It can be hard to create a buzz around contract management. Get it wrong and it can sting badly. Get it right and the results can be honey-sweet!
Procurement can sometimes be a real flash in the pan. The commercial squad can descend on any project that looks big enough, ugly enough or sexy enough. Money and risk can be like bees to honey – the higher it is, the sweeter the taste. It’s a sure fire way to get procurement’s attention!
Procurement professionals can be highly skilled at project planning, sourcing and providing commercial advice leading to strong contract frameworks. But when the show is over often everyone moves on to the next big shiny thing.
While there is merit in ensuring that a solid sourcing exercise is executed, often the cream on top comes from executing exemplary contract management.
Contract Management? Yawn!
Contract management doesn’t have to be boring! If businesses get serious about contract management then serious results can be realised. There is nothing worse than a set and forget contract. It is almost guaranteed that some gold is being missed somewhere.
Contract management is quite simple at the heart of it (although admittedly it could definitely do with a re-brand).
How to Get Started
1. Ride on the buzz of signing. Capitalise on the newness of the contract by setting up the relationship meetings correctly at the beginning.
If you are a procurement person who will not be managing the contract then set up the meeting with the key relationship managers on both sides of the fence. You’ll be surprised how much value you can keep extracting, even if the contract is only freshly anointed!
2. Take time to get the roles and responsibilities right and make sure each party understands their role.
3. Measure results and performance in a meaningful way. At the beginning of the project think about good ways to measure success. Make sure to ask your internal customers and supply market for ideas.
4. Execute. Set the meetings, carry them out, do the surveys, do the reviews, gather the data, analyse the data, report on the data.
How to do it right
Being organisationally ready is key. While individuals can carry out actions and get results, true value is experienced when the culture of the organisation (or the procurement team) is geared towards supplier relationship and contract management (SR&CM).
The best examples can be seen where dedicated SR&CM resources reside in a procurement team, rather than expecting individual team members to carry out these tasks within a role that encompasses many other specialisms.
Contract Management Challenges
Being aware of the challenges of embarking on a culture of change can help to set reasonable expectations of what is achievable and how long it may take. Knowing some of the sticking points from those that have gone before can be helpful in scoping out the scale and length of journey that is ahead.
The common challenges can be:
- Resource. Obtaining sign off to get dedicated resource and gaining buy-in on the idea. Finding the right skill sets can be difficult. Sometimes new roles and directions can change the culture of the team.
- Internal customers complaining about suppliers but either: not telling anyone; not telling the supplier; not telling procurement; and / or all of the above, plus not being willing to measure performance once mechanisms are put in place.
- Bias – not wanting to use a supplier “just because”. To manage true poor performance (as opposed to perceived), then procurement need something tangible to build the picture and also, to give the supplier a genuine chance to improve.
What is the pay off at the end of the rainbow?
If procurement functions commit to embedding contract management into their team environment there can be many rewards.
- Increased capability within the Procurement team – opportunity for other specialisms within procurement to learn from SRM&CM experts
- Increased capability in the business as the contract managers and people dealing with the suppliers in the day to day increase their commercial acumen in regards to having tough conversations (or good ones!) with suppliers
- Closing the gap between the supplier and the buyer. Understanding each side of the fence and the challenges experienced from both sides.
- Ability to tackle poor performance in contracts effectively and efficiently as evidence is gathered, reported on and monitored. We’re not talking big brother looking to punish the supply market, there are often improvements required on both sides.
This article is solely the work of the author. Any views expressed in it are those of the author and do not necessarily represent or reflect official policy of the New Zealand government or of any government agency.