We are reminded of the “big picture” view of contract management in a recent post from Tim Cummins, the prolific blogger on the topic as CEO of the International Association for Contract & Commercial Management (IACCM). In a recent blog Contract Management: Lot’s of focus, but what is ‘good’? Cummins notes there has been a surge of interest in contract management in recent years.
The surge of interest, Cummins notes, has resulted in organizations that try to “professionalize” their contract management staff by trying to improve their effectiveness and efficiency. But this alone is no guarantee of successful contract management; indeed, what does “good” contract management mean?
Cummins then goes on to make a key observation that’s worth extra emphasis. Successful contract management really depends on the goal or desired outcome: what is its true purpose in the organization? He then notes three types of goals:
* “Improve the bottom line”
* “Ensure greater agility and flexibility”
* “Compliance and control”
Alternatively, one can think of these phrases as different kinds of efficiency outcomes:
* Cost-efficient outcomes
* Operationally efficient outcomes
* Regulatory/compliance-efficient outcomes
Thinking of your organization’s goals when thinking about how to improve or better-organize your contract management efforts can be a helpful exercise.
For instance, if your company knows that revenue or operational dollars are being lost due to supplier or contract commitment problems, your contract management team’s focus is going to be cost and performance issues.
This means paying special attention to recording and sharing all financial aspects of a contract as well as performance reports. A contract management database, after all, is the best place to store information that may come in from several departments: audit, accounting, accounts payable, etc.
If your company is aware of problems created by slow responses to changing conditions with key suppliers or customers, agility should become the key focus of your contract management team. This may mean paying special attention to gathering information in the contract management database on performance reviews that can help identify which suppliers or partners are able to actively problem solve – and which aren’t.
The point isn’t to task your team with identifying winners and losers; it’s to gather and review information that can inform management’s view of how suppliers and business partners react to changing conditions.
If your industry is heavily regulated, or needs to pay particular attention to regulatory requirements, focusing on compliance and control is going to be a priority.
Knowing this as a goal, then, should inform the training and task management of your contract management admins and staff. Are there reporting requirements that contract management staff should be aware of and support? Should they be aware of information storage requirements? Having contract management staff in the loop on compliance issues may help improve company-wide compliance.
Of course, for many businesses or industries all three outcomes are desired, though to varying degrees. Thinking of types of outcome, however, may be a good exercise to organize your contract management efforts.