Recently the CEO of the International Association of Contract & Commercial Management, Tim Cummins, has been blogging on the top 10 issues of contract management.
Here’s a somewhat condensed version of these 10 items:
- Should legal/law departments “own” contract management
- Does contract management software serve any purpose?
- What’s the difference between contract and commercial management?
- Can suppliers/vendors be trusted?
- Can procurement be trusted?
- Is it possible to show ROI of contract management?
- Is the path to better compliance through involvement of contract managers?
- How important a role should compliance play in contract management?
- Why is it so hard to get senior management involvement in contract management?
- The fundamental difficulty of defining contract management
Looking at the list of big issues, it is pretty clear that contract management should be a core competency because of its affect on the bottom line in any enterprise or business.
Without a doubt this is a great list, but the “big picture” view has to be this: without a serious commitment to engage in organized administrative and strategic contract management, any business is exposing itself to real risks.
- The risk from noncompliance or poor compliance of legal/governmental requirements – which are only expanding, day by day, in many industries and business sectors.
- The real risk of “leaking” financial value from underperforming contracts. Underperforming can mean spending more money on services/contracted products than what contracts call for (due to poor oversight or billing and invoicing errors).
- The real risk of losing clients and customers from underperforming vendor contracts. This can mean lost business, lost clients, lost sales and lost customers because of quality and operational performance in the supply chain.
- The loss of unrecoverable administrative costs due to too much time and energy devoted to searching, recovering and reviewing information in an unorganized system of contract storage.
- The “opportunity cost” of failing to spot important (beneficial or harmful) trends in the costs/value evaluation of company-wide contracts. Think of this as the loss of strategic information that can feed “big data” efforts and business intelligence data.
When you add up all these risks from not committing to contract management, it is very clear that these often hidden problems are exactly the kind that leach money from the bottom line of companies and leach value from a company’s strategic value or competitive advantage.
What emerges, then, is the conclusion that managers and administrators of the contract management task are at a key, strategic role in any organization.
At the administrative level, managing a complete, up-to-date and searchable database means putting in the organizational time and energy to create an efficient, data-rich database. That data, in turn, forms the foundation for information that can serve many useful purposes and reduce risk across the enterprise. That’s a lot of work, and no doubt, it’s not always easy.
But if a company commits to contract management, it needs to devote time and energy to giving contract managers the right tools as well. A tool such as Contract Assistant makes all of this work far easier than any homegrown system can accomplish. Your data is usually only as good as your database, after all.
And, realistically, why create a database “by hand” these days when multi-featured products like Contract Assistant exist?
But let’s take a step back and remind ourselves that contract managers play a key role. So three cheers for contract managers and administrators! Let’s hope they get the support they need tackling all the “top issues” of contract management.