Here on thdmcollaborators we’ve opened a dialogue with Tim Cummins, President of The International Association for Contract & Commercial Management, the IACCM. In the first part of our conversation, we found out about the body’s aims and values and its ground-breaking research – especially the astonishing fact that, on average, businesses lose an average of 9.2% of value down to poor contract management approaches. We’re picking up the conversation again to see what practical steps IACCM thinks business leaders can take to stop this worrying erosion of value.
thedmcollaborators This 9.2% finding is concerning. But what can be practically done about it? Are there steps you’d like to see organisations taking to repair the damage?
Tim Cummins One of the critical things today is that we are living in a technology-led world, but one of the biggest problems with contracting is that it has by and large remained a highly manual process which embeds a level of inefficiency. You can almost view it as medieval – written documents drafted in accordance with an individual’s perception of what is good.
The good news is that one of the exciting things we’re seeing at the moment is the emergence of new technologies, Artificial Intelligence, natural language processing, blockchain and advanced analytics. Organisations need to get a grasp of these opportunities to stem value erosion and bring contracting into the digital age.
thedmcollaborators That would be a great start!
Tim Cummins The second critical point is organisations need to start viewing the contracting activity as a lifecycle activity, a more integrated business process, rather than one where somebody works out the requirements, somebody else works out what standard or contract agreement is going to be used, another person gets involved with its negotiation, and a completely different group of people get involved with its implementation and management. Organisations need to define the process, every handoff/step-through, to make sure that it has integrity.
The third point is make sure that you have developed contract terms and conditions that are consistent with the business goals and strategies. One of the things that we find most often when we do benchmark work for our members is that the contract models and the contract terms that they have in place are not consistent with their strategies and goals and the way they want to relate to their markets.
The fourth point would be the need to think about the skillsets that you require to create good and sustainable business relationships. In particular, the role of those who are producing and managing contracts needs to change fundamentally: times for contracting are unacceptable, as are the costs associated with it. Some businesses try and avoid contracts altogether, which means they lose the benefit of holding structured discussions around the topics of, “How are we going to work with each other? What exactly are we trying to achieve? What happens if we don’t achieve it?”
It’s an important set of discussions to have – but at the same time, you’ve got to have those discussions in a realistic timeframe. Organisations need to redefine the contract management skillset, moving away from traditional world, where it’s about review and approval, into a world where contract professionals and procurement professionals are thinking, “How do I enable the business to make good decisions? What information, what knowledge do I need to give them? What tools or systems do they need?” Doing so will accelerate the ability of the business to get into the right type of contracting relationship.
thedmcollaborators I’m sure I can speak for all of thedmcollaborators community when I say that’s really useful advice for business, and thanks for taking the time to share your organisation’s insights, Tim.
thedmcollaborators was speaking with Tim Cummins, President and public speaker at the IACCM (The International Association for Contract & Commercial Management), which has 43,000 members in169 countries and in over 17,000 different organisations.
The first part of our interview can be found here