When it comes to contract and commercial management, what does good look like? With some 83% of business people in a recent poll dissatisfied with their organization’s contracting process, you might think that this would be an important question and that businesses worldwide would be seeking answers.
By and large, they are not.
In past blogs, I have made efforts to describe ‘excellence’ in both areas. Yet to be helpful, organizations often need ways to measure current capability and performance. That is where tools such as capability maturity models and assessments can be useful. At their best, they offer not only an insight to current state, but also a benchmark against other organizations and a route-map for improvement.
Certainly that is the way the IACCM capability assessment works. It measures process, rather than organization, since ultimately it is process effectiveness that matters – and the quality of organizational performance will become evident as part of the results. It offers a variety of benchmarks, ranging from global, geographic or industry averages, through to comparisons by quartile. It also challenges organizations to ensure that contract and commercial practices are aligned with the strategic goals and objectives of the business (which often they are not).
The most common weaknesses are in leadership and technology. In many ways, the two are intertwined. Without technology, processes remain manual, time-intensive, resistant to change – and most important, they remain largely transactional and lack good management information or data. Because of this, the process (and people related to it) generally have limited status or influence, except at a transactional or deal-based level. As a result, it is a role that rarely attracts natural leaders and where top management fails to see the purpose that good leadership would serve. Lack of investment (in both people and technology) is an inevitable result.
IACCM data has shown very clearly the costs that are associated with poor contracting and the absence of good commercial data. Capability assessments reveal the nature of current weaknesses and the steps required for improvement. With these insights available, it should not be difficult to achieve solid progress. In a world where management claims to seek continuous improvement, you might expect rapid and immediate attention being paid to this area of business operations. Yet in general, it is not. There is an embedded reluctance to grasp the opportunities that come from change.
In part, the reasons for this go back to the already mentioned issue of leadership. But organizational politics and fear of disruptive change also play a major role. Many different groups claim an interest in contracting and commercial management. While none may be willing to take ownership or accept accountability, they are stubbornly determined to prevent anyone else from doing so. As a result, there is generally inertia, broken only when there is a major error or disaster. This is followed by a flurry of activity, perhaps some new form of control mechanism or addition of contract terms that protect against an event that is unlikely to recur.
Improvement will come. In most cases, this will be in spite of incumbent contract and commercial practitioners. It will be driven by technology – not the contract management software of the past, but tools and systems that inject powerful data analysis and enable new ways of contracting and new insights from contracts. ‘Good’ is already starting to look very different from the past.