Author: Tim Cummins
At the start of last week, I had two very different conversations. In each case, the conversation was with the global head of the Commercial & Contract Management function and in each case they were handling major outsourcing and services agreements. But at this point the story starts to diverge. They are summarized below:
- Has been instructed to cut CM resources by a third
- Is struggling to demonstrate specific value or explain what impact the headcount cut will have
- Has been ‘too busy providing operational support’ to develop a forward-looking strategy
- What technology?
- Is experiencing sustained growth in functional status and budget
- Has documented contribution of $60m cost reduction / revenue growth in first half 2018
- Has an approved strategic plan and executive sign-off for forward investment
- Has implemented technology to drive data, efficiency and value delivery
So what did they do differently?
Organization #1 is typical of so many – hard working, industrious, committed, but ultimately invisible in terms of value. When reviewing opportunities for cut-backs, executive management simply asked the question “Will it have any effect if we reduce headcount?” Even though there certainly will be an impact, there is no data to quantify this or to support the continued level of budget.
Organization #2 also kept busy – but with a somewhat different focus. Following a capability assessment undertaken by IACCM in 2017, it embarked on a program to ensure functional alignment with corporate goals and strategies and to gather data to demonstrate its business contribution. This led to a rapid review of the tasks being performed and ensuring that these were connected to quantifiable benefits. A business case for small technology improvements that would streamline workload and support delivery of those benefits was approved in the summer of 2017.
As a result, the function has been able to show tremendous progress in the value it is adding.
• An average 25% reduction in contract cycle time due to easy search capabilities
• Regular management reporting on key business and commercial indicators
• A single, harmonized global process for document management
• A range of validated savings and revenue improvements through:
o Avoidance of de-scoping through contract interpretation and close client obligation management
o Obligation management – spotted and collected on missed rights that were not being exercised by Capgemini
o Avoidance of service credit payments
o Capturing service level earn-backs
o Cost avoidance via a decrease in maverick spend
o Improved oversight of renewals and consolidation opportunities
The lesson from this is rather self-evident. Don’t just assume that being busy translates to value. Far too often, groups fail to challenge what they are doing or how they are doing it. As a result, their work may fail to keep pace with changes in business strategy or priorities and almost certainly they lose visibility at senior levels.
It can be hard to self-challenge, which is why most successful groups gain some sort of external input. This could be through techniques such as a capability assessment, or it might be through gathering external benchmark data – simply finding out what others are doing. That could be through formal research, or more simply by attending roundtables, industry conferences or member meetings. IACCM offers all these things to its members – yet in common with other professional associations, we find only around 20% take advantage of what is on offer.
Finally, there is a method that doesn’t even require you to leave your seat. The IACCM Benchmark Study runs every three years and provides participants with comprehensive data (at no charge) which they can use to self-assess and have meaningful conversations with senior management.
So ultimately the lesson is, if you find yourself in the situation faced by Organization #1, there really is no excuse.
Read more from Tim Cummins on the Committment Matters website.
Tim Cummins is CEO of the International Association for Contract & Commercial Management (IACCM), a non-profit organization that he founded in 1999. Read more here.