I’ve recently been taking a look at the findings and key highlights of a report by Peter Smith of Spend Matters in this blog. In this third and final post I look at Peter’s conclusions on how effective Contract Management may be achieved.
Peter advises an end-to-end approach with a focus on a range of areas that run through the whole cradle to grave contracting process, but before any of this can be put in place, he points out that to begin with a discovery exercise is necessary. This will establish which contracts are live, who owns them and the key terms and conditions that might contain potential risk or opportunity – the two key themes of Peter’s paper.
Peter also notes that discovery can now be achieved with “tools”, rather than a protracted, expensive manual project – and this is exactly where Seal fit in with our Contract Discovery and Analytics solution.
As Peter points out, the purpose of his paper is not to give a “detailed how to guide”, but provides five, key overarching points for improving Contract Management in any organization:
- The need to prioritize – any improvement program needs to consider where the biggest benefit can be achieved quickly and cost effectively
- Understand your starting point – in many cases, a step change through the contract discovery process may be needed just to get an initial grip on the situation, before implementing on-going contract management disciplines
- Treat Contract Management as an Information Management Challenge – get Contract Management capability and maturity to a top performing level – gain insight into all the contract “movements” within the organization
- Focus on the raw materials – ultimately, the raw materials for achieving effective contract management are people (skills, capabilities and knowledge) and tools (technology, processes and data). A sustainable improvement program needs to look at both; it is unlikely to succeed by merely focusing on one or the other
- Stakeholder management is key – one of the difficulties with contract management is that responsibility is often devolved around the organization. So any successful program must work out how to involve different groups and gain their commitment to change
Peter concludes his report by stating that, “Contract Management is not well understood as a process by most organizations, and few understand its importance… Contract Management is fundamentally about managing risk and value”.
But in order to get started, the first and very necessary step is Contract Discovery – qualify and understand the contract population, internal ownership and the key terms and conditions contained within contracts enables an organization to quickly identify risks and opportunities.
The full report by Peter Smith Managing Director, Research, Spend Matters UK/Europe can be downloaded here: http://seal-software.com/download-spend-matters-preparing-for-procurement-perspective-report/