I appreciate your response very much. I do feel that maybe I wasn't as clear as I should have been on the way we currently process the paperwork for these resources or rather the time periods that we are working with. We currently have terms for these resources that range from one week to 12 months. That said, most of them are over 3 months and the majority run 3-6 months. So thankfully we are also only using PO's for anyone working more than 1 month and usually only the 3-6 month range resources are renewing on a regular basis. I hope that helps to paint a more clear picture of the situation.
I would raise a call off PO so invoices can be processed and hours agreed, I wouldn't raise a PO for each person each week
Yes, there are multiple templates and business cases available for potential outsourcing frameworks. IACCM offers its members access to a wide range of standard templates which can be used as-is, and/or adapted to include elements specific to companies on a case-by-case basis, so we should learn more about the specific requirements, needs and size of your organization prior to analyzing templates for those purposes.
As Pablo has indicated there are multiple options, as a business case will be highly variable and largely depend on the structure a given enterprise expects of their business cases across the enterprise. Plus, the business case will largely depend on the nature of what is being outsourced. With these variables in play, someone else's business case might not be an ideal for your purposes - it will have limitations and should not be treated as the solution. Rather, it is best utilized as a general starting point. Has your enterprise created business cases for other endeavors? Those internal templates should be consulted.
With these caveats aside, you are encouraged to join the IACCM Community of Interest (COI) focused on Outsourcing, as there are probably a few members in the Outsourcing COI who can share some specific examples.
Thank you very much, i will join the IACCM Community of Interest :)
BlueCross BlueShield of South Carolina
It is a good topic to talk about. I struggle with what metrics to report on. It only takes one bad contract to cost the organization lots of money but it is hard for people to grasp it. How do you report on that? Currently, I report on the number of contracts the organization has and the amount of money expected to spend under a contract. Cost savings and cost avoidance is reported by my department through our category managers. I believe the category managers take the first offer from a vendor and then subtract the final number after negotiations to calculate cost avoidance. Cost savings is calculated if the organization will contractually pay less under this contract than it historically has for that same commodity. These definitions were agreed to by both our CFO and our Director.
• Century 21 Vanguard
Patrick, are you familiar with IACCM's "10 Pitfalls" research? This study looks at the top value erosion areas. Flip the erosion perspective and you'll quickly find key areas where by improving your capabilities you will improve ROI. Please reach out to me if you wish to discuss this in detail.
• BlueCross BlueShield of South Carolina
Thank you for the excellent recommendation. I've reviewed the research in the "10 Pitfalls" and it has provided me with concepts that I will research further internally.
Patrick, in addition to this first part of the "ROI of Contract Management", I'd also recommend to continue reading Tim's part two of that blog: blog.iaccm.com/commitment-matters-tim-cummins-blog/the-roi-of-contract-management-part-2 You may have already read how the article describes how the Contract Management role has evolved. Now, in this new section, you will have the chance to identify the benefits that can be achieved when creating and demonstrating value from such a role.
Michelle, you might want to first search the IACCM Library for data that can help you make your case. We have studied many large global companies and believe the average loss for poor contract management is about 9.15% of revenue. Of course this varies depending on industry and your organization's contracting maturity. Please reach out to me if you'd be interested in an assessment of your organization.
You might also wish to look for last year's Innovation Awards, where the Winner Layne Jeffery built a CM department where there was none:
An interview with him and the other award winners is in the library as well.
• Rogers Communications
Thanks to both of you. I'm new here, so my apologies if I'm asking obvious questions.
Michelle, if you are still struggling with this, let me know and I will be happy to arrange a time to talk and help with your questions.
I hesitate to give you a generic answer because it depends a lot on some of the business objectives and management issues that prevail in your company. Your success will depend on making a proposal that aligns with management thinking and priorities.
You can reach me at firstname.lastname@example.org
• EB5 Brics
While you build the business case, if you need technical assistance or perhaps some metrics, I'd be happy to help.
Hi Peter - I think this is a useful survey to capture the views of people. From across the other side of the world, the two that resonate significantly with me are very similar to this list, with I think defining value right near the top.
I think the easiest thing for people to measure their success used to be cost reduction. But I think that mindset is a long way from the current movement of being strategic, and running perhaps even against the push towards social or environmental outcomes.
Without an easy measure, from my perspective, the best way to measure success is the feedback from your end users which includes suppliers. Did they understand the process, did it work for them, and post contracting, are they happy ? Sure, it gives people less ability to compare across organisations, but I think it's that competition, rather than co-operation, that sometimes stops us from achieving better outcomes.
• Simoons & Company
From a customer-supplier perspective I agree with your observation that cost reduction has most often been the measure of success. However cost reduction on that side often leads to rising hidden costs elsewhere in the organization. In strategic partnerships we not only look at value, but also at the full relationship to measure success. To do so we interview, and/or survey, stakeholders at both sides.
Most important element of measuring success however, is not the measurement itself, but the action plan connected to it to improve the elements that lag behind.
God day Sedef - well, again, I hate to see a good question like this sitting there all along unanswered, so here goes my contribution.
Firstly, if you get to create your own KPI's, I think that this is an awesome opportunity for you. It's a great opportunity for you to pick some criteria on which to have your performance judged by.
I think it's an opportunity though for you to think about whether or not you want these KPI's to relate to your performance alone, or contribute to or align directly with organisational performance. This could be a factor of where you feel you are as a team with procurement maturity, as well as your ability to influence the organisation's plans. Let me explain by way of example.
Four years ago, for our team, it was all about how quickly we could turn around tenders, time to contract, and the number of complaints (which thankfully were none) about the conduct of our tenders. So for us then, the KPI's were team focussed and didn't really track well into organisational plans.
Fast forward to the present day, the team has pushed back into the business to be engaging with them at a much earlier stage. The KPI's we are moving to are around developing category plans with the business and presenting them to the senior leadership team, monitoring and reporting on the significant contracts in their portfolio and working with the teams on meaningful social procurement outcomes that are relevant to their categories. As you can see, these are less about the team, and track really well into where we want to be as an organisation.
Oh, and like all KPI's, it perhaps goes without saying, but make sure that they're SMART (Specific, Measurable, Attainable, Relevant, and Time-Bound) or SMARTER (adding Explainable and Relative to the mix).
So Sedef, my advice would be to jump the opportunity to set your KPI's, and make them relevant to where you are and where you want to be. I think you are the best person to work that out, rather than me just telling you what you need based upon your one paragraph question.
Have fun with making them - and it would be great learning for others within the forum for you to tell everyone what you ended up with !
• Ngamuru Advisory
Following on from Darren's excellent points, I wanted to find out how you went? Did you find the missing one? I started my Performance Based Contracting (PBC) journey in 2004 designing, implementing and managing performance measures (not just KPIs!). Over this time I have seen many, many performance measure that can be used depending on what you are trying to achieve. Indeed, over the years we have actually formed the opinion that there are more than simply KPIs, since most humans can only handle 3 - 5. Therefore, having dashboards of 20 it too much information. So while there are a number of websites that can give you a variety of performance measures, can I suggest you have a look at why you want to measure; what is the outcome you are trying to achieve? Is it the standard project ones (scope, schedule and cost), or are there other things such as the health of the relationship, the culture of safety, etc. And if you think you can't measure the last ones, you can! Just takes a bit more work to set-up. So best to work that out first.
To help, as an IACCM Fellow I write on blog where I write about this (www.performancebasedcontracting.com), which sometimes become articles for IACCM (part of the role of an IACCM Fellow). Therefore, I'd suggest you have a look here and see if this helps. There is probably a lot of content (all free!), but hopefully it helps.
Anyway, I hope this helps you on your journey. And don't be afraid to ask for help!
Thanks, Phyllis, I am glad that you found the webinar helpful; it was certainly a great session to moderate, with some really good questions at the end. I agree - we often don't pay enough attention to the learning style and the impact that has on how information is absorbed. Paul Branch
Personally, I would say the 10 are still applicable today (Jan 2020). I also think the point about how fast the world is moving - particularly technology wise - is true and it has only sped up even more in the past 5 years.