SciQuest NextLevel Dispatch: Exploring Contract Risk and ROI (Part 1)

Earlier today at SciQuest NextLevel, I had the good fortune to run into an old industry friend, Tim Cummins. Tim continues to serve as CEO of The International Association for Contract & Commercial Management, better known as IACCM, and is as much philosopher as pundit and researcher. I had the chance to catch about half of Tim’s breakout presentation at the event, and in just twenty minutes, I had a couple pages of notes on challenges in measuring value and the right metrics in the contract management sector, many of which (as usual for Tim) are worth documenting and exploring in more detail.

I’ll share a few of these thoughts in this post and follow up with other comments from his presentation later in the week. The central gist of Tim’s theme during his talk was that we are not setting ourselves up for contract management success, but rather contract management misfortune, given the current alignment of arrangements in buy-side contract negotiation, creation, implementation and management. For example, according to IACCM’s latest research, litigation with another party ranks as the “42nd highest actual risk in contracts.” Yet it is often prioritized as the first element of focus.

As Tim puts it, “most contract work tends to be focused on the wrong topics – we think we’re creating a great risk management structure and tool [but we are putting all of our time on the wrong areas." Consider how measurement metrics change in contracts once they are put into place (and even in the negotiation process), yet we do not focus enough on capturing the right set of metrics to measure and manage performance or communication.

We’re also not living in the 21st century, either. For example, Tim posed the question: Do our contracts recognize the use of instant messaging today, which is becoming a dominant form of intra- and inter-company communication? We need to account for new communications vehicles in structuring contracts for success and feedback – and even for risk management and litigation purposes.

Central to the challenge is we do not learn from experience. Tim cited IACCM data that 29% of organizations do not have a system to capture and share contract learnings at all. And of those that do, only 27% (in total) say it works well. Another 33% say it’s not effective and 11% say they have such a system but it’s not used. In other word, we are flying blind when it comes to improving the contracting and contract management process when it comes to learning from experience – and our own data in terms of what works and what does not.

Stay tuned for further coverage from Tim’s presentation and how best to look at contracting ROI with the right set of metrics.

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