Author: Martinne Heckscher, Lead Contract Manager, Global Business Services (GBS), IBM
Complex projects have the power to make or break. Get the basics right and you've bought yourself time to handle the complexity and risks - and protect the bottom line.
It might seem obvious – but it's far better to aim for delivery excellence than prepare to manage conflict. Although riskier, excellently executed, complex contracts enhance reputations and put goodwill firmly on the balance sheet.
Many factors contribute to complexity in contracting and delivery - first of a kind solutions, non-binding scope, new services that need to be combined or high reliance on subcontractors. Add moving business scope, technical complications, organizational change and vague requirements to the mix, and it's no surprise that complex contracts have a greater risk of becoming troubled.
Get it right from the start
Complex contracts need to be treated in a different way, especially at the start. However, not all aspects of the project will be complex - our job is to understand which parts need special handling and which just need quality best practice implementation.
As a minimum the contract manager can:
Project launch1 is an underrated process. Taking time to coach delivery teams during start up is an opportunity to get those difficult conversations started and catch problems early. An enhanced project launch2 should include:
Root out uncertainty!
Contracts never read as a project plan, and that can mean vagueness on “how” to execute the commitments in the contract. Delays in deciding what to do will hit the financial health of the contract, because resources will stop until the team receives guidance.
The contract expert often sits in the challenging position of converting a customer's less-than-exact descriptions of their required solution into a blueprint for delivery. To win the customer's heart at contract signature, you need to demonstrate a plan exists for handling uncertainty. Any “grey zones” of uncertainty remaining in the contract must be identified and an action plan agreed with the client so project activities are specific and clear for the delivery team.
Contracting sometimes tries to deal with this uncertainty by putting in contract failure clauses: fixed price, complex governance, SLAs and penalties. But contracts are often painfully silent on how to handle the risks and issues known at contract signature, and simply state the consequences of not achieving delivery excellence.
This approach often makes problem-solving the supplier's issue, and we all know that most problems cannot be solved by one party alone. Contract penalties for failure will in no way make good the losses of not getting the customer's change agenda ready in time.
Have an action plan for risk
Complexity increases risk and we must be able to recommend ways to mitigate it before it develops into an issue.
A typical project manager's risk log will rate risk as low, medium or high. With an understanding of the contract and its consequences, contract managers are in a good position to ensure the sales team properly hands over the risks to the delivery team with an action plan in place to identify and act on problems quickly.
I use the following as a coaching guide for risk. These discussions would be part of a contract awareness session with the delivery team:
The contract manager can ask the difficult questions that identify whether the risk is:
Monitor metrics closely to catch issues early
It is vital that your senior managers can see your complex contracts in the metrics that are monitored. You cannot manage delivery excellence if you do not measure it. Delivery excellence on a project basis means understanding the client's requirements, delivering a solution to meet those, within the timescales required and with optimal resources.
If delivery fails to meet the customer's expectations, requirement disputes will arise, positions will be taken and trust will erode. The challenge is to catch the risk indicators before they become “nobody wins” issues.
Leadership from both the customer and the supplier must have the ability to filter escalations and disputes through the above two filters. When harmony can be achieved here, the resolution will be more permanent and you will have filtered out personal interests which can be extremely disruptive to the goal.
Benchmarking troubled projects is also a powerful call for continuous improvement, highlighting the need for better processes to handle project complexity.
Metrics can include:
Other useful problem metrics are:
If contracts are failing, find out the reasons
If contracts are failing, be sure to ask for explanation from your delivery teams. The following root causes of inability to meet client expectations are from some IBM analysis done in 2002 which spearheaded the delivery excellence initiative internally:
The sad part is, these pointers are still relevant today, for many companies, and possibly will hold true into 2020. The internet is awash with similar failure conclusions so complexity for any supplier or customer is a tough nut to crack. But crack it we must, as avoiding complexity will simply erode margins in the long term and make you less relevant in the eyes of the client.
What can we do differently for the complex projects?
Companies and customers should consider investing in enhanced project launch for complex projects and take the time to set it up right. In addition consider using program management office automated tooling3, which can offer much more than a simple documentation storage system or deliverable tracker. It can also give transparency to the customer and supplier on progress and help operationalize the contract and its many obligations.
When it's tough use your best skills
An organization's skilled professionals must be able to explain the steps to take when it gets tough. Do not underestimate the power of guidance, checklists4 and templates to use when facing problems. This is how you improve the process for handling difficult tasks that the project must solve. Invest to extract this knowledge from your talented staff and use tooling and technology to get the best practice efficiently out to future projects.
Get your best resources handling the difficult stuff and make sure they are teaching others how to handle it. They should not be wasting their time clearing up the mess of unprofitable contracts or handling basic tasks that should have been automated years ago.
We need to be practical, and prevent problems by writing better contracts that describe delivery. Then, when there is an unforeseen problem - solve it. This quality makes your team the smartest one to do business with.
About the author
Martinne Heckscher is a senior IACCM certified international contract and commercial manager (CCME) and an Associate Certified International Outsourcing Professional (IAOP). She is competent in all the major customer disciplines, contract management, international account management, program management, distribution support, third party management, buying and contract closure/in-life support.
At IBM GBS, she often leads the company in creating deep solutions that will transform the client's business. This requires a high degree of professionalism from the team deployed to understand the client's requirements and piece together a robust solution that will deliver the outcome, on time and within budget.