When is best practice not best practice?
Can we know what either really is, to be honest – unless we genuinely know what at least one of them should be?
These stark but critically important questions could apply to many aspects of life, but how about in the crucial business areas of contract management? Tightening up contract management could improve profitability by the equivalent of 9% of annual revenue, after all – and we think Enterprise Contract Management could be a huge factor in getting corporations there.
The source of that intriguing statistic is the IACCM, the International Association for Contract and Commercial Management, who have also, of course, shared their views with us on thedmcollaborators recently.
The future of contracting
IACCM is an organisation that EASY sees as a trusted source of wisdom in this area, and we networked extensively with its membership at the IACCM European Conference 2016 in early May in Rome (click here), which was the perfect setting for the latest thought leadership for the contract professional.
Of all the great content and debate, I’m going to zoom in on one definitive presentation – ‘The Future of Contracting,’ given by the organisation’s CEO Tim Cummins and its COO, Sally Hughes, on the second day of the proceedings.
I want to talk about this as I see it as a fascinating snapshot of what the IACCM and the contracting professional leadership cohort of today see as best practice. Tim and Sally started by saying that their findings were all based on real data –specifically, input from more than 1,000 experts and senior practitioners, and derived from an extensive series of interviews, roundtable discussions, forums and web based surveys the body conducted in the November 2015 – February 2016 period.
As you can imagine, the research covered a great many things that we don’t have time to cover, sadly. But there are a couple of things I want to highlight, as the group’s experts say are important determining factors for the global contracting community:
Key aspects of the contracting process will be undertaken through technology – but technology’s contribution won’t replace the human touch, but rather “change – and enrich” the contracting process. Over the next 5 years, contracts will not only be recognised as critical business assets, but will start to be treated accordingly. As a result, contracting will increasingly operate as a proper management tool for integration in business operations and for integrity in business practices.
However, the problem, say IACCM members, is that we have a situation where businesses have become dependent on their external suppliers and, increasingly, their performance is determined by the quality of operations across an ‘interdependent network’ or virtual enterprise. And such complex environments require a disciplined approach to their management – and require proper digital integration.
The gap between expectation and reality in contract management
IACCM members agree, seeing huge potential for better electronic, systematised workflows. As a result, in the near future the combination of analytical tools and artificial intelligence systems will enable extraction of data across contract portfolios, say IACCM professionals – offering not just efficiencies, but also far greater insight into the effectiveness of alternative contract types or terms, as well as management of contractual networks, not just individual agreements.
Contracts themselves will increasingly be seen as core business assets and also a source of valuable business information. But, again, there’s a blockage: incumbent contracts and commercial staff are in many cases “not well positioned and, in the opinion of executive management, frequently lack needed skills”.
The verdict’s clear as far as IACCM’s vision of the future of contracting is concerned: preparing for this future is multi-dimensional, but at its heart is technology.
So, in sum, contract management stands at the heart of modern business, acting as the real glue behind many inter-dependent and inter-locking entities and business processes. Digital and paperless ways of working are a corollary seen as vital for the future of the sector, too.
But here’s my problem. If that’s what best practice in in contract management is, are we there yet?
I don’t think we are – and I will tell you why in Part 2 of this two-part blog, which will draw on what I heard ‘from the coalface’ in Rome from the members tasked with dealing with all this.
I found what they said surprising and challenging – but also offering serious opportunity for the DM space.