Contracting Excellence Magazine - Jan 2012
The Role Of Contract Management: Preparing For The Future
Many of the world’s most profitable companies invest very little in their contracting process, but that does not mean they lack a contracting strategy. Indeed, they have often chosen to operate with business systems and in markets where flexibility of commercial terms and offerings is not required, or can be managed by non-contractual means.
IBM in the 1980s, Microsoft in the 1990s, Apple today; each is an example of a company where market demand for world-beating products trumped the need for negotiation and commercial flexibility. Until recently, the pharmaceutical industry maintained high margins through product leadership and market controls that made rigor in contract negotiation appear of little importance. In all these cases, investments in contract management focused primarily on the administration of contracts and in the imposition of rules and procedures that prevented deviation from standard terms and conditions.
At the other end of the spectrum, consumer based industries such as retail may also view contracts as largely non-negotiable instruments. The inability of the consumer to dictate terms and conditions means that flexibility is needed only in the context of special promotions or deals; and in general, such industries are dealing with suppliers who also lack power to negotiate. Therefore contracts, to the extent they exist, are mostly standard forms and employees have little empowerment to agree variations to terms.
For these companies, ‘contracting strategy’ means having the ability to operate off standard terms of their choosing and avoiding the costs and risks inherent to negotiation and the management of non-standard agreements.
Between these two environments, the bulk of businesses need a more nuanced approach to the way they do business. However, the challenge for many is that they do not in fact have a contracting strategy, or the strategy they have is no longer aligned with business conditions and needs. This may be because they are still trying to impose standard terms in a market where competitive pressures demand a revised approach; or it may be that they are trying to operate with high levels of deal-based flexibility at a time when technology, regulation and cost pressures have combined to make such an approach unaffordable and vulnerable to unacceptable levels of performance risk. The financial services industry provides an extreme example of a business sector that failed to understand and manage its contracts. Others, in sectors as varied as outsourcing and engineering, are learning the hard way that commercial knowledge, supported by robust and consistent contract management discipline, is a necessity.
Misalignments of this sort result in ‘the contracting process’ being viewed by many as a source of complexity, frustration and delay. It becomes an inhibitor because, as business and market conditions change, contracts and the contracting process typically lag behind. And it is that lagging which results in a burden of excess costs and missed revenue, together with the potential for severe competitive exposure. Recent IACCM research suggests that, on average, corporations are losing the equivalent of 9.2% of annual revenue through weaknesses in their contracting process, being a combination of missed savings and cost reduction on the one hand, and lost revenue opportunities on the other.
The role of contract management is clear. It is to secure economic value; to provide a framework for the allocation and management of risk; and to oversee the performance of commitments that reflect a positive brand image.
It is within this context that IACCM advocates the need for a fresh approach to contracting, including the need to reconsider the purpose of the contract itself, and to develop a clear strategy that is capable of rapid adjustment to shifts in business and market conditions. In a new paper, ‘The Future of Contracting’, it will lay out the rationale for change and the steps that are required to turn the contracting process into a source of competitive advantage and economic value. Currently in the final stages of production, the paper will be issued in several weeks and discussed at a variety of forums, including its launch at the Ariba LIVE event in Las Vegas and the IACCM EMEA conference in London.
Contract & Commercial Management: Operational Guide
The Definitive Guide to Commercial Contracting
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The Operational Guide is a unique work, addressing contract and commercial principles on a worldwide basis, for both buy-side and sell-side practitioners. Invaluable for training, as a reference work, or simply to update your understanding of current practices, this is a volume that you really must own!
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The Value Of The Direct Customer Experience
I was not feeling very appreciated on my flight the other day. As I sat in my seat I wondered what happened to customer service in this country.
The first leg of my flight was on United, the second on Continental. The airlines are now merging. It will be interesting to see if any benefit emerges for the customer.
History is not on our side. While there are exceptions to every rule, the flying experience in this country is no longer exciting or pleasant.
Waiting to board the United flight, I saw employees ignoring passengers including parents with small children and the elderly. Talking in loud tones about their frustrations, saying unkind things about their company, they transmitted their dislike for their job and acted as if we were an irritation. They were clearly worn out and unhappy. Customer service was the last thing on their mind. At Continental, they were a bit more courteous but the plane was crowded, uncomfortable and there was only one beverage service on a 4+ hour flight. I wondered about the difference in their business goals so I logged on to their website and this is what I found:
United’s Corporate Responsibility: Making Lasting Connections, Every Action Counts. To improve the impact we have on the travel experience, on our communities and on the environment. We help drive tourism, generate business opportunities and contribute to economic growth and exports. Etc., etc., etc., not particularly inspiring or believable. Sounds like it was written by corporate communications rather than a true corporate goal.
Continental Airlines’ Corporate Commitment: Our Company is committed to being the airline customers want to fly, and the airline employees want to work for. We are dedicated to providing a level of service to our customers that makes us a leader in the airline industry. Our goal is to make every flight a positive experience for our customers. So, if the customer is happy everyone is happy. It’s certainly customer centric, but do you believe it? Do they practice it?!
The software business is not an ideal model of customer service either. While customer service was getting better for a while, with the shrinking pool of potential suppliers through mergers and acquisitions, it has clearly regressed.
The biggest complaint we hear is that the customers’ requirements are not being considered--when they meet with their sales representatives, it’s more about what they should buy instead of what their needs are. Many feel trapped in their current relationships (with few alternatives and massive costs to transition to an alternate supplier). Meanwhile, maintenance costs continue to rise to keep the supplier’s revenue pumping. In many cases, the customer is paying for a complex bundle with functionality they don’t really need nor asked for. In the worst case, if they buy a bundle and then decide to discontinue some part of that group, the supplier tries to renegotiate/adjust how maintenance is calculated to increase revenue. Is that good customer service? Is it reasonable? Is it even ethical? Maybe that’s for another blog….
When thinking about the customer experience, naturally Apple comes to mind. Jobs made computers sexy and intuitively easy to use; as a result people are willing to pay a high margin for Apple’s products. He wanted you to walk out of an Apple store happy. Based on my experience, he succeeded. He truly understood the customer experience. I wonder what the new CEO of United Airlines is working on? Cutting costs or enriching the customer experience, I hope it’s both.
So I got to thinking, how is the customer experience in your vendor management organization? Do you provide good customer service or do you “follow a procedure” at all times? Do you look at the quality and long-term benefit of a product/contract or do you buy from the lowest priced supplier? What attitude do you bring to your meetings with your customers? Do your customers look forward to working with you or do they do it grudgingly because they have to?
Ditka Reiner is the CEO and founder of Reiner Associates, Inc., a consultancy specializing in third-party contract negotiations and vendor management. She holds B.S. and M.A. degrees in education and psychology and has more than 20 years experience in information technology. Ditka’s IT experiences cover a range of specialties including application development, operation management and distributed and mainframe change management.
When Risk Paradigms Collide - The Dark Heart Of Our Troubled PPPs
When contracting companies analyse the risk of a public infrastructure project, they think first of the practical realities of the job, those factors that might impact on their ability to get the job done as planned.
When financiers analyse the risks of a public infrastructure project, they focus on the risk of creditor default. If they are far from the action (for example, through securitised arrangements), they may rely on others to assess the physical on-the-ground risks. If they are close to the action, their aim is to be “risk-free”— to pass off risk to the contracting entities that design, build and operate the infrastructure.
When investors analyse the risks of a public infrastructure project, they focus on risks to their returns. Like financiers, investors aim to be risk-free by passing off risk to contractors and, where this can’t be done, to limit their exposure. Some sophisticated investors in public infrastructure (especially those who package the deals) intend only to be there for the short term –as long as is needed to appear credible to the debt providers and ratings agencies they need to impress — and take their mark to market profits out early. Less sophisticated investors may rely entirely on ratings agencies (or fund managers) to determine whether or not to invest.
Of course, this is a significant oversimplification, but – like all good simplifications — it reveals truths. In a public private project (PPP), these parties converge — the contractors, financiers and investors come to the table together. They enter the bidding war as a single consortium and, ultimately (if successful), they sign the contract as one special purpose company.
Once they enter the bidding war, they get to deal with yet another perspective on the risks of the transaction – that of the government.
When governments analyse the risks of a public infrastructure project, they focus first on the risks that might impact on their ability to get a quality asset that will last for its projected life at the best possible price. They are also driven by “soft” risk concerns such as community perception, and the consequent potential for political fall-out. And because these projects are seen to deliver long-term concessions for the private sector, there is significant pressure on governments to transfer risk.
You might legitimately expect that by bringing these divergent perspectives together a PPP would have a really robust approach to risk. It would take on board the perspectives of all players, and deliver the optimum outcome.
However, this seems not to be so. The news in 2011, as in previous years, has featured PPPs encountering difficulties at an early stage, suggesting there may have been flaws in the original thinking and/or risk analysis. In NSW alone, we’ve had a number of high profile PPPs that have not delivered the returns expected by their backers. These include the New Southern Railway, the Cross City Tunnel, Lane Cove Tunnel and most recently, the Waratah trains.
The PPP market is undergoing a natural correction as a consequence of the fall-out from the global economic crisis. Regulatory crack-downs on mark to market accounting make investment in PPPs less attractive to short-term investors and arrangers, who wish to take their profits out early. Banks have become wary of relying on patronage forecasts and ratings as a basis for lending. The ratings agencies have been publicly criticised for their compromising conflicts of interest and for a “large failure of common sense” in their valuations of complex securities (to quote Jamie Dimon, CEO of JP Morgan).
Satyajit Das, in his highly commended book, Extreme Money: the Masters of the Universe and the Cult of Risk, is able to draw on example after example illustrating that apparently sophisticated bankers, investors and regulators did not truly appreciate the nature and risks of transactions they entered into or oversaw. This may have been the case with some of these projects too.
This coming year brings potential litigation to the Australian PPPs. Media reports indicate that debt insurers led by Syncora are taking action against Reliance Rail with respect to default covenants on the Waratah trains project. Court reports indicate that litigation may be brewing over the traffic projections allegedly relied on by investors in the Lane Cove Tunnel project.
The landscape for governments is changing too. While still keen to promote PPPs, the newly installed O’Farrell Government in NSW has signaled a move towards direct borrowing and community involvement in infrastructure financing, including the use of “Waratah Bonds” to raise funds from the community. At the same time, it has also signaled a potential softening of approach towards its private sector PPP counterparts, which may augur well for a post-GFC resurgence of confidence. For the Waratah trains project, the government’s gesture of support to the PPP company (Reliance Rail) in late September was allegedly all that stood between it and insolvency. According to material published in relation to Reliance Rail’s accounts, the NSW Government provided a ''letter of intent to engage with [Reliance] and stakeholders to consider restructuring options, which includes providing financial support … to enable [Reliance] to establish a sustainable capital structure.')
So, it may be that the PPP I worked on several years ago is now simply part of history — the legacy of a bygone era, when credit was cheap. It was sponsored and driven by a now defunct investment bank, and featured a highly structured, highly complex and highly leveraged financing structure.
Nevertheless, I believe there are still lessons to be drawn from the experience. My role in the project was to represent the interests of the contracting entities from within the consortium. I brought a public infrastructure and project delivery perspective that was intended to counter-balance the investment bank perspective.
The project, as with many PPPs, was enormously complex. Within the maelstrom of paper, email traffic, documentation and multiple parties that this project generated, very few members of the project team were privy to all elements. The very scale and speed of the project required us to be compartmentalised. Added to that, concerns about conflicts (both real and imagined) meant that most of the PPP participants had their own advisers and did not always see their shared interests as being equivalent to their individual interests.
One aspect that intrigued me from this experience, and the reason I am writing now, was the extent of reliance on quantifying risk by reference to monetary amounts. Of course, as a project team at the project level, we still looked at risk conventionally, and strove to moderate project risk through negotiation. But, at the corporate level and at crunch time, there was a willingness to analyse risk only by reference to maximum exposure on default (liability cap). It was as if it wouldn’t matter at all what went wrong, as long as the maximum financial exposure was not exceeded. There was a tendency to look at risk through the prism of default and financial exposure, which I saw as coming from the banking paradigm. Instead of correcting underlying problems, a maximum liability cap provided a band-aid solution.
One small illustration from a published PPP may suffice. A clause allows the government to make various changes to policies and procedures at any time without having to consider the cost implications to the contractor, up to a dollar cap of $100,000 escalated per annum. No doubt, the dollar cap is the result of a commercial negotiation. So, my take on this would be that the government counterparty wanted “free variations” to allow policy changes, without the burdens of micro contract management on every change. These variations were “free variations”, not because the government sought to take advantage of the contractor, but because the government party did not see these changes as typically carrying any cost consequences. This is only speculation, of course, as to the contractual intention, and no doubt the bid team was not prepared to leave this to the contract managers.
Instead, the bidders have offered to resolve this perceived open-ended variation right with a counter-offer of the dollar cap.
Superficially, the dollar cap is appealing. It clearly identifies the worst case scenario. But, paradoxically, the effect of the monetary cap is to actually endorse the “free variations” approach. No longer were they words in a contract about changes to “policies and procedures”, which may have yielded to different interpretations out in the field. Instead, there was an implicit promise to do $100,000 (cost adjusted) worth of free policy-driven variations every year (that’s $3 million over 30 years, compounded exponentially where those variations affect ongoing maintenance obligations).
The dollar cap, with its appealing simplicity, made superfluous any debate on the underlying risk. At the same time, it hampered the contractor’s ability to mitigate its risk through argument about the intended scope of the clause. These are always hard calls, but in this case, the fix – while certain in its maximum exposure – may well be worse than the ill it was intended to correct.
The dominant risk paradigm became that of the financiers, who needed the hard dollar assurance of the monetary cap, but who ultimately passed off those risks to other project participants. Bankers looking at businesses they propose to fund consider the likelihood of the business defaulting, and their maximum exposure if that occurs. Businesses that value their long-term survival do not look at their own risks from the paradigm of default – they plan to perform the contract. They seek to minimise risks that will prevent them performing, rather than relying on a cap on their exposure on default.
The same tensions seem to be apparent in many PPPs, as the conflicting risk paradigms converge at a point in the transaction where everyone is eager to get the project over the line. On-the-ground project risks can seem trivial within the scheme of a multi-billion dollar transaction involving parties around the world, and so they are often overtaken in the drive to close the deal. Consortia are often led by investment bankers whose key role of obtaining project finance can mean that their perspective tends to dominate.
A very experienced colleague recently observed that “All PPPs are adversarial.” If this is so, there is clearly room for improvement. There are difficult risk issues to be traded off, but a holistic approach valuing all risk perspectives must be the aim. And, of course, there must be room for “partnership” in a PPP.
As new models arise from the ashes of the GFC, we should work on getting risk right. We can no longer t assume that because reputable institutions are prepared to lend and invest, that they’ve got the risk analysis right. On the government side, we’ve learned that infrastructure doesn’t come risk-free. Governments need to be active participants, and engage with bidders to ensure that bidders and their backers do fully appreciate the risks. There is always a fear of sharing project risk on a PPP, because the downstream benefit from the concession is not shared, but we need to find ways to manage this.
We need private sector participation in infrastructure, so let’s hope there remains a willingness to invest and to share knowledge and experience. We need a future of true PPPs that unlock the benefits each party can bring, and represent a sensible and holistic approach to risk. .
This is going to remain an interesting space.
Director, Contracts Australia
The Future of Contract Management in Latin America
In Latin American countries, as well as in the majority of the emerging regions, Contract Management is often seen as a mere administrative function, performed by low level administrators, including tasks such as billing, payment, and the recording and filing of contractual documents. There is very little focus on the proactive, value-add approach that the position really requires.
The role of the Contract Manager
Lately we have seen Contract Management beginning to emerge as a recognized profession in Latin America, although the change is slight and the profession still in the early stages of development.
As commented by Tim Cummins in his blog, Commitment Matters, following the first IACCM event in LatAm: "Contract Management is not an established discipline in the region". I agree with this, although I strongly believe that the role is on the way to becoming essential and recognized as a strategic element of business in the near future.
The professionalism of our discipline is, however, undoubtedly in the start-up phase. With the exception of:
- some US and European top multinationals that invested in the region, opening regional HQs in Brazil, México or Argentina;
- certain US organizations that developed strong channel partners in Latin America;
- and also the so called “multilatinas” (local multinational companies born in Latin America and with market focus on emerging economies);
…contract management roles are not common here, and the interest in this area of competence in Latin American countries is not at the same level as in more established markets like the US and Europe.
However, even in those local subsidiaries where contracts 'administrators' report to contract managers or directors based in the US and/or Europe, and many still perform the aforementioned basic administrative tasks.
We find many examples of this situation in Brazil, Mexico, Argentina and the rest of the Southern Cone, in particular within regulated sectors like oil & gas, power & water, other energy resources, construction, and civil engineering.
At the majority of other companies, the role does not exist at all in the region, and contract management functions are therefore performed by Project Management, Procurement, Sales, Sales Operations etc, keeping the contract support (drafting and negotiation) in the jurisdiction of lawyers if the organization is at a size that requires in house support. If not, it will fall to Finance.
The Legal perspective
An interesting point regarding the legal system adopted in Latin American countries is that, although Latin American markets are referred to as 'emerging economies', from the legal perspective the region is ruled by Civil Law as is seen in France, Italy, Germany, Spain and others (Continental European Law), as opposed to the Common Law of the Anglo-Saxon community.
Despite this legal system, perhaps due to the growth of higher education in the region, or the expansion of North American Law firms in the international market, Latin American professionals have recently been developing new business models that recognize the increasing importance of Common Law, abandoning traditional practices inspired by the legal culture of Romanist roots and Napoleon’s Code.
In my experience, although price and market reputation are important factors to be considered when forming business relationships, we place more emphasis on our existing relationships - provided that we focus on the importance of working together and enabling the creation of value for both parties in a 'win-win' based collaborative commercial relationship.
Of course, in the event that there is no evidence in a past relationship of maximization of joint gain and minimization of risks and aggregated costs, we should analyze and determine which customers or suppliers are the right ones to focus on. Factors such as reputation and price would be crucial at that time.
Post-award CM: relationship or contractual oversight?
Post-award Contract Management in Latin America is mainly focused on providing dedicated oversight of the contract to make sure that each party performs in accordance with the agreed obligations.
Of course, post-award CM recognizes additional objectives, like management of the relationship or identification of change opportunities, but the priority at this stage is to ensure that performance meets contractual requirements, which implies the need to keep monitoring, analyzing and documenting everything to ensure the achievement of mutually agreed goals.
The road ahead
I am extremely confident that Contract Management in Latin America will soon be deemed as a “fast growing” and complex discipline, that the role will become more robust and common in organizations throughout the region.
I believe that one of the main drivers for this growth is internationalism and global operations.
With many countries in Latin America having opened up to the outside world even prior to the beginning of the current economic crisis, and due to macroeconomic factors such as currency exchange and commercial advantages (commodities price, tax matters, etc.), the region has shown a certain stability in its local economies in comparison with Europe and the US.
This has encouraged many countries to trade within the region, which has added a great deal of complexity to the role of the Contract Manager in Latin America - not least because of the language and cultural issues raised. Now more than ever, the Contract Manager requires a unique skill set that goes way beyond the traditional role of a contract 'administrator'.
This of course raises the question ' where will the Contract Managers of the future come from?'
Rather than re-training existing contract 'administrators', I believe that organizations can find the next generation of contract managers by seeking proactive professionals, some of which may be part of the legal community, who can bring a diverse set of skills and knowledge, are business-orientated, open minded, familiar with multinational environments, multi-jurisdictional matters and different legal systems.
In addition, these professionals should offer experience establishing contracting policies and appropriate terms and conditions to support market strategy, while managing business risk and generating win-win relationships with mutual gain and aggregated value.
I am sure that IACCM will be part of the continued growth and success of Contract Management in Latin America, due to their deep commitment to best practice and contracting excellence.
Supplier Relationship Management: Program Launch
Be one of the first to achieve the world’s only internationally recognised and accredited qualification in supplier relationship management (SRM).
The pioneering program is designed to equip practitioners with the skills and knowledge they need to implement SRM practices effectively within their organisations. Completion of the program will lead to individual certification and a “licence to practise SRM”.
SRM is emerging as both an important business activity and a professional discipline within major organisations around the world. Research evidence suggests that SRM can deliver significant tangible benefits in addition to those achieved through world-class strategic sourcing, negotiation, and contract and performance management.
You will join a group of practitioners as they work through the learning program, in a virtual environment of e-learning modules enhanced by message board interactions across the group and webcasts to enhance the learning materials and provide a forum for interactive discussion of best practices. The skills assessment tool will enable you to do a gap analysis on your current level of skill and capability, enabling focus on personal learning goals for greatest development impact.
This comprehensive training program recognises that relationship management requires a blend of technical capabilities – for example, in process and organisational design, and structuring of appropriate contracts and future-facing measurement systems – and key behavioural competencies such as communication, influencing and trust building.
Participants on this e-learning programme, will learn how to:
- Prepare convincing SRM business cases
- Design an effective governance structure
- Create and implement a communications plan
- Engage key stakeholders and supplier executives
- Develop metrics that drive successful behaviours
- Encourage positive approaches to change
- Collaborate with strategic partners
- Devise appropriate contractual arrangements
- Track and report SRM benefits
- Resolve conflicts and issues collaboratively
The SRM Program has the following priced elements, all prices are quoted in US dollars:
Skills Assessment: $150 per person
e-learning program: $750 per person
(note that skills assessment is a requirement of certification)
Practitioner - Member Level (intermediate): $150 per person
Expert – Certified Member Level (advanced): $250 person
IACCM membership is an additional $150 per annum per person
Please note that we are able to run the SRM program as an in-house corporate program for your company, with a minimum of 6 participants.
The corporate program is facilitated by means of a bespoke learning portal created for your company. An additional $1500 set up charge applies.
The above per person charges may vary for a corporate program, to enable us to meet your needs for webcast interactions, on site interventions, message board participation. Further details of corporate programs are available on request: firstname.lastname@example.org
Learning In Companies
Learning in Companies
Why people need to believe you when you say learning really matters
• Jobs for life no longer exist; learning a living is the "new" future.
• Learning a living requires shared interests and trust between individuals and managers. It recognises that support for learning is
• There are so many, irrefutable reasons to support and encourage individuals learning at work.
• Learning requires individuals to be active (this is "real world" practice), yet, the company reality is very often one of mere vague wish lists (the
• Learning in companies presents many challenges, key ones being having managers who will actually model, support and encourage learning.
• The only competitive advantage a company ever has; is how good its people are at learning.
• A company only ever develops and learns and changes through its people, there is no other way.
• The overall message is that learning works, but that it has to be practiced better.
A changed world of "learning a living"
It is no longer valid to speak of "a job for life."
We now need to change "earning a living" to "learning a living".
The traditional view of earning a living is one of payments and rewards being the prime reason for coming to work. Certainly this is important and provides an encouragement to work for many.
But, it is becoming increasingly important for leaders and managers to
ensure their people learn and develop in a partnership approach between the company, managers, and individuals. This then reflects shared interests and trust between people.
This can, represent more a "learning a living" approach.
This can take place within the "traditional" work environment and accepts that support from managers and others is valuable and is needed.
The company, whilst not "guaranteeing" continual employment, now assists with giving "employability" skills.
There can be many other reasons why companies might want to support and encourage learning; some of the reasons are:
• To stay in business
• To remain competitive
• To be a leader in the specific business area
• To better serve the needs of its customers
• To increase profitability
• To be a role model for its suppliers
• To prevent mistakes
• To avoid repeating mistakes
• To benefit from all the knowledge the employees have to contribute
• To raise the companies collective I.Q.
• To create a motivating work environment
• To attract and retain outstanding employees
• To build on the companies strengths
• To support the growth and development of its employees
• To become better at what they do
• To help its employees learn how to work together more effectively
• To change the culture of the company
Company sponsored learning: the reality?
Many companies will have mission or vision statements that say something like the following:
"We believe our people are our most important resource".
However, the gap between such a mission styles belief and the “on the ground” practice of developing people is so often, a very wide one. This is nothing new; for example, comments at the 1999 Chartered Institute of Personnel and Development (CIPD) Conference noted: "senior managers promoted learning, but, engaged in no personal development themselves".
(Source: David Lee, Director of the Professional Development Foundation),
Company statements that people are our most important resource and we develop them are just too often a vague wish list and therefore, over time, have no impact whatsoever.
Learning is an active and a varied process; therefore such passive wish list statements from companies are just meaningless theory.
The gaps between people development theory and the actual practices remain large ones. For many companies, the theory and practice are at odds with each other.
The message then to any level of influencing management has to be:
• to model learning by being open to learn
• by demonstrating actual learning
The work environment and the company view of training/ development/learning are therefore critical. They show how a company allows and supports its people to move forward.
Learning within companies
Learning will pay back to companies, far beyond the shortterm profit/loss statements. Financials only thinking fails to look beneath the results. But, perhaps this is no surprise if the C.E.O. is from a finance background as the preconditioned thinking style is one of, profit; cash, balance sheet, and shareholder return type variables.
This type of one sided only thinking misses seeing behind all the people related variables that have the real impact on the "numbers" that goes beyond just the short term. For example, a graduate trainee applies a few focused years of learning over a long period, and the pay back from this learning is over a much longer time scale.
The following "challenges" need to be faced by companies:
• Why, do some companies expect only the quick fix from learning?
• Why, do some companies set a bad example from senior managers who have learnt nothing new for many years?
• Is it not true that the company that learns and adapts faster, will, ultimately achieve a better and more satisfying business success?
• Is not true that the only competitive advantage a company ever has; is how good its people are at learning?
• Do senior business managers want such a competitive advantage?
Individuals do the learning in Companies
In companies, the managerial elements of planning, organising, directing, and controlling are all overseen and managed by people; therefore it is clear that it is the people that need to learn. It is important to not forget that it is the individual who has to do the learning. A Company only ever develops and learns and changes through its people.
Many people will prefer to work for a company that supports and encourages their learning. This is shown where, "companies developing a strong coaching culture, demonstrate a strong commitment. These companies are rewarded with greater loyalty, involvement and commitment, with in increased motivation, effectiveness and professionalism of both individuals and groups"
(Anna Britnor Guest, 1999, in Success Now JulySept 1999 and on www.trainingzone.co.uk/toolkit).
Becoming a Learning Company
The following two exercises will help you to take a view of your company policy on learning and developing (and therefore to changing and improving "the way we do things around here").
(1) Which are true for your Company?
• Learning is integrated into everything people do in this company, as people are encouraged to learn at all times. Learning and development is built into jobs.
• Learning for learning's sake is encouraged and effort in learning is rewarded.
• Employees are trusted to choose the learning courses that they need and personal learning plans are reviewed and discussed regularly.
• People with different job titles from different departments learn together and managers share their own learning experiences openly.
• We promote mentoring relationships to enhance learning, as we believe that our peoples learning will determine the company future.
• Learning is integrated into all meetings; all work groups and work processes, when people are encouraged to pass on information and openly give their views.
• All individuals in the company, regardless of position, have equal access to learning opportunities.
• We treat mistakes as learning opportunities.
• We have initiated crossfunctional training with rewards for those employees who learn a wider range of job skills.
Were you able to say yes to each of these?
If so, were you able to provide real examples?
If not, then you have just discovered your company has areas that need developing.
(2) True/false quiz
The following true/false quiz will give you an understanding of how your company responds to the learning needs of employees.
Answer the following statements as being True (we do) or False (we do not) for your company
• We do/do not work to remove barriers to learning.
• We do/do not cultivate a "learner friendly" environment.
• We do/do not understand how adults learn.
• We do/do not use various tools to assess employees' learning progress.
• We do/do not plan in specific learning opportunities for our people.
• We do/do not acknowledge that people learn from experience.
• We do/do not recognise what type of learning is most appropriate for each situation.
• We do/do not encourage each employee to become a lifelong learner.
• We do/do not encourage employees to keep an open mind to learning.
• We do/do not understand the factors that inhibit learning.
• We do/do not know how to motivate people to learn.
• We do/do not spend a minimum of two hours a month on one to one people coaching/mentoring?
Were you able to say, "We do" to all of these?
Any "do not" statement represents an area that needs to be developed
Learning and therefore Improving Companies
Companies supporting learning will move towards fostering a learning culture. Accepting the need to foster a learning culture means:
• understanding and accepting the importance of change
• being open to learning
• recognising the importance of continuous improvements
If this is to be achieved, managers must learn to encourage people to challenge the normal and traditional ways of thinking and doing things. A learning company can only ever be one, if it is comprised of individuals who are learning. This includes individuals at all levels throughout the company, from the C.E.O. down.
"Businesses must encourage and support all their employees continually to develop their skills and qualifications"
(Department of Trade & Industry)
"We are in a new age; the age of information and global competition. We have no choice but to prepare for this new age in which the key to success will be the continuous education and development of the human mind and imagination"
(Department for Education & Employment)
Companies really have no choice but to foster a learning culture.
This will mean the company allowing itself to become open to learn.
Learning within companies must be encouraged and supported.
Learning must not be discouraged and expected to happen "naturally".
This report is based on:
"Improving Learning & for Individuals & Companies," 2002, ISBN 1904298311
"How to Mentor and Support Learning," 2003, ISBN 1904298656
“The Learning Toolkit” 2008, ISBN 9781852525620
“The Developing People Toolkit”, 2008, ISBN 9781852525651
All written by Stuart Emmett
Stuart Emmett is a freelance independent trainer and consultant who trades under the name of Learn and Change – Stuart believes that in times of change, it is only those who consciously learn, that will inherit, a successful future Stuart has operational and strategic experience in varied commercial service industries gained in the UK and Nigeria – and is particularly interested in the “people issues” of management processes, as well as logistics and supply chain management. He has worked on 6 continents, in over 30 countries and delivered to over 50 nationalities.
Stuart can be contacted at email@example.com or by visiting www.learnandchange.com
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I was very satisfied with the program and felt strongly that the materials were extremely beneficial to my role as a Contract Consultant. Christopher J. Lagoe I Contract Consultant, Law and Risk Management Division, Kelly Services, 26 August 2011
Overall, I found this training to be most informative and I know I will continue to refer back to this information in the future. WHAT A GREAT TRAINING EXPERIENCE!!!! Donna Campanelli, Senior Contracts Administrator, Parker Hannifin Corporation, Parker Aerospace Group, 4 January 2012
I felt that the modules dealt with scenarios which I as a contract manager face day in day out at work and the module tests kept probing my understanding of the subject. Coming from a legal background and having worked on litigation strategies for multinational companies this course has enhanced my understanding and taught me subjects and process which were very alien to me before the start of course commencement. This indeed has well equipped me and has added a lot of tools in my arsenal to deal with complex challenges which a CM faces on the job. Vinod Priya, Contract Specialist, Accenture, India, 7 March 2011