning, we believe that contracting professionals of the future will significantly reduce time to award on major acquisitions. Armed with knowledge of how industry does business they will spend more time communicating before a requirement hits the street, reducing time from FedBizOps6 to award to less than six months or less on major complex requirements.
This we believe is the future. The first to learn more will be the first to execute, and will be held up by all federal acquisition stakeholders as the models to follow.
- Is the Federal Civilian Workforce Really Growing? Some Important Context
- Federal contract spending dropped $20 billion in FY12
- Data, Analysis & Documentation FEDERAL EMPLOYMENT REPORTS
- 2012 Demographics: Profile of the Military Community, a .pdf file: http://www.militaryonesource.mil/12038/MOS/Reports/2012_Demographics_Report.pdf
- Better for Less Improving Public Sector Performance on a Tight Budget, McKinsey & Company
- FedBizOps is a US Federal Business Opportunities search engine for currently over 22,000 active business opportunities with the federal government. (See also USA.gov website for careers in US Government.)
ABOUT THE AUTHOR
Jose Arrieta is responsible for effectively implementing the Small Business Act in Treasury's procurement program. He and staff assists, counsels and advises small business firms, small disadvantaged business firms, HUBZone small business firms, women-owned small business firms, veteran owned small business firms, and service disabled veteran owned small business firms on procedures for contracting with the Department. This office also publishes additional informational literature on Treasury's procurement opportunities.
The future for UK public sector IT procurement and how to stay ahead
“Value for money” focus triggers big changes
Is your business involved with UK public sector procurement? If so, you'll already be well aware of big “value for money” changes driven by the need to make significant savings - £15 billion in the current fiscal year1 – and also in response to recent high profile fraud investigations involving members of a Ministry of Justice sub-contractor2.
For the IT sector the recently published Government Digital Service (GDS) Design Principles3 describe the new UK procurement landscape. This article looks at what these changes mean and future implications. The changes may provide clues for how suppliers can adapt IT solutions to meet clients' ongoing expectations.
Ten principles that affect IT
The Government's GDS Design Principles support the “value for money” drive to go digital where there is a clear cost benefit and improved service to end users. It involves
- Compliance with 26 “Digital by Default” service standard criteria4, ranging from understanding user needs to testing the service with the minister responsible for it, aimed at creating simple and effective digital services of a consistently high quality that can be efficiently maintained.
- Alignment with the ten new GDS Design Principles3, set out below:
- Start with the end users' needs - based around the functional and non-functional requirements of the actual users, which may not be the individuals directly involved in the procurement process.
- Create a core offering once and share it - consider if the solution is being provided elsewhere and can be linked into or whether a developed solution can be used elsewhere to better leverage a solution. For example, utilizing an application programing interface (API) or using a room and desk booking tool across several departments.
- Take advantage of existing data when designing a solution - rather than users having to adjust to a system designed in isolation, use available user behaviour to shape the solution. For example, gathering information of how users use existing websites and mobile devices.
- Produce quality systems that deliver simple and convenient services to end users – this may result in a more complex system design and build to result in a better user experience.
- Develop solutions iteratively – begin small and build the solution, involving users, into an alpha, beta and full release. This approach reduces the risk of major failures and allows flexibility for user requirement changes during the development lifecycle.
- Solution designs need to accommodate all current and potential users – consider users that may need to develop basic IT skills and require more support than the average user. This is especially relevant to IT solutions for the general public.
- Appreciate the end user's context – consider all user scenarios in the design. For example, could users access the service in a public area such as a library or café as well as an office or private residence?
- Design a digital service – the service may start with a website interaction and could lead to a phone call or an interaction at a physical government building, such as a postal office.
- New services need to be consistent with existing digital services – the government has an extensive portfolio of digital services and it is important users can interact with them in a familiar and efficient manner.
- Share knowledge and program code for a common benefit – this relates to attaining a high level of openness among all stakeholders. Examples include shared program code, ideas, lessons learned, and performance feedback.
Collaboration key to agile approach
The GDS design principles highlight the government's aspiration for more solutions to be developed through an agile approach. This requires a more collaborative approach with end users closely aligned to the end users' needs. This approach focuses on creating a minimum viable product to realize priority benefits to end users at an earlier stage by comparing them to a more traditional method. The principles also promote solutions designed to be re-usable and in the government's long term interests.
- Using IT Lean thinking – this results from combining ITIL (IT Infrastructure Library) practices, being established practices for IT service management aligning IT services to business needs, agile software development and a culture focused on sustained continuous improvement5;
- Creating a more competitive environment and removing exit barriers – Creating and evolving G-Cloud6 (a UK Government initiated procurement framework to deliver computing based capability) and Government Digital Services frameworks have led to standardized solution offerings involving established rate cards for pre-defined roles. This has led to greater transparency of supplier solution offerings that can be procured more quickly through framework call-offs, and has led to re-procurements of multiple IT services provided by single incumbent suppliers being split up by service groupings for shorter contract terms. This reduces the need for, and cost of, activities such as benchmarking exercises. Another benefit to the government of the framework based approach to contracting is to retain IP ownership of developed solutions, encourage the use of open-source7, and standardize fundamental terms and conditions, for example relating to termination for convenience and limit of liability. Another action to level the playing field has resulted in the government setting a target to increase the level of government spending with small and medium-sized enterprises (SMEs) from 6.5% in 2010 to 25% by 20158.
- Simplifying and delegating processes – a recent example is the replacement of the Government Protective Marking Scheme with the Government Security Classification Policy that has resulted in suppliers now self-asserting their services rather than having to seek Pan Government Accreditation.
Beyond cost cutting - more effective services for end users
- Emphasizing what makes a direct difference to end users. This means a more commoditized approach to services determined by end users to be of lesser importance to them and a re-balancing of effort and cost towards services that end users consider to be critical to them;
- Using a more open and collaborative approach – GDS design principles, Lean Thinking and effective management of service groupings necessitate a collaborative focused approach between key stakeholders. This is likely to increase the requirement for collaborative agreements. Sharing knowledge where suppliers have extensive expertise can also be further leveraged to add value;
- Supporting “Bring your own device” (BYOD) policies – suppliers need to adapt services to meet end user requirements, including system accessibility across devices that span operating system platforms. The increasing need for IT platform agnostic solutions requires suppliers to manage increasingly more complex IT system design, build, maintenance and security compliance challenges;
- Using a new approach to assessing suppliers – Some government clients evaluate and rank their largest suppliers (by revenue spend), on a regular basis and make the results available to the assessed suppliers;
- Using beneficial cross-sector solutions – the government has embraced solutions that benefit users across sectors. The UK justice sector's Common Platform Programme is a current example of an IT platform and digital data store solution that is intended to provide unified benefits to Crown Prosecution Service and HM Courts and Tribunal Service system users.
Transparent accountability of what is provided and charged, and more
There is nothing new in the expectation that suppliers produce accurate information on a periodic basis of what has been delivered and charged which is reviewed and signed off by the client. The challenge is to go a step further to produce comprehensive and value adding reports in an efficient and standardised way that can be easily adapted over time to remain aligned to service and end user requirement changes.
Framework Agreements9 may reduce the need for some financial checks and protections such as open book accounting, cost certificates and associated gain share arrangements, although the requirement for such activities remain for non-framework based contracts.
It will affect you!
Describing the new IT procurement landscape above reveals ways you can stay ahead, take advantage of opportunities to do so and become more aware of likely future changes in government IT procurement. Whatever happens will affect you.
9. A framework agreement is an agreement or other arrangement between one or more contracting authorities and one or more economic operators which establishes the terms (in particular as to price and, where appropriate, quantity) under which the economic operator will enter into one or more contracts with a contracting authority in the period during which the framework agreement applies. (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/62063/ogc-guidance-framework-agreements-sept08.pdf)
ABOUT THE AUTHOR
Ross Vart (BSc, MBA (Henley), CCME), has over 17 years IT industry experience and takes a pro-active approach to seek out current and future changes in the environment to realize mutual benefits for key stakeholders.
Seven strategies to help you stay out of court
No law exists that says “do not manage a contract badly.” Nevertheless, you can use a variety of legal principles to punish bad contract management. In Australia, those legal principles include good faith, unconscionable conduct and misleading or deceptive conduct.
If you manage your contract badly you are more likely to find yourself in litigation. What's more, you may find you are not able to rely on contractual terms that purport to protect you from liability, or unfairly allocate risk to the other party.
Although these legal principles form part of Australian law, the same could apply to principles in other jurisdictions that require commercial parties to act in accordance with basic standards of behaviour – such as honesty, accuracy, diligence or fair dealing. Moreover, the underlying principles of good contract management apply across jurisdictions.
When parties' risks conflict
Commercial parties can use various contractual measures to allocate or transfer risk. These include liquidated damages and contractual indemnities. However, this can give rise to two problems.
The first problem is that the risk allocation means the parties' respective incentives are not aligned. If so, the contract will not work well from a practical perspective. As an example, consider a construction project that requires the construction company to complete the project by a due date or pay liquidated damages for every day completion is delayed. However, the client must pay the construction company on a time and materials basis.
In this case, the construction company has the risk on delay, but the client has the risk on cost. The construction company will try to complete the project quickly, whatever the cost. It might use materials that are ten times more expensive because they are available a few days earlier – and the client must foot the bill. In all likelihood, the parties will end up in dispute.
Terms may not stand up in court
The second problem arises at this point: Even if the contract says a particular risk is allocated in a particular way, will that really stand up in court? In the construction example above, the client might claim that, by choosing the expensive materials, the construction company had:
- breached a duty of good faith;
- engaged in unconscionable conduct; or
- engaged in misleading or deceptive conduct by failing to make clear the likely costs or how materials would be selected.
If these types of claims are made, the defendant may not be able to rely on the terms of the contract!
Contracts must now do so much more …
At this point, it is worth noting that contract law is a human invention that has arisen in its modern form over about the last 200 years.1 It is a tool to facilitate transactions. Like every tool, it has its purpose and its limitations.
Contract law plays a vital role in facilitating commercial transactions. However, its current use now extends well beyond simple purchases of goods or services. Much commercial activity is now conducted through outsourcing rather than direct employment. Private construction companies and their subcontractors deliver major infrastructure projects through “public private partnerships”. Instead of employing someone to clean an office, for example, a business can now engage a cleaning company, which may in turn engage individual cleaners as franchisees.
As a result, contracts have become increasing complex. Contracts now cover situations where, instead of a one-off exchange of goods or services for money, the parties enter into a long-term relationship in which they require flexibility to deal with matters that arise over time, and their obligations are to some extent open-ended. This is sometimes described as a relational contract. It does not always fit well with the traditional model of contract, under which all of the parties' obligations are set precisely in stone the moment the contract is entered into.
Increased use of contracts and outsourcing has also meant many individuals are no longer employees and have lost the legal protections of employment law – placing an increased burden on contract law to ensure fairness.
Good faith – express or implied?
Good faith is a controversial topic in Australian contract law. Lower courts and commentators argue whether it is an implied term in all contracts. The High Court of Australia has not settled the issue. Courts have, however, accepted that good faith applies in a number of situations.
The first situation is where there is an express duty of good faith. This means the parties have included in their contract a term that they will act towards each other in good faith. This might be the case, for example, in a franchise agreement, a dealer-distributorship or other form of relational contract. Alternatively, the parties might expressly agree to negotiate a matter in good faith.
The following are situations where a party has been held to be subject to an implied duty of good faith:
- where one party exercises a power or discretion afforded to that party under the contract, such as a right to terminate for convenience (without cause);
- where one party is evaluating tenders, in which case the duty ensures transparency, consistency and fairness;
- where one party is pursuing an ulterior motive, such as by secretly undermining the benefit to the other party of the contract.
“Unconscionable conduct” protects small businesses
Historically, the doctrine of unconscionable conduct has applied where one party exploits another party who has a special disability or vulnerability. That disability or vulnerability might be illness, mental infirmity, illiteracy, etc. The doctrine protects people who, for one reason or another, are unable to look after their own interests.
Parliament and the courts have, however, gradually expanded the application of unconscionable conduct laws to protect small businesses where they are subject to unfair treatment by big businesses. Even where small businesses are able to appreciate what is in their commercial interests, they might be placed in a situation where a stronger party:
- has superior bargaining power;
- imposes contractual terms that are not reasonably necessary to protect the interests of the stronger party;
- applies undue pressure;
- uses unfair tactics; or
- offers terms less favourable than the terms offered by others in the market.
These types of matters are specified in the legislation. Recent case law explains that the ultimate question is whether the conduct is contrary to good conscience - and we judge that by reference to the norms of society.2
These issues are still playing out before the courts, and will generate significant litigation for some time to come.
Misrepresentation counts as deception
In Australia, a legal prohibition exists against engaging in conduct, in trade or in commerce that is misleading or deceptive, or likely to mislead or deceive.3 It applies where one party makes some form of express or implied misrepresentation. If another person relies on that misrepresentation and suffers loss as a result, that person can claim compensation from the person who made the misrepresentation.
The prohibition on misleading or deceptive conduct is a very broad law because, as a plaintiff, you don't need to prove that the defendant intended to deceive anyone. What matters is whether the defendant made a representation and whether it was accurate or not.
Whether something is misleading or deceptive is judged by the overall or dominant impression. Disclaimers and caveats in contracts may not be sufficient to prevent the dominant impression from being misleading. Further, in Australia it is not possible to contract out of the misleading or deceptive conduct laws.
Misleading or deceptive conduct claims are very common in Australian courts, including in cases regarding construction projects that have gone badly.
Strategies to avoid disputes
The legal principles discussed above suggest the following strategies to stay out of legal disputes:
First, pick your counterparty carefully. Only enter into a relational contract with someone who understands the principles of good contract management and who you are confident will manage the contract well.
Second, in negotiating and drafting the contract, make sure you get the scope of works right. None of the legal principles discussed above give any excuse not to. To the contrary, they mean you need to be even more careful. Spell out clearly the parties' respective roles. A court is unlikely to interfere with such fundamental matters. The difficulty arises when the contract says that one party will do something, but the associated risk is allocated to the other party.
Third, think carefully about the incentives created for each party: are they aligned? The construction example given earlier shows that liquidated damages do not always lead to a good outcome for the party those liquidated damages are intended to protect.
Fourth, include an effective change management process. Bad contract design allows a contractor to quote very competitively on a project, knowing he or she will be able to charge higher margins on the inevitable variations. This even gives the contractor an incentive to make variations necessary.
Fifth, use contract recitals to explain what the project is about and use plain language in drafting as far as possible. Remember that one day you may need the contract to be intelligible to a non-technical person, such as a judge.
Sixth, in implementing and managing the contract, don't try to exploit or mislead the other party. Make sure you can demonstrate you have communicated clearly and transparently, and you have a reasonable basis for your statements and actions.
Seventh, even if you think the contract puts the risk on the other party, do try to get the project right. A successful project is much less likely to end in litigation than an unsuccessful project. Remember litigation is uncertain, risk allocation is not always effective and one party is rarely blameless, particularly in a complex project.
Is bad contract management illegal?
Again, there is no law against mismanaging contracts. Nevertheless, as described above, you can use a variety of legal principles such as good faith, unconscionable conduct and misleading or deceptive conduct to punish bad contract management.
The express terms of a contract remain vital. Sometimes bad contract management will breach an express term, such as an express obligation to act in good faith or a mandatory change management process. However, even when no express term is breached, courts are increasingly prepared to find that bad contract management breaches an overarching legal principle. This is particularly so when there is a lack of fairness, honesty, reasonableness, transparency and accuracy, or if there is sharp practice, exploitation or high-handedness.
So good contract management is essential if you want to stay out of court. I can't promise you will avoid all legal disputes but, if you have managed your contract well, you will have a better case.
And it is worth remembering that, if you manage your contract badly, you are more likely to find yourself in litigation, and may not be able to rely on contractual terms that purport to protect you from liability, or unfairly allocate risk to the other party.
- Morton J. Horwitz, “The Historical Foundations of Modern Contract Law” (1974) 87 Harvard Law Review 917.
- ACCC v Lux Distributors Pty Ltd  FCAFC 90.
- Section 18 of the Australian Consumer Law, which is a schedule to the Competition and Consumer Act 2010 (Cth). The prohibition was previously in s 52 of the Trade Practices Act 1974 (Cth).
About the author
Matthew Lees BSc, LLB (Hons), LLM is a commercial lawyer and a partner of the firm Arnold Bloch Leibler, based in Melbourne, Australia. He advises clients on matters involving competition and consumer law, intellectual property and contract law. This article is based on an IACCM Ask the Expert Webinar presented on 12 September 2014.
Avoiding collaboration disputes - a strategy that works
If you have never been in a dispute with another company, just spend some time in the construction industry and you will learn just how problematic it can be. Notoriously associated with an adversarial culture that breeds claims and destructive conflict, the construction industry has long promoted collaboration as the best way to avoid or manage disputes. It's also seen as a powerful way of adding value by driving out dissatisfaction and inefficiencies within the industry.
These guidelines will help
As part of an extensive research project I recently reviewed over a hundred academic papers and conducted several interviews with participants based in the UK construction industry. I discovered that the most effective practices for avoiding and/or managing disputes could be categorised into a framework under the headings “People,” “Environment” and “Process” - better known as the PEP framework. PEP can work well for all industries as a checklist to help avoid some of the pitfalls that have led to disputes in construction.
Concerning behavior, commitment, communication and empowerment.
Behavior: Strong interpersonal relationships are essential in any collaboration, and will help resolve any difficult issues that could lead to disputes if not managed effectively. Established norms and values can get in the way of behaviours needed for successful collaboration, and can also be a source of disputes.
Answers to my research interview questions varied on how to achieve the “right” collaborative behaviors. Some spoke of major benefits gained by co-locating critical parts of the supply chain, and retaining a core team to ensure knowledge is shared from project to project. Others suggested conducting workshops for personnel across the entire supply chain to ensure the collaborative contract is fully understood by all parties, as well as briefings and team building activities.
Suppliers and customers are each responsible for ensuring their staff exhibit the right “fit” for collaborating, and their management should not hesitate to remove anyone whose attitude does not support collaborative behaviour and should try to remodel relationships when collaborating so that collaboration teams are more open, less managerial, and less hierarchical.
Senior management commitment is key to collaboration to generate and sustain a collaborative approach - and ensure collaborators do not feel threatened. Although not directly related to disputes per se, unless employees feel comfortable in the collaborative environment, they will not develop the correct behaviors.
It's important that senior management commitment to collaboration, and decisions made, flow down and are clearly communicated throughout each organization, to avoid any mismatch of communication in the supply chain which could potentially become a source of dispute.
Communication must be open and honest. This is essential to build strong relationships between the collaborating parties, so that issues can be raised and discussed openly, and any issues resolved in a collaborative rather than adversarial way.
During our research interviews, respondents suggested the best way to communicate was to have the collaboration team jointly produce a newsletter for the entire collaboration. They also thought it important to make sure, when interviewing, that senior projects people have good communication skills, and can communicate openly and easily down and up in terms of seniority. Other ideas included ensuring the correct formalities at meetings.
Empowerment: Effective collaboration can also empower decisions to be made at the lowest level possible within a project, aiding quick decision making and avoiding unnecessary delays due to excessive bureaucracy that can be a source of dispute.
Concerning the physical flow of information and cultural aspects of collaboration:
Integrate the supply chain: Fragmented supply chains - common in the construction industry - can clog the flow down of information and decision-making, leading to miscommunication among contractors and creating issues with planning and control. Integrating the supply chain seeks to address these fragmented supply chain issues, helping to avoid conflicts and building mutual appreciation and understanding of all parties' requirements to achieve mutually acceptable solutions.
Cultural aspects of collaboration: A “no-blame” approach is another important trait of successful collaboration, where the aim is to develop a culture where issues are resolved mutually, promptly, and on a no-fault basis with the ultimate aim of achieving win-win solutions.
In the construction industry, partners who may stick together over the long term focus on developing a common culture, taking forward shared experiences so that it becomes centered on continuous improvement. However this approach may not be for everyone, so would need serious consideration before being incorporated into non-construction based projects.
Concerning tools and techniques, alignment of goals, risk sharing, education and training, and making contracts easier to understand.
Tools and techniques are numerous and can help reduce the number of disputes. Examples include:
- Implementing collaboration policies, systems and practices to stimulate and maintain collaboration;
- Due diligence of suppliers to ensure “cultural fit” for collaboration.
- Incentive schemes to drive the preferred forms of behavior;
- Relational maturity and contracting models (such as those proposed by IACCM);
- Collaboration charters outlining the formal collaboration strategy (essentially detailing the working relationship between the parties);
- Seminars on the correct administration of collaboration contracts;
- Regular collaboration focused meetings;
- Collaboration facilitators and teambuilding;
- Formal workshops;
- Brainstorming sessions and open discussions aimed at achieving creative solutions; and
- Audits in lieu of supervision.
You will need to consider how these apply within your industry, the cost benefit and which party will bear the cost, whether or not to charge this at project or individual level, and whether any incentives to project stakeholders are monetary or comprise other benefits.
Education and training at a high level is important within construction, as in all industries, to improve attitudes and overall management skills for collaboration. There should be mandatory intensive induction and training, to raise awareness of the need for senior management commitment and to improve knowledge of supply chain management concepts.
Creating mutual objectives and aligning goals: As is also the case in all industries, shedding self interest in favour of the mutual benefit and interest of the collaborating parties is critical if disputes are to be avoided. Harmonization of interests and alignment of goals and objectives are also powerful ways to help guide the collaborating relationship.
Risk sharing is an important dispute prevention method in construction, as it is across all industries. With the recent move away from traditional fixed price contracts to more equitable sharing of risk, the collaborating parties work together to manage risk in the most effective way. Risks are assigned to the team members most suited to managing that risk. Financial incentives may be offered to contractors via target-price contracts. Whether such changes are applicable to you will depend on the environment you work in and whether risk management is causing you problems.
Include visuals to make contracts easier to understand. This can reduce the likelihood of misunderstandings which could ultimately end in a dispute, as confirmed by interviewees whose experience of visualisation in contracts has been very positive. Visuals may include icons, pie charts, flow charts, tables, timelines, maps, photographs, colour coding, and bar charts.
CONCLUSION - Interpreting PEP guidelines
In collaboration there is no one-size-fits-all set of guidelines, but it's still essential to have written guidelines for handling any issues surrounding disputes or conflict that may occur in your organization. Obviously these are too wide-ranging and extensive to cover in one article, so I suggest you consider incorporating whatever you find useful from the PEP guidelines above, and tailor the principles to fit your specific needs.
ABOUT THE AUTHOR
Robert Lydon is a Commercial Manager at an Airbus (Defence & Space) subsidiary (based in Saudi Arabia). An IACCM Certified Contract Management Expert (CCME), Robert has over ten years commercial and contracting experience working in both the UK and the middle-east in industries as diverse as aerospace, IT, construction, and telecoms. He has also this year completed the MSc International Commercial and Contract Management from the University of Manchester (United Kingdom), completing his dissertation and latter studies on disputes in collaborating environments in the UK construction industry.
Benchmarking surveys can validate your business case
After completing the surveys you can immediately analyze your current performance and make a business case for justifying your investments and improvements. Surveys are as follows. Closing date is March 15.
- Performance measurements: This survey looks at headcount, contract complexity, measurements used to gauge both individual and functional performance and a range of efficiency indicators (e.g. cycle times, number of contracts per professional etc.)
- Primary areas of activity: This survey looks at scope of role, where responsibilities are performed, time allocated to different activities and use of outsourced or offshore services. www.iaccm.com/services/research/survey/?id=85
- Value proposition: The survey you are about to complete focuses on the value that you deliver to the business. It looks at reporting line, objectives, challenges you are facing, the use of automation and skills. www.surveymonkey.com/s/BValueProposition2014?
Those who complete the survey may attend all five of IACCM's upcoming thought leadership webinars to further discuss the topics prior to publication. In addition, you will receive the results a full 60 days prior to general release. This will culminate in the research being showcased at the European Forum 2015.
Schedule of events in support of this research
(events limited to survey participants)
- 17 February – Thought Leadership Webinar hosted by Tim Cummins, CEO
- 17 March – Thought Leadership Webinar hosted by Tim Cummins, CEO
- 13 April - Advance copies of research released to survey participants
- 28 April – Thought Leadership Webinar on research findings
- 15 – 17 June – Research showcased and released to general membership at European Forum
This benchmarking report has previously generated approximately 70 pages of very valuable data to support your endeavors within your organization.
Please take the time to complete and participate in our series of events – it's a big part of your IACCM membership benefit package. But more than that, benchmarking is critical to your business. In fact, executives are increasingly expecting every business function to offer ready access to reliable external benchmarks - and in the field of contract and commercial management, IACCM is the only reliable source.
Expand your knowledge and increase your skills with two IACCM programs
- Oil and Gas Contracting Practice course
Time commitment 35-40 hours, one-year access
As a CM professional in the Oil and Gas sector, you face unique challenges and opportunities like dealing with the ripple effects of Macondo, knock-for-knock indemnities, local content requirements, and National Oil Companies (NOCs). By taking the O&G Contracting in Practice course, you will discover effective ways to handle many issues like these.
The course will take you through a series of brief, on-line learning modules. Complete with useful tools, templates, articles and case studies, it gives you the basics plus on-line message boards to interact with practitioners who face situations similar to yours.
This course complements the IACCM contract management (CCM) learning and certification programs with specialized content for practitioners in the O&G sector. Successfully completing the course counts towards the Continuing Professional Development (CPD) standards for IACCM Certified Professionals.
You will get one year of access to the program.
You will invest about one hour per module representing a thirty-five to forty-hour commitment across the entire program.
Interested? Click on IACCM's Oil and Gas learning opportunity for more information.
- Supplier Relationship Management (SRM) Program
Time commitment flexible, one year access
This pioneering program will give you the skills and knowledge you need to implement SRM practices effectively within your organization. Equally suitable for individuals or teams of up to six, completing it leads to individual certification and IACCM's prestigious 'License to Practise SRM'.
You can learn at your own pace. Typically it takes up to four months to complete but you will have up to 12 months to complete the program.
Participants will learn how to:
- Prepare convincing SRM business cases
- Design an effective governance structure
- Create and implement a communications plan
- Engage key stakeholders and supplier executives
- Develop metrics that drive successful behaviors
- Encourage positive approaches to change
- Collaborate with strategic partners
- Devise appropriate contractual arrangements
- Track and report SRM benefits
- Resolve conflicts and issues collaboratively
The course typically takes four months to complete.
For more information, click on IACCM's SRM program
Learning is an investment – invest in yourself and your future.
New mentoring program launches for IACCM members
Wherever you are on the career ladder – a newcomer or established commercial or contracting professional moving to a different organization - mentoring can help you achieve your ambitions and potential.
In her new role as leader of the IACCM Mentoring Community of Interest, Lee will be trying to “fill the gap” where possible for members who would like to find a mentor within IACCM. She will be actively seeking out IACCM members with the skills, talent, and dedication necessary to take on a mentoring role to match the requests of those seeking this support.
“As mobility in the marketplace increases, contracting professionals will often move into new organizations with different cultural norms. Pairing with an experienced mentor can help one navigate the challenges of that new culture to become a successful contributor,” said Lee.
In a recent interview Lee talked about the big benefits of mentoring to all parties - what's involved and what's needed – and shared her own early experience of being a mentee.
'Read the contract, read the contract and read the contract'
“Early in my own contracting career, my mentor provided invaluable experience and I owe much of my success to him. His first words were, 'Read the contract, read the contract, and read the contract.' From that point on, each time I was assigned to a new account, I would diligently read the contract to ensure I knew it inside and out.
“My mentor was very patient in answering every question and guiding me through the complex labyrinth of the organization. At every turn, he was ready to listen, advise and guide me in a straightforward, yet meaningful way.
As a result of benefitting from his mentorship over time I have been able to provide that same mentorship to several mentees. It is a very rewarding experience, and one that is extremely important to those involved, our profession and every organization.”
Why is mentoring so important?
Mentoring creates a win-win relationship in which the benefits flow, not just to the mentees, but also to organizations that foster these relationships. Mentoring is a powerful tool that can help foster the knowledge base and skills, advancing the profession.
A good mentor-mentee relationship is a two way street - if you want a good relationship with your mentor, become a good mentee. You need a genuine interest in your mentor and a willingness to do what it takes to be successful.
Usually the mentor and mentee agree on the time commitment for the relationship during the first meeting. A common arrangement is to meet once every two weeks for a one-hour session to discuss challenges, successes, failures, and strategies for moving forward. The mentor will provide advice for those areas requested by the mentee.
What makes a “good” mentor?
Good mentors are first and foremost good role models who empower their mentees to develop their own strengths, beliefs, and personal attributes. They remember what it was like starting out in the field and accept where their mentees are in their professional development, providing encouragement that will foster professional development and a feeling of accomplishment in what they have learned.
Good mentors do not take the mentoring relationship lightly and understand that good mentoring requires time and commitment. They have excellent communication skills and can adjust their way of communicating to suit the personality style of each mentee.
A good mentor:
- Takes a personal interest in the mentoring relationship
Good mentors feel invested in the success of the mentee. This requires someone who is knowledgeable, compassionate and has the attributes of a good teacher or trainer. A good mentor appreciates the ongoing effort of the mentee and empowers him/her through positive feedback and reinforcement.
- Motivates others by setting a good example
A good mentor consistently sets a good example by showing how his/her personal habits are reflected by personal and professional goals and overall personal success.
- Provides guidance and constructive feedback
One of the key responsibilities of a good mentor is to provide guidance and constructive feedback to their mentee. Identifying strengths and weaknesses and learning how to apply the strengths and overcome the weaknesses to be successful in the field is vital for the mentee's growth and development.
- Is respected by colleagues and employees at all levels of the organization
Mentees want to follow someone who is well respected by colleagues and co-workers and whose contribution in the field is appreciated.
- Exhibits enthusiasm in the field
Mentees want to feel that the time and energy they spend learning will be rewarded and ultimately provide them with career satisfaction. Mentors are in a position to convey their passion for the profession and the importance of life-long learning.
- Values ongoing learning and growth
Good mentors are committed to self-development and open to experimenting and learning practices that are new to the field. They read (and may write) articles on subjects where they have developed expertise. They may choose to teach or attend classes to further develop their knowledge and skills. They enjoy attending workshops and conferences to remain active and engaged in the profession.
As a mentee, reading pertinent literature available in the field and putting suggestions and recommendations into practice is a good way to show your mentor that you take your career and responsibilities seriously and are worthy of the mentor's energies.
Mentoring and the way forward …
Lee sees contract and commercial management as vital to organizational success – and mentoring as a way to help individuals within the profession be as effective as possible. She will be communicating mentoring best practices and will be looking for ways to develop awareness of the value of mentoring throughout the IACCM global community.
ABOUT THE AUTHOR
Before Lee Roszczynski joined Deloitte in 2013, she worked in contract management and negotiations in both the public and private sectors. She has supported projects with the State of Indiana, Salt Lake County Economic Development, IBM, and Unisys. In addition to working at Deloitte Consulting, Lee is currently writing her dissertation to complete an advanced degree in Mediation and Conflict Resolution at the University of the Rockies in Denver, Colorado. Her volunteer activities include mentoring, psychological counseling, small business advisor, economic development, and on-going personal development.
They're making big differences! Latest career moves
In August Steve joined Atos IT Solutions and Services Inc. as a Senior Contract Manager in Richardson, Texas. JD certified member of IACCM and currently pursuing an MBA. Steve will be helping to develop a Contract Management function within North America as the French based Atos continues to expand its business. Steve has extensive commercial contracts experience in a wide variety of industries including Technology Hardware, Software and Services; Systems Integration, Outsourcing, Environmental Remediation, Public Sector and Financial Services. Specialties include substantial skills in contract drafting and analysis, review and negotiation, team leadership, contract and subcontract management, negotiation and dispute resolution.
After spending over 10 years in the defense industry supporting both US Government and international commercial contracts, Casey Baker recently accepted a position as a Senior Manager with Capgemini. In his new role, Casey serves as the sole provider of commercial management to all sales, account, and delivery teams within the Financial Services Global Business Unit in North America. His responsibilities require direct negotiations of proposals and change orders with clients as well as providing sound business advice internally throughout the delivery of various engagements."
Christophe Cailleaud was appointed as Head of Global Biologics Supply Chain and Partnership Management in September 2014, located in the Boston area. In this role he will be responsible for setting up and managing the external partnership management function as well as coordinating the strategic end-to-end supply chain activities across the Biologics divisions. Christophe has over 25 years experience in various procurement and strategic sourcing positions in electronic consumer goods, automotive, and biotechnology/pharmaceutical industries. His career history includes Head of North America Procurement for Sanofi in February 2010 and also Regional Procurement Project Leader for Sanofi Latin America in 2011. In his nine years with Sanofi Pasteur from 2001 to 2009, based in Lyon - France, he set up and developed the Corporate Purchasing function. Prior to his tenure at Sanofi Pasteur, he was Purchasing Director in the Electronic Division of Valeo Group in France, and Europe Purchasing Product Manager at Thomson Multimedia based in Germany. Christophe graduated from the ISCP (Institut Superieur du Commerce de Paris) Business School with a major in Finance/Controlling.
Frank Chiu joined Cognizant Technology Solutions in June of 2014 to expand and lead the Commercial practice. Frank has a successful record of improving financial results & performance by creating and optimizing commercial practices and business processes across international & domestic environments. He has nearly 30 years of customer-facing contract structuring, negotiation and financial management experience of large and complex IT and services agreements. In addition to his deal work, Frank has created from scratch, re-engineered and led multiple global commercial practices at Orange Business Services, SITA, Cbeyond and First Data. Frank is a graduate of Florida State University and resides in Atlanta, Georgia, USA.
In July 2014 Jeremy accepted the position of Commercial Director with Genesys Aerosystems in Mineral Wells, Texas. Jeremy has extensive experience in both governmental and commercial contracting including both domestic and international. In his current role, Jeremy is the company executive for all export, contract and commercial operations at Genesys. Prior to Genesys, Jeremy has held executive roles in Contracts and Commercial Management within Fortune 500 firms.
In May 2014, Jay Nield was appointed Legal Director with Hewlett-Packard Company in Plano, Texas, supporting HP Enterprise Services (HP ES) where he also serves as the HP ES Lead Counsel for both the US financial services sector and all Canadian business. In addition to managing a team of attorneys and contract negotiators, Jay's responsibilities include negotiating high value/complex deals of a strategic nature, risk evaluation/mitigation, dispute resolution, escalations and internal deal/corporate governance activities. Jay began his career with HP in London at the start of 2010 before relocating to Plano three years later. Prior to HP, Jay worked in private practice and held positions within a number of blue-chip technology companies including British Telecom, Lucent Technologies, Fujitsu Consulting and Fujitsu Services where he was Head of Legal for Continental Europe. He is dual-qualified to practice in England & Wales as well as the United States (NY). He holds an LL.B (Hons) and an LL.M (The Queen's University of Belfast).”
Torie Orton recently joined Computer Sciences Corporation (CSC) as an Advisor. As an attorney, Torie provides senior contracting support to a variety of CSC customers. Prior to this position, Torie was a Senior Contracts Manager at Zodiac Aerospace.
Jeffrey Rockett, JD, CPCM has joined Ellumen, Inc. an Arlington VA based provider of IT services and solutions to federal and commercial health enterprises. In the Sr. Contract Manager role, Mr. Rockett provides a spectrum of legal and contract expertise across the burgeoning organization, ranked as a “Fastest Growing Company” in the Inc. 50/5000.
Stacia Roesler, formerly with IBM and Hewlett-Packard, is exiting retirement in January 2015 to accept a position as the Director of I.T. Contracts & Procurement with the State of Maryland, based in Annapolis, MD. Stacia brings with her over 30 years of experience within the IT industry in all phases of contracts and procurement. She most recently served as HP's Asia-Pacific Regional Manager for Enterprise Contracts. Stacia is a Certified Professional Contract Manager (CPCM) and Lifetime Fellow with the NCMA.
In February 2014 Emma accepted the Senior Commercial Manager appointment in the start-up EPC Construction team at Marubeni Europower, and in March 2015 she is moving into a permanent position as Senior Commercial Manager for global consultancy Turner and Townsend. Emma is an MCIPS qualified Senior Commercial Manager with international experience in client and contractor roles in energy, civil aviation, and marine businesses. Her background is in contract and international business law, and in the workplace she demonstrates an aptitude for managing existing and developing new international contractual relationships. She has introduced contract and commercial management focus and behaviours into several businesses, and has a track record of dealing with high value, complex commercial and construction issues at Marubeni, Vattenfall and Rolls-Royce.
In November 2014 Steve commenced a new role as a Senior Consultant with Blake Newport Associates. Steve has worked in a commercial/contract role for over 20 years and his career has involved various companies in the Pharmaceutical, Telecommunications, Aerospace and Defence Sectors. Steve has worked with various customers ranging from aircraft manufacturers such as Embraer, Bombardier and BAE through Tier 1 Systems Integrators such as CGI, Fujitsu and HP, to telecommunications providers such as Linx Telecommunications, and to domestic and international government agencies and departments. Steve has an MBA and is certified to expert level by IACCM in Contract Management.
Joined the Central Government Agency as a Commercial Manager in October 2014. Having trained as a lawyer in the UK, then discovered IT law and developed a substantial business focussed career. A unique mix of commercial, legal and procurement with over 10yrs experience of contracts, commercial, legal and business in IT and Outsourcing. Proven track record of cost management. Varied industry experience within Financial Services, Banking (at Lloyds Banking Group), Telecoms, Retail, FMCG, Travel and Central Government, generally specialising IT purchases from a range of suppliers and providers and has strong overlap to Supplier Relationship Management, Contract/Commercial Management and Procurement.
Rita joined Accenture in July 2014 as Contract Manager part of the UK&I Resources Contract Management Group and is currently managing a portfolio of clients. She specialises in outsourcing and system integration commercial IT contracts - both within framework and SIAM models. Following past experiences with EDS, HP and Atos her areas of industry expertise include insurance, transport, media and now energy utilities. Rita is IACCM certified and has worked in pre- and post-sales contract manager capacity. Although based in London, she travels to other client sites on a regular basis as well as leads an offshore support team in a virtual environment.
Paul joined Atos IT Services UK in June 2014 as a Contracts Manager responsible for providing a contracts management service to the Post Office and RMG accounts. Paul previously held roles with Capita IT Services and British Telecom.
Paul joined Capgemini in June 2014 as Risk Director where he is responsible for negotiating and winning complex Application Development & Management and also consulting service projects; applying best practice in risk management throughout the sales cycle and communication to the delivery team post-contract.
After a few years working as a Consultant Contract Manager to General Dynamics European Land Systems in Vienna, Niall joined Lockheed Martin UK in June 2014 as a Subcontract Programme Manager on UK Military Vehicle Programmes. He's expanding his experience in PM and Supply Chain relationships to add to his Contract/Commercial skills and experience. Most of his Contract and Commercial career to date has been in the UK, US and Worldwide Defence markets. Niall has a Bachelor's Degree in Mech. Eng from Bristol University and an MBA from Nottingham University.
Joined Xerox in Milan in December 2014 as Strategic Alliances and Marketing Director with the responsibility to lead and build strategic partnerships to grow Xerox's footprint in the Italian market and to identify new trends, challenges and business processes that can leverage Xerox core capabilities, that will position the company to increase the strategic relevance to the industry, and generate significant annuity-based profitable revenue.
Joined CSC in Paris in April 2014 as Senior Advisor – Global Contracts with the responsibility to lead highly complex contract & commercial presales activities across Europe. His prior focus will be to lead and coordinate all contractual & commercial negotiation activities in direct relation to clients, strategic partners, subcontractors and suppliers. Prior to this appointment, Bart was Director of Contracts, Negotiations and Partners with Bull (Belgium & Luxembourg), a Contracts Manager with Accenture in Belgium, and a Contracts Manager with Siemens, Belgium. Bart speaks fluent Dutch, French and English, and has legal qualifications in Belgium (Licentiate law) and a degree in law and Legal French from the University of Gent, Belgium.
In September 2014, Bryden joined Babcock International as a Commercial Officer in their Energy and Marine Technology division based in Rosyth and Plymouth. Babcock is the UK's leading engineering support services organisation with revenue of over £3.5bn in 2014 and an order book of circa £12 billion. In his role, Bryden will develop his Contract Management skills through IACCM training and in managing contracts in the defence, oil and renewable energy sectors. Bryden holds a Bachelor's Degree in Law and a Diploma in Legal Practice from the University of Edinburgh and has set his sights on a career in Commercial Contract Management.
Five new IACCM board members announced
- Ghislaine Gunge, Commercial & Contract Management Head, CSC
- Dan Mahlebashian, Global Director IME Purchasing Services and RTP Process, General Motors Corporation
- Violet Okpere, Group CP Discipline Excellence Manager, Shell Projects & Technology
- Nils Svanberg, Global Contracts & Services Manager, ConocoPhillips Company
- Pablo Zarra, Global Process Advisor, Contracting, Chevron
They join the existing board members:
- Lucy Bassli, Assistant General Counsel, GCO Manager, Microsoft
- Arne Byberg, Associate General Counsel, Hewlett-Packard Co
- Barbara Chomicka, Senior Project Manager, EC Harris LLP
- Kai Jacob, Process Manager and Head of Global CM Services, Legal Department Manager, SAP
- Andy Kerstan, Global Contracts Manager, Rio Tinto
- MC McBain, Vice-President Global Business Development, IBM
- Gianmaria Riccardi, Director, Strategic Alliances & Marketing, Xerox
- Margaret Smith, Executive Director, Contract Management and operations, Legal Senior Executive, Accenture
Trying to navigate your 'career lattice'? Contract and commercial management could be your ideal career choice!
We work hard to gain experience. Updating existing skills and developing new ones are essential for anyone looking to remain relevant in the ever-changing environment.
Shelby Olson, a highly-skilled senior leadership and career consultant, offered insights on current and developing job market trends and ways to proactively manage your career. Her suggestions make sense economically and are designed to be personally fulfilling.
She shared her perspectives with the IACCM Women's Networking Group in the webinar Navigating the Career Lattice: Managing Your Career in the New World of Work, which you can view via this link.
The “career lattice” is the process of gaining skills and broadening your competencies through various career opportunities. Unlike the “career ladder” it is not a single, direct career path that starts at entry level and moves through mid-management into senior levels and top positions in the business world. The reality today is more likely to be a “lattice” of experiences across various jobs and training opportunities with stops, starts and sideways moves to position one for the next level of career growth.
Careers in the current millennium share the following characteristics:
- people will continue to change jobs more frequently;
- organizations will continue to be reluctant to bring in full-time headcount;
- virtual work team arrangements are increasingly being set up on a project basis;
- the “free agency” phenomenon will accelerate; and
- workers will need to embrace lifelong learning and “up-skilling”.
“Free agency” – taking control
In particular, the free agency alternative enables people to take ownership of their professional futures by starting their own businesses, consulting operations, or contracting out their services. This has become increasing popular with more people taking responsibility for their own careers rather than relying on traditional employment pathways. It also offers options to businesses that need specific skills but hesitate to increase the number of employees in their operations.
Most importantly, everyone must continue to enhance and develop his or her skillsets. Complacency will not advance your career today and could undermine it if the work you do is eliminated and replaced by technology or migration of work to a lower cost geography. Up-skilling is not optional, it's mandatory if you want to remain relevant to the changing workforce demands of the fast-paced global environment.
Could C&CM be your ideal career choice?
So could contract and commercial management (C&CM) be an ideal choice as you navigate your “career lattice”?
C&CM professionals appreciate how diverse and demanding the field can be; the inherent variety is also its strength. Contracting professionals come from widely differing backgrounds - from legal, finance, project management, sales and elsewhere. The profession offers opportunities to those who are capable, flexible and can apply their skills to achieving business results.
Particularly in demand these days are the “softer skills” that are critically important when it comes to managing business relationships as well as negotiation – a potentially winning combination for those with a mature outlook.
Free agents are able to find work within the C&CM sector, supplementing the staff of large businesses or providing specialized skills for unique opportunities. Professionals with experience, insight and flexibility can make major advancements – whatever their background – when they demonstrate and deliver the value that the contract and commercial management roles have in winning business, securing profits and saving money.
To address the topic of up-skilling, you can obtain certification in a current area of expertise or a new career choice. As IACCM learning programs demonstrate, there are a variety of certification options available for the novice and the experienced commercial, contracting and procurement professionals.
C&CM is not without its challenges – which our article Finding your way to a career in contract management explores (CE January 2014).
Yes, it is daunting for newcomers to break into a career in C&CM. In our field as in all others, each job applicant must know the best practices, the trends, the industry, an organization's vision and mission, and be able to demonstrate that he or she is best suited for the position to deliver positive returns to the company for their investment.
Even experienced C&CM professionals find it increasingly difficult to identify their next role in the current economic climate. Most realize it is essential to expand their skillset with more training and varied experiences. In fact, many high-level management personnel use networking and professional mentoring to foster their careers and identify new opportunities. You should too.
So how will you take ownership of your future? What strategies will work best for you in examining a potential career or next “move”? These are very personal questions that deserve your attention. Some practical advice: don't lose sight of tomorrow while you are working today; be prepared to capitalize on new business trends; and create alternatives for your horizon that leverage your unique experiences, skills, passions and strengths. After all, this is your journey and you want to be happy and fulfilled as well as rewarded.
ABOUT THE AUTHOR
Roselle Harde is the Vice President, Learning & Development for the International Association for Contract and Commercial Management (IACCM). Roselle is responsible for providing the strategic direction of the IACCM learning and certification programs and ensuring that each program builds on or supports the IACCM mission.
Five critical risks - and why employers need top contract management skills
Three experts presented the webinar: Tiffany Kemp, founder and director of Devant Ltd, author and speaker; Richard Given, global head of HTS Legal, HSBC; and Tim Cummins, CEO of IACCM. They discussed the five growing risks that justify the need for an increasingly robust contract management competency in our workforces, summarized below.
- Growing dependence on third parties
Research shows the average company spends 70% of its revenue on external suppliers. This alarming volume of outsourcing is adding to the increasing reliance on third parties. Efficiently managing critical supply networks is key to successful results.
- Growing regulation
To ensure compliance, forward thinking contract management is even more essential in today's increasingly regulated environments.
- Growing internationalism
Cultural, linguistic and jurisdictional differences require greater discipline and better documentation; creating and managing contracts must be specifically fit for purpose.
- Growing executive demands
Top management expects contracting professionals to be more integrated with the business decision-making process. Better strategic contributions expected include stronger assessments based on facts (not opinions) and provable explanations of economic impact of various contracting models, terms and conditions and the like.
- Growing pressure for collaboration
Practitioners must recognize the interconnections and interdependencies of contracting relationships in today's environment. Unreasonable demands and adversarial relationships are costly, unacceptable and can derail performance. Suppliers must get successful results. Joint working, shared systems and greater transparency enable more proactive problem solving and lead to much better outcomes.
Want to know more? To listen to the webinar (available to IACCM members) click on Five reasons why contract management is becoming a critical competency. Find out how the profession is changing and why today's contract managers are expected to do more– and do it better.
ABOUT THE PRESENTERS
TIFFANY KEMP, Devant Ltd, UK
Professional speaker and author of the book Deal Makers - how intelligent use of contracts can help you sell more, and deliver better.
RICHARD GIVEN, Deputy General Counsel, HSBC, UK
Corporate commercial attorney with substantial in-house legal experience across all legal systems and all cultures.
TIM CUMMINS, CEO, IACCM
works with leading corporations, public and academic bodies, supporting executive awareness and understanding of the role that procurement, contracting and relationship management increasingly play in 21st century business performance and public policy.
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.