Commit to a new way of doing business

Gregg Barrett LAST week I introduced the framework developed by the International Association for Contract and Commercial Management (IACCM). Called commitment management, it is defined as a systematic way to align business requirements and capabilities with contractual and governance structures, policies and processes, to ensure that business relationships are established responsibly and fulfilled as agreed. I also said this framework was supported by new technology that increasingly enables controlled empowerment new levels of managed flexibility to cope with the challenge of extended value chains. The value proposition behind commitment management, at the highest level at least, is that it will allow organisations that follow the practices to have the ability to make and manage commitments faster, more reliably and profitably than their competitors. Heavy stuff you might be thinking. To simplify it, I have tried to explore the 10 practices that constitute the commitment management framework, with a practical example of each as employed by organisations that are considered best practice. I have based the examples on a 2007 IACCM presentation on the topic. 1. Ownership and accountability for the contracting process Best-practice corporations make contracting a defined and managed process, not a series of fragmented activities that aim for a consolidated set of documents or focus on risk containment. They ensure that someone in the organisation has ownership for the effectiveness of the process from bid inception to contract close-out and is accountable for the quality of its results. Example: A senior executive is responsible for implementing consistent policy and related processes that provide an environment for effective resource utilisation, enterprise knowledge capture and its application and business process measurement, learning and improvement. 2. Terms and structure audit and update Best-practice corporations ensure the competitiveness of their terms and the ease with which contracts are updated/ changed. They have systems in place to capture internal data and monitor competitive practices. They ensure that time is spent in the most productive areas, not repetitively addressing the same issues. This ends the firefighting mentality.

Example: A firm regularly assesses its terms structure and applies LEAN methodology (i.e. to accelerate the velocity and reduce the cost of a process by removing waste) to modify or eliminate non-value-added or marginal terms with the objective of minimising negotiation effort on passive terms and maximising focus on value-creating active terms. 3. Integration with product lifecycle management Best-practice corporations have aligned contract resources and tools with product management/marketing to ensure that products and services carry terms and offer capabilities that enable competitiveness throughout the product lifecycle. Examples: A firm includes commitment management professionals in product market strategy formulation and supply chain professionals in product design and delivery strategy. 4. Portfolio risk management Best-practice corporations move beyond a situational analysis of risk to ensure that internal systems enable a balance between consequence and probability, that risks are viewed and monitored as a portfolio and that risk-mapping techniques are used throughout the contract and negotiation process to support highly visible enterprise risk management data covering contractual and relationship risk. Example: A consistent scoring mechanism is used for all commitments. Commitment risks are proactively monitored, managed and updated in an enterprise database 5. Value chain focus Best-practice corporations have addressed the integration of buy-side and sell-side commitment management to ensure efficient, synergistic relationships that support responsive delivery capabilities against shifting market/customer requirements. Example: A regular process is established for co-ordination and strategy sharing between sales contracting and sourcing/procurement contracting teams. 6. Electronic contracting strategy Best-practice corporations assess the potential scope of electronic tools and systems to streamline their contracting process from inception to close-out and develop a holistic strategy for the acquisition, development and implementation of those tools. These include integration with other enterprise applications and strategies (for example, e-commerce). Example:

Implementing a contract lifecycle management solution to provide workflow controls, audit controls and a data repository of contract commitments and terms. 7. Self-help skills assessment and development tools Best-practice corporations are implementing tools and support that give substance to global employee development and effectiveness, at functional level and to empowered workers who perform a commitment negotiation or management role. Example: A contracting organisation utilises the IACCM-managed learning modules to assess and develop commitment management competencies for its members. 8. Strategically-aligned measurements and reporting Best-practice corporations use sophisticated tools and techniques to create refined measurement and motivation systems that incentivise collaborative behaviours between internal functions. They also determine key performance indicators that are adjusted to support corporate goals and strategies, drawing from established and respected methodologies. Example: Commitment management leaders and other corporate business leaders jointly identify dependencies between their organisational objectives with associated KPIs that are incorporated into their respective performance objectives and management incentives. 9. Pro-active change management Best-practice corporations focus efforts on building their post-award contract resources and capabilities to drive optimum performance. This is differentiated by the pro-active identification of need/opportunities for change thereby reducing disputes, maximising financial results and cementing relationship values. Example: A process is implemented by which best-practice learnings, market conditions, relationship performance and contract trends are reviewed on a quarterly basis to identify opportunities to implement contractual changes that will improve relationship effectiveness and drive greater value to all parties. 10. Differentiation and sources of value Best-practice corporations have contracts groups that describe their differentiated role (relative to other internal groups) and the specific values they provide (in terms of measured contributions to business performance that are tied to corporate strategy). They have methods

to disseminate this information in a manner that creates an internal awareness and understanding of their role and contribution. Example: An overview of commitment management opportunities and accomplishments is incorporated into regular C-level communications to the corporation. If you would like a first-hand account of the value that organisations are realising from employing the practices I have outlined, then attend the IACCM Americas 2009 conference taking place at the end of this month (http://www.iaccm.com/americas/overview.php). At the conference, you will get the chance to hear from organisations including Procter & Gamble, Conoco-Phillips, Baker & McKenzie and Credit Suisse. Alternatively, you can catch the IACCM EMEA 2009 conference later this year.