“Getting to Grips with Contract Management”- a further extract

Here is a further extract from our new Spend Matters “Perspectives” briefing paper:

“Getting to Grips with Contract Management - How the CPO Can Lead on Managing Contract Risk and Opportunity – Discovery, Focus and Capability”

The Paper is available to download, free on registration, from the Seal Software website here. In this section, we sum up what the CPO and procurement generally can practically do to go about improving the state of contract management in their organisation.

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A planned, systemised approach will pay off given the scale of the issues here. So unless your organization is already in the top-performing bracket in terms of contract management, we recommend treating this as an improvement program, with appropriate program management disciplines and processes.

The purpose of this paper is not to give a detailed “how to” guide to implementing all these elements of contract management. That will have to await the 250-page book... However, there are five key overarching points for the CPO, or anyone else taking on responsibility for improving contract management in the organization, to consider.

  1. The need to prioritize – we may have said enough already to make it clear that contract management is a huge topic and achieving high performance won’t happen overnight for most organizations. Any improvement program needs to consider where the biggest benefit can be achieved quickly and cost effectively.
  1. Understand your starting point – there are clearly different approaches needed depending on whether this is a “steady-state program” or one driven by an event such as a major M&A event. The program will also differ between a situation where there are already some contract management disciplines in place, or where no structure or information exists. In many cases, a step change through the contract discovery process may be needed just to get an initial grip on the situation, before we can implement ongoing contract management disciplines.
  1. Treat Contract Management as an Information Management Challenge – getting contract management capability and maturity to a top performing level requires not just procurement and legal acumen nor initial visibility. It requires that organizations treat contract management as an information management challenge. This is at first and then over time, throughout a contract and supplier lifecycle. Just as companies in regulated industries (e.g., defense) track the movements of all employees and guests in key facilities through a combination of automated credentialing systems, so too should procurement (or any contract steward) gain insight into all the contract “movements” within their organization. A single, uncaptured exception a new SOW, clause change, etc., is one too many. Information management must come first.
  1. Focus on the raw materials – ultimately, the raw materials for achieving effective contract management are people (skills, capabilities and knowledge) and tools (technology, processes and data). A sustainable improvement program needs to look at both; it is unlikely to succeed by merely focusing on one or the other.
  1. Stakeholder management is key – one of the difficulties with contract management is that responsibility is often devolved around the organization. The CPO has an interest given the role in sourcing and therefore contract creation; the legal team will usually play some role; the COO or CFO may “own” corporate risk; and obviously a whole range of budget holders and contract users have an interest. So any successful program must work out how to involve the different groups and gain their commitment to change.

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