Contract Management: The new opportunity for strategic procurement?

 In Blog, Resources

Is Contract Management the new black for the procurement profession?

Tim Cummins, CEO of IACCM, has been broadcasting the value of contract management to his growing readership for some time now, demonstrating the virtues of good contract management, but also the growing necessity of it. In this eSeries we share 10 of Tim Cummins blogs which help define and demonstrate this statement. Part 1, Contract Management: The new opportunity for strategic procurement is below. Subscribe to our blog to receive the next installment directly to your inbox. 


PART 1 

Several months ago, I was talking with a friend who is CEO of a mid-size software company – let’s call it Company X. She had been working with the marketing group at a large corporation and they were excited by the functionality that her product offered. The IT organisation were also supportive because of its ease of integration and use. Both could see significant financial benefits when compared to competitive offerings.

The problem was that Procurement had already started a bid process and Company X was late to the game. Their sales team – despite the internal support from Marketing and IT – had failed to gain Procurement support for either including them in the bid, or putting the process on hold. In frustration, my friend decided that she would personally call the responsible Procurement manager. After several minutes of conversation, she felt compelled to ask: “Which matters more to you – getting value and the best solution for your company, or complying with the process?” Without hesitation, the reply was: “Complying with the process”.

It is attitudes like this – and the blind adherence to rules – that helps account for the findings published recently by the Chartered Institute of Purchasing that ‘Three quarters of IT chiefs believe Procurement hinders rather than helps”. Perhaps indicating the depth of the problem, the article fails to question why such attitudes prevail and what Procurement should do differently. Instead, it focuses on the risk that this non-compliant behavior is creating – in other words, the problem is entirely with the executives and their attitude.

To me, the interesting point is that the remaining 22% of those IT chiefs presumably think that Procurement brings them value. So what are those 22% doing differently? I bet it is not that the IT chiefs are mindlessly subservient; it is more likely that they have procurement staff who are better integrated with their function and support the demanding business goals that are today imposed on IT executives. They are active in aligning business value and needs with market capabilities; they achieve compliance because people want to engage them.

I feel that talented procurement professionals are being badly let down by those who call for ‘licensed practitioners’ to be imposed on the business. It undermines their skills and contribution to imply that the only way Procurement can gain status is through diktat. It overlooks the fact that business functions are servants to the business, not its master. They are responsible for offering the services and support that merit inclusion and involvement in decision-making.

Within every business, processes are essential to ensure underlying controls and efficiency. But they represent a platform – and a key aspect of professionalism is to exercise judgment in their application. We must understand not only the rules, but also their implications and impacts in specific situations. The mark of true professionalism is therefore to know when it is appropriate to deviate from the rules (or to challenge and change them) and how to manage the consequences.

Today’s focus on business value means that we must all be ready to question what we are doing and how we do it. If three quarters of your clients feel you are hindering their work, I suggest it is time to rethink what you are doing – not to turn around and blame them for avoiding you.

 

This article is part 1 of 10 from the series “Is Contract Management is the New Black for the Procurement Profession?”

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