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What is the status of contract & commercial management today?

Published: 15 Mar 2013 Average Rating: unrated Print
 
This article appeared in Contracting Excellence magazine on 15 Mar 2013 view edition
 

If you don't know your starting point, how can you plan your journey?

This article helps you examine the status of your skills and knowledge as a contract manager and learn how this compares with your future needs. It also explains what steps you can take to identify and address skill gaps that may otherwise limit your career progress.

If you don't know your starting point, how can you plan your journey?

This article helps you examine the status of your skills and knowledge as a contract manager and learn how this compares with your future needs. It also explains what steps you can take to identify and address skill gaps that may otherwise limit your career progress.

Uniformity of Skills and Knowledge: Does it REALLY matter?

What skills do you need? What is the current status of your knowledge, compared with your colleagues or with other practitioners? What skills or knowledge improvements are most sought by recruiters and by senior management? If you could access this information, would it assist you?  Would you do anything with it? 

If your answer is no, then don't read on.   But, if you care about your career, your status, your company and of course, your future opportunities, then you may want to invest the next 5 minutes reading this article.

Since its inception, IACCM has monitored skills and knowledge needed by contracts and commercial practitioners to do their jobs effectively. Our research has surfaced more than 40 skills and knowledge fields listed in Figure 1.  Their relative importance depends on the precise role to be performed.  To be truly effective, the typical practitioner must be proficient at somewhere between 20 and 25 of the fields listed.   

Ability to Develop Terms and Conditions

Ability to Direct Deal Shaping and Commercial Strategy

Ability to Motivate / Gain Agreement in Multi-Cultural Teams

Analytical

Awareness of commercial and contract terms and conditions

Commitment to Change and Personal Development

Commitment to Results / Strategic Thinking

Communications

Consulting

Contract Drafting

Data-Based Decision Making

Developing Others

Familiarity With Standards and Norms

Financial Principles and Impact of Issues / Decisions

Identifying / Acting on Opportunities for Change

Influencing Others

International Bids and Contracts

Interpersonal Relationships

Knowledge of Local Business and Commercial Practices

Knowledge of Products and Services

Leadership

Legal Awareness

Manage Bids and Tenders

Negotiation

Organizational Awareness

Performance Monitoring and Reporting

Planning / Project Management

Problem Solving

Relationship Management

Risk Management

Sensitivity to and Knowledge of Cultural Considerations and Impacts

Stakeholder Management

Teamwork

Technology Use and Understanding

Third Party and Channel Contracts

Time Management

Understand Client's Business and Needs

Understand Market Industry and Norms

Understand Process / Roles and Responsibilities

Understanding Geopolitical Conditions

Understanding of Goals and Strategies

Understanding of Local and Global Production / Distribution / Logistics / Capabilities and Needs

Understanding of Organization / Management System / Business Processes

Understanding Standard Contracts, Terms & Conditions, Communications / Legal Policies

Value Focus 

Vendor Analysis and Selection

Fig. 1: The Contract & Commercial Management Skills Portfolio
Note: items in bold are traditionally most important; items highlighted in red are of major current / future importance

This question of which skills really matter is the first issue we encounter when assessing practitioners, because what is needed and at to what depth depends on the job definition as well as the nature of the business. As examples:

  • Will you be required to draft agreements, or simply to review them?
  • Will your role include negotiating financial terms or handling relationships in overseas markets?
  • Does the business use third party channels or sub-contractors?
     

Such questions have led many to conclude that harmonizing skills and defining knowledge in a job description has no purpose.  This conclusion severely undermines the value and status of the role because, if true, then we must conclude that contract and commercial managers are not professionals – they are quite simply individual workers with a similar job title. The concept of an underlying body of knowledge and a consistent method and purpose lies at the heart of every profession.  The idea that skills and knowledge are transferrable is fundamental to professional development and recruitment.

Consider for a moment the finance or legal profession. No doubt, different organizations define the job role of their lawyers or accountants quite differently. However, they hire qualified professionals, because they know that such individuals have an underlying competency based on consistent techniques and knowledge used in today's world.  They then seek qualified professions possessing skills that match job requirements.

The Status of Skills and Knowledge Today

The depth and quality of contract and commercial skills today is highly variable.  We know this, because, over the years, IACCM has assembled a wealth of data that highlights typical skills and knowledge of the contract or commercial manager. Thousands of our individual assessments have enabled IACCM to segment the data by industry; by sell-side versus buy-side, by level of experience, by geography, etc.

We discovered, for example, that the average rating for communications skills is 3.2 (on a scale of 1 for a beginner and 5 for an expert). Analytical skills rate a 3, but key areas such as negotiation and risk management average only 2.8. The target competency level set by senior management is around 3.1, so the average professional falls way short of management goals.

Not surprisingly, the overall quality of skill and knowledge directly relates to the scope and importance of the role being performed. This tends to vary significantly by industry and by geography. A gap exists between the averages for the buyers of goods and services and those in sales contracting.  Another gap appears between the scores of professionals in a pre-award (bid and negotiation) and those in a post-award (contract management) role.

Based on those averages, the typical scores for sales-oriented professionals is almost 20% higher than those focusing on procurement.  And professionals in pre-award score typically around 15% higher than those in post award. But in each case, that gap is closing.

Preparing for the Future

Today we see management expectations growing, regardless of industry. Managers demand greater value from their contracts and commercial staff.  Indeed, some view these skills as potentially a major source of competitive advantage – but only if such skills start to provide proactive market insights and intelligence.   Simply performing transactional tasks is of little value.   The expression, keeping us out of trouble means much more than avoiding lawsuits; it means creating commercial instruments that guarantee a high probability of success.   A good example would be to assist the program team on strategies to not only retain customer business but also grow the business -- almost like a business development professional versus a contracts/supplier chain manager.

We see a shift of emphasis in the required skills portfolio.  Here are a few major shifts:

  • Businesses are placing increased importance on capabilities such as shaping direct deals and commercial strategy (current average score 2.7) or financial principles and analysis (currently 2.9). 
  • We see growing emphasis on international business, leading to placing greater value on cross-cultural awareness, understanding of geo-political issues, financing options and laws/regulations of various countries, each of which currently score less than 2.5. 
  • Management has also increased its focus on 'psychology' – an appreciation of the impact of culture or the way that negotiation or contract terms may influence behavior.
     

This proves the critical importance of professionalism.  Skills and knowledge of the future will not only require knowing how to do things, but also why and when we do them and most importantly the business impacts that commercial or contracting options are likely to have. Therefore, the skills are shifting far more towards areas of research, analysis and diagnostics.  Skills are not limited to just having knowledge, but are continually expanding and using knowledge to generate new ideas or better approaches.

What should I do next?

Much evidence proves that contract and commercial skills are in increasing demand. And further evidence proves that today's practitioners do not always have the skills most needed for the realities of business today, let alone those of the future.   In today's world, you can't just be a contracts/supply chain expert! 

Many contracts and commercial staff believe that they must improve their capabilities in traditional aspects of the role – and they may be correct that this is important. But it will not be enough; to meet the demands of the market (and therefore of top management), we need to expand our knowledge and skills to tackle the emerging needs and priorities. This alone will make us visible and relevant to the executive agenda.

Some years ago, the head of a commercial function told me the story of when her CEO spoke at a meeting for the company's worldwide commercial team. He told them, “I think of you as a I think of a dial tone – I would really miss you if you weren't there”.  I suggest all of us should aspire to be more than missed when we are not there.  We must be professionals viewed as indispensable to good commercial and contract practices and judgment and as key members of executive advisory teams.

To establish this status, you must have a personal commitment to continuous improvement. One immediate and practical step would of course be to obtain your personal assessment and benchmark of skills from IACCM.   Once you know your start point, you can effectively plan your journey!   We at IACCM look forward to assisting you in you journey as a contracts and commercial manager!  

 
 
 

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