Mind the Contract Management Best Practice Gap!

At a recent landmark conference by the IACCM, the International Association for Contract and Commercial Management, the leading membership body for all those who work in this vital part of 21st century business, we all heard about the future of contracting and what best practice should look like in contract management. Armed with that information, and insight I’ve accumulated working with EASY customers who’ve been trying to deal with these problems over the years, I sat down with some IACCM members to ask them about their day-to-day workflows.

This is what I discovered.

Even the biggest enterprises are really struggling.

And that genuinely surprised me.

I’d had fair warning, as the IACCM’s very tuned-in leadership had already flagged that a lot of firms were struggling with some of the basics of modern contract management. Worse, in some ways, we’ve gone backwards. When I came into the industry it was a given that a contract had to be a win for both parties, buyer and seller. Now it’s all about getting the lowest possible market price as the default setting for all negotiation.

The good news is I think the contracting community’s woken up to this and there’s a growing realisation that value for both sides has to be evidenced – that we need to move to a more relationship-oriented way of managing commercials. But then there’s another issue; the speed of business today is so fast that organisations really need to have instant access to all relevant information at all stages of contract negotiation and set-up.

Is a contract a way to screw the supplier to the ground?

But they don’t. They’re not there, and that’s surprising after years of commercial data processing. I spoke with only one team that said it had mouse-click access whenever needed to a proper database of contract histories and content. IACCM data released at the conference I was at (www2.iaccm.com) told us only 52% of members say they have any sort of digital system for contracts, and of that ratio only 17% expressed confidence that they could actually find what they needed.

Surely there’s a link here? Surely the challenge of an overly-rigid contracting culture and the desire to move to a more relationship-based one can only eventuate when we have better systems to base that dialogue on – where there’s real visibility into what people are doing, have done, and have committed to do?

Another surprise for me was how shallow the penetration rate of these systems that have all this data and permissions is. Contracts are the lifeblood of the enterprise, and so are a resource that needs to be properly looked after. That can only be achieved if we know that only those people who should see the contract can and can work on it on a tightly-defined basis.

That so many IACCM delegates in large organisations admitted they couldn’t do this gave me pause for thought, I have to say.

But this is not at all just about buying an ECM system to help, essential though that is. The C-suite’s not paying enough attention to contracts, despite the fact that they are a vital cornerstone of successful global business now. As a result, there is inefficiency and leakage of the potential for better relationships and hence better profitability throughout the supply chain.

Let’s start helping the contract manager

I told you that I wanted to explore the gap between what we know is contract management best practice and what’s out there.

I think the gap is a lot bigger than any of us would really want.

But I don’t see this as a recipe for despair – far from it. I see it as a huge opportunity for the DM community.

Let’s open up that dialogue with the C-Suite. Let’s start opening the eyes of these harassed contract managers to the potential and power of paperless, integrated ECM contract management.

And let’s deliver together that amazing IACCM vision of the possible tech-powered contract management future: a future where the combination of analytical tools and artificial intelligence systems will enable extraction of data across contract portfolios, so 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, making contracts both core business assets and also a source of valuable business information on an on-going basis.

We can get to that place. Are you game?

Howard

The author is Howard Frear, Sales & Marketing Director at EASY SOFTWARE UK

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