Commercial Managers in the digital age: keys to success
Published: 22 Aug 2019
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Author: Tim Cummins
At its heart, commercial management is about grasping the big picture, seeing connections, developing practical solutions. On one level - the availability of information - the digital age is streamlining and simplifying the commercial manager's role. On many others, it is potentially making it more complicated, or at least very different from the past.
What are the issues?
A recent book put it like this: “Complex trends in globalization, demographic shifts, and new technologies are raising urgent challenges for managers on an everyday level. Because of the number of companies undergoing digital transformation, managers need to navigate an intense speed-to-market landscape while juggling virtual teams within and sometimes outside their organization“.
And this means ….
Commercial managers must not only identify the risks and challenges from this fast-moving environment, but also – and this is critical – innovate, offer creative solutions. Fundamental questions in a digital world are how to innovate, develop new ideas; how to influence and gain insight from both physical and virtual teams; how to communicate and drive change across extended ecosystems. In themselves, the questions are not new. It is the scale and speed that makes things different.
Keys to success
A growing volume of research points to the critical role of communication style and 'managing your network'. High performing commercial managers unite teams around a clear and shared sense of purpose – not just what they are trying to achieve, but why. They generate an environment where ideas and positive challenge are welcomed and where collaboration is understood, expected and achieved. They are comfortable operating across extended networks, internal and external, both to gather information and achieve results.
At the same time as the digital world imposes these demands, its effective use also makes it possible. Today, there is no excuse for being information deprived; there is no excuse for failing to establish connected networks; there is no excuse for failing to master diverse communication techniques; there is no excuse for lacking self-awareness and influencing skills. These are simply critical attributes for a Commercial Manager.
Communication – the final barrier
Finally, what about communication style and content? As recent conference delegates know, this is an area where IACCM has been doing a lot of research. Working with academics at UC Irvine, we have examined a large number of 'commercial' personnel – lawyers, contract and procurement managers. Many are not today exhibiting the critical communication style required to be a commercial leader or influencer. Rather than projecting themselves as enablers, they are seen as 'preventers' – safeguarding what we already have, rather than enabling opportunities for the future.
Not everyone wants to be a Commercial Manager, but for those who do it is critical that they understand and grasp the implications and needs of working in the digital age. A good place to start is in shifting personal and team image by challenging and, where necessary, changing what and how we communicate.
IACCM offers its members tools to analyze current communication style and provides methods to establish the new approaches needed for individual and functional growth.
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• Century 21 Vanguard
•
2015-03-03 16:26:08
Hi Suzanne,
You might want to start with Suzanne Birch at IACCM Resourcing sbirch@iaccmresourcing.com. Also, you can post your resume on the IACCM Job Post page under the resource tab. Good luck!
P.S. Next week Suzanne Birch will be hosting a Women's Networking Group webinar on 'Marketing Yourself through Social Media.' You might want to sign up for it. Check out the events calendar.
• Phillips 66
•
2015-04-14 08:41:32
You might want to check with Global Resources depending on what you want to do. They do a lot of placement of professionals into Corproate settings as consultants. My company has used them and I know peopel that work for them.
Replies: 2
• Fire and Emergency NZ
•
2019-06-14 06:59:15
Good evening Abdullah - I'll contribute an observation on the first one. Perhaps others who have been doing contract management and procurement for longer than me might have a different view, or say it more eloquently, but here goes....
Purchasing is a subset of procurement. It is the giving effect to a lot of the procurement work that you've done earlier (i.e. establishing what you want, identifying suppliers etc).
That said, I think that you can purchase without doing procurement, and in fact, I'd go so far as to say that you can even get the same outcome.
However, only by procurement can you demonstrate that you've got the right outcome. If you only purchase, and don't understand your needs, identify the market and consider the offerings against your needs, you can't demonstrate that you've got the best outcome for the business.
And this is where I think we as a group can demonstrate our worth to the business. We can show with procurement the outcomes that we've avoided (goods not matching requirements, getting better pricing outcomes, repetitional damage etc) by running a fair and robust process ensures that the business is better off.
On many occasions I've seen my team has moved someone from their initial fixed ideas into better outcomes by taking the time to show them what's possible and what good looks like. Do that enough times, and you have more and more allies in the business to encourage others to use your services.
Regards
Darren
• IACCM
•
2019-06-14 17:41:27
Hi, Abdullah,
Check out this article in the IACCM Library, 'Procurement' and 'Purchasing' Are Different:
www.iaccm.com/resources/
•
2019-06-14 17:45:20
Having looked at this topic, there is actually already a lot written on the question of the difference between purchasing and procurement. As they observe, for the typical person they are probably the same, but apparently 'the experts' in procurement know the difference! Though once you start reading, there is plenty of contradiction...
When it comes to Supply Management, it is yet another variant and clear as mud whether it is actually different from Procurement. Supply Chain Management is certainly a more holistic activity of which procurement is part, but that's about all you can really deduce.
The net is, these terms are used with a high degree of variability and tend to mean whatever anyone wants them to mean; the only common factor is that they are all associated with the act of buying!
Tim Cummins
• Ginkgo Management Consulting
•
2019-06-24 04:21:43
Hi Abdullah
Years ago Procurement and Purchasing were often used interchangeability. These days they have very different meanings. Procurement refers to the end-to-end activities from strategic category management, through to the operational analytics of spend and performance, to the tactical buying and sourcing activities which can happen in-house or in shared services.
As the Procurement function has 'grown up'it has become far more strategic, so although the term Procurement refers to all the activities conducted by the function, it also implies more strategic perspectives. The scope is also overlapping with other related functions like Finance (Accounts Payable as part of the purchase to pay process) and supply chain (Supply Planning, product innovation and supplier performance management). The increasing focus on digital in Procurement is also seeing more collaboration with other functions for example, RPA (Robotic Process Automation) and machine learning, process automation and contract management, and predictive analytics.
Purchasing is clearly the administrative activity of raising a purchase order, managing the goods/service receipt notice and approving to pay. More advanced companies use on-line catalogues to support this along with automated workflow routing and defined delegations of authority. Put simply, Purchasing includes the tactical purchase and approval activities to support buying.
When we speak about supply chain today, we tend to talk about a value chain. Some organizations are now including supply chain and Procurement in one organization given the overlaps, but predominantly they continue to be separate, but related functions.
Supply chain will include demand planning and forecasting, distribution planning, warehousing and logistics, manufacturing (which may also be a separate function), supply planning and often new product development.
Where Procurement gets involved most is in supply planning and supplier performance management, for instance, using contracts to enforce performance, and collaborating with supply chain and marketing for product and service innovation by tracking supply markets and innovations.
Conceptually, the Procurement function has shifted from managing costs to providing value. Using advanced analytics of COGS and SG&A data, digital tools and advanced supplier market research, the function is working far more collaboratively with other functions. As business cadence increases, functions are becoming more linked and lines between which function does what is blurring.
Hope this helps.
Replies: 4
• KMD
•
2019-02-12 05:39:08
Dear Daniel - In my view any legal training/education will help you going forward and demonstrate to a new employeer that you have legal competencies in place.
If I was hiring my interest in you being such a strong technical profile would increase if you had legal merits to show.
Hope this was of some help !
/Ole
• Occidental Petroleum Corporation
•
2019-02-12 17:40:50
Daniel - I recommend you go for it. However, I have two perspectives on this based on experience; and one personal perspective that underlies my decision to take the same course of action you're contemplating. I worked as a US Federal Contracting Officer for almost ten years - the first seven before I attended/completed law school. Subsequently, I have worked in the private sector including large, global agreements in the IT industry.
Experience perspective 1: Some attorneys and paralegals felt threatened in some manner because I had a law degree. Their perspective is that they are "legal" and I should only be dealing with commercial matters, leaving the "legal" issues to them. I've actually heard some in legal oppose the hiring of Contract Management professionals who also possess a law degree. Finally, I also had at least one manager who apparently felt threatened that subordinates (I and five other Contract Managers) had law degrees from colleges and universities from around the world and had told me that he would not agree to hire an "attorney" for a role I had on my team.
Experience perspective 2: Other attorneys and paralegals I have worked with were more self-confident and not threatened by the fact I had a law degree and was licensed to practice law. Instead, we worked together to leverage my legal knowledge/skills to help manage their time. I would escalate issues and have regular touch-point meeting so that they were informed as to ongoing issues and permit us to collaborate and discuss difficult legal/contractual issues. It also gave me more flexibility to negotiate agreements that protected the legal and business interests of the party I worked for without having to go back to "mommy/daddy" each time an issue arose in the negotiations. At the same time, we also had a working knowledge of the limits of my authority and a good working relationship where I could quickly escalate and propose a solution for them to consider and ask questions about - something we called the "4Cs", ("Communicate, Collaborate, Consult and Crosscheck"). I had learned this from a wonderful attorney who had been the general counsel where I had once worked.
Personal perspective: I decided to go to law school because as a US Government Contracting Officer I had to regularly discuss issues with our attorneys. Not having a sound understanding of the broad areas of the law that applied (not just contracts) sometimes caused me confusion when the attorney would try to explain something - particularly when it ultimately impacted the contract or the enforceability of a provision in the contract. I decided to go to law school to gain a better understanding. It resulted in me have a much deeper understanding of contract principles that must be applied and of the concepts we all rely on (whether or not we realize it) when we draft, negotiate, operationalize and enforce our contracts. I recommend you go for it.
• Neptune Marine Service Ltd
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2019-02-26 05:23:02
Hi Daniel,
If you can afford the time & cost for the legal degree (LLB or JD)- then will be worth considering that.
From my personal experience, some sort of Commercial/ Contracts/ Business law certifications or diploma will give the required knowledge and upper edge for the jobs.
Regards,
Gaurav Seth
• AusNet Services
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2019-02-28 18:24:20
Hi Daniel, I don't believe a law degree is necessary. It depends on the role.
I am legally qualified and I echo Mark's comments. I find that I am better able to articulate the risk I see with my legal friends.
The main thing is do you want to do it? A law degree will give you additional skill such a negotiation etc. It will also give you confidence in the law around contract law, construction, tort and tax.
But a law degree will also give you so much detail on those areas that you won't need all in your role.
• BAE Systems
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2019-03-01 05:23:07
Hi Daniel,
I was also a Commercial Manager at GE for approx. 4 years and with the company 11 years. Since my redundancy just over a year ago, I have been trying to find a like-for-like Commercial Operations function like we had at GE but a number of Commercial Manager roles sit either in the Finance function or the Legal function, not as their own Commercial Operations function.
I'm contemplating doing a Juris Doctor to gain legal qualifications on top of my BBus and MBA Exec as I don't want to go down a CA/CPA path. Otherwise I am exploring the IACCM certification.
Hope it all goes well for you with the decision,
Tania
• Itron, Inc.
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2019-05-01 21:42:38
Depends on how your organization is structured but typically no. In fact there is a good argument that they should not be lawyers as that role has different specialties.
Replies: 6
• Australian Red Cross Blood Service
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2019-07-29 06:42:41
CCM needs to be far more multidisciplinary than the traditional finance function which was focused on the bottom line.
Strategy, risk, compliance, technology, legal, safety, communications, marketing all being amongst the skills that CCM professionals need to develop and maintain.
I would go into the conversation with the CEO asking what it is that the CEO wants greater transparency over and then demonstrate how this can be achieved by leveraging the CCM role out from under finance.
• Self employed
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2018-06-29 06:56:03
Its fast becoming established in many (albeit usually larger) companies to have CCM as its own function reporting direct into CEO/MD, so you can say you're following best practice. To echo your comment, this recognises the independence and increasing importance of the function and ensures CCM has equal voice.
CCM under Finance is a bit of an anachronism, however try to ensure there's no implied criticism of your CFO in this move...ideally get them to support the change?
•
2018-06-29 12:17:03
Thank you very much for your advice, Phil.
Replies: 3
Allianz Technology
2017-06-06 07:06:35
Performance of Contract Management
I'm curious to get inputs about the performance assessment of contract management.
While other roles have defined metrics (for instance, procurement roles can be meas...
I'm curious to get inputs about the performance assessment of contract management.
While other roles have defined metrics (for instance, procurement roles can be measured by savings, number of contracts and other achievements), I find it difficult to measure the performance of contract managers.
Contract Managers get involved tasks in several areas, such as governance, negotiation, change process, deliverables and obligations' tracking, exit management, and many more, I'm not being able to define consistent metrics to measure performance (notice that I'm not talking about performance of a supplier or a contract, but of a contract manager).
Any inputs? How contract managers are evaluated in your corporation?
• IACCM
•
2017-06-06 14:15:02
Dear David,
The performance of the Contract Manager role and the performance of the Contract Management Process in general is one of our key points in each one of our recent IACCM anual conferences and networking events, as the matter takes us to the question: "How should we measure and demonstrate success?"
Indeed, while transactional performance is clearly important, it rarely offers the insights that we need, if we are to raise our status and our contribution.
Our thinking and our measurements must start to focus on driving benefits at a portfolio level and relate directly to achieving the strategic goals of our business.
Value will be delivered through a process based view, through monitoring the outcomes of what we do, through generating measured innovation and continuous improvement.
This depends upon capturing and analysing performance data, through challenging established rules and procedures, through inspiring the new models and approaches we have discussed this week. And it also depends on courage - developing leadership and influencing skills.
Keep in mind one of IACCM survey findings: 'Contract Management is one of the least automated processes... and this results in inefficiency and weaknesses in PERFORMANCE oversight, as well as in the absence of management reporting and information'. Here we value the importance of Contract Management Automation and that´s why we are focused on this topic in recent Ask the Expert sessions and in our future events (Australasia and The Americas conferences).
Best regards,
Pablo Cilotta
• Sysintellects
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2017-06-06 20:34:54
Dear David, have you thought about listing out every task that contact managers are responsible for in your corporation then, assigning a numerical value to each task. Then, assigning a score to each task to analyse and create a quantified report on your overall contract management performance?
e.g. you mentioned governance, negotiation, change process as a few of the tasks. Perhaps you could write these tasks in a spreadsheet and assign values like so:
Total Value = 100
Governance - 30
Negotiation - 20
Change Process - 10
Deliverables Tracking - 10
Obligations Tracking - 10
Exit Management - 20
Then, for each contract manager, you could assess their performance based on a score. Score could be for example, between 1 and 10.
e.g.
Score Values = 1 through 10
Performance Assessment for: Joe Smith (Sr. Contract Manager) for Q1
Governance - 30 - 8
Negotiation - 20 - 6
Change Process - 10 - 9
Deliverables Tracking - 10 - 9.5
Obligations Tracking - 10 - 7
Exit Management - 20 - 9
You could average each of the score values and weigh it against how important each of the tasks are (based on their numerical value). From a high level point of view, based on these numbers, you could create a percentage of "contract management performance efficiency" per quarter/month/week/day for each of your contract managers.
This is just one idea. As full disclosure, I work with a contract management software vendor where we help our clients effectively manage their contracts online. We don't have this particular feature built out on our software yet, but would be open to discussing further and building it our for you in our Analytics & Reporting function, if you'd be interested.
Feel free to contact me directly at nazar.abdul@sysintellects.com
Hope the above ideas help!
• Academy Sports + Outdoors
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2017-07-31 16:44:04
The less standardization you have on your services the greater the difficulty will be in establishing useful performance metrics that span your portfolio. For example, a BPO contract or a customer IT services agreement will have many specific considerations that can lengthen the time of negotiation and result in contracts that vary substantially from other contracts in the same portfolio.
Replies: 3
•
2016-07-11 21:14:46
There are a few disadvantages from the pass-through approach. First, the party bearing the cost is not in direct negotiation with the source of the cost. As such, some costs that might be more aggressively addressed are not fully addressed. The discussions around how to best manage and mitigate the costs will exclude the party who is ultimately most interested and invested in those costs. As such, there is seldom much innovation or break-through thinking generated in these discussions.
There are other disadvantages arising under pass-through approaches related to the contractual terms, which also impact costs.
• SPL
•
2016-08-05 13:22:39
That's what SI's do. You go to an SI to be a one-stop shop. It is inevitable that he wont be able to do it all himself so much will be subcontracted. Where this is done at zero margin (!) we call it pass through. It does make me wonder why an SI would want the admin and risk burden of such a large pass through without any reward and, I agree with Anonymous that you are distanced from the party actually completing the work, so you don't have direct control over half of your project.
Hire a good PM and split the SI contract into two and deal direct with both.
•
2016-09-12 00:11:09
Not sure of the size of your proposed project nor of your organization. I just finished leading negotiation of a large, multi-year ERP implementation project that will span several countries and be vital to our company's future. We have a single SI who has the resources to complete the work themselves (we reserved the right to review and approve any proposed subcontractor/subcontractor resources prior to their use). Not sure why you have an SI that wants to, if I understand correctly, use one or more subcontractors to perform a significant portion of the work.
If you are using a smaller Systems Integrator, then I would want to make sure that the SI is responsible for consistency in how the work is performed and that consistent methodology is used; and that ultimately the SI is FULLY responsible for the work delivered. Depending on the size of the ERP work and your organization, you may want to hire a Project Management team or at least Project Manager to help oversee the timely completion of the work.
As to you question about whether or not the project is worth executing - without knowing the business case, the cost and understanding the risks, I'm not sure anyone can answer that, but I would be cautious with such a large percentage being subcontracted.
Replies: 3
• IACCM
•
2015-01-27 18:37:02
Communications is a repeated source of success or failure in contract management (as with so many other pursuits!). Unfortunately, communications are treated as a step or action item. Successful contract management programs often cite their sustainable communication strategy, and not merely an occasional tactic, as the key driver of their success.
It would be interesting to see whether any members have examples of sustainable communication strategies that they can share across the IACCM membership base.
• Academy Sports + Outdoors
•
2015-01-28 17:51:16
I've noticed generally that younger, less mature organizations have a less enthusiastic view of the contract management function, whereas a large, mature organization usually has realized at some point that it is essential. To a certain extent, I think that we in legal or contract management roles are unreasonable if we expect that others will really "get" what we do. Normally they just want answers or results. But time and time again I've seen the greatest successes come in situations where the legal/contracts function sits down and works directly with the business leads as partners. Once the business leads feel supported, they will become evangelists, that is, provided that the support we give is creative, responsive, and timely.
• Zensar Technologies Ltd.
•
2015-02-04 03:06:41
Contract Management needs to be driven as strategic initiative, with top down approach to see success. Integrating the activities of contract management with existing quality audit process and project execution norms may give the required boost or importance. Continuous improvement with revision in tools and checklists, creating extensions of contract management process within the stakeholders like sales and operations, by providing enough ammunition through trainings and continuous dialogue to resolve issues. Management attention and involvement in the process can be increased by helping in provisioning of visual metrics depicting risk analysis, risk profiling without consuming the precious hours.
• Fokker Aerostructures BV
•
2017-01-06 11:14:24
I would like to reply (after two years :)) to the second comment here below which starts with a great observation on the effect on maturity of organisations on how they perceive contract management bu then states that "Normally they just want answers or results. But time and time again I've seen the greatest successes come in situations where the legal/contracts function sits down and works directly with the business leads as partners. Once the business leads feel supported, they will become evangelists, that is, provided that the support we give is creative, responsive, and timely."
Actually my view is that if this would be sales-side contract management this exactly describes the way less mature organisations look at contract management. Contract management 'only' as supporting function and not as performance monitor, 'checks and balances' of sales and delivery, profit maximizer and risk reducer which goes much further then working together with other functions but actually keeping them on track.
Replies: 4
• Ministry of Defence
•
2019-10-22 13:59:48
In my team its cross functional; procurement, finance, project management. Whoever the beneficial user is may the best person to advise if the requirement is being delivered to time, quality etc. Suggest you might want to think about creating a cross function contract management team.
• KMD
•
2019-10-26 04:55:01
Dear Ted, it pretty much depends on your organisational ambition & objectives with the Contract Management function. In my oppinion many organisations don't realize the potential (strategic advantages and benefits) of Commercial Excellence - if the organisational understanding & culture around Contracts & Commercials are at a low maturity level you can see Contract Management placed as a sub-function in eg. Legal or Finance (being a somewhat defensive approach), while the few org. (as I know it) who realize the potentials are placing it higher in the organisation, some even spilt it out to a stand-alone veritical (making sure that the context of being a "support function" is embedded, implemented & maintained) of course balanced with the organisations overall aspiration, purpose and "nature". BR Ole
• BC Hydro
•
2019-10-31 00:03:28
In our organization, Contract management resides within the business; however Supply chain (Finance) own the process. Over the last 5 years we have been fully integrating Category Management and as a result putting in more strategic, long term agreements with an overview to the category rather than the need. Putting in such a strategic shift in business has saved us millions in our new contracts by looking at all the driving forces behind the need. Now that we have a robust Category Management program in place which covers 80% of our spend - we need to ensure that a enterprise wide practice is in place to make sure we are getting what we need, when we need it and are paying the right price otherwise the contract is simply a piece of paper. That is why Supply chain owns the process but the business is responsible for managing the work and providing the required resources to do so.
• PRS for Music
•
2019-10-31 15:42:32
Hi Ted
In my company the contracts team sits in Operations as the contracts they manager supports our deliverable pipeline. However, we have close links with our legal team and procurement sits in Finance. Looking at some of the replies it seems there doesn't seem to be any best practice.
Cheers
Jan
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https://commitmentmatters.com/2019/08/22/commercial-managers-in-the-digital-age-keys-to-success/
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