Planning Business Process Improvement in Contract Management

Here's a step-by-step approach to implementing a contract lifecycle management initiative in your company.


Here's a step-by-step approach to implementing a contract lifecycle management initiative in your company.

According to recent research conducted by the International Association of Commercial Contract Managers (IACCM, "Corporate Benchmarking Survey, Summer 2004"), 87 percent of contracting professionals stated that the speed of decision making and execution in contracting are sources of organizational competitive advantage. While many practitioners are bullish on the prospect of value creation in contract management, the challenge of securing wider organizational buy-in around the merits of business process transformation still remains.

Since contract lifecycle management (CLM) initiatives are not yet widespread and existing initiatives are still early in their lifecycle, building a business case for CLM requires an especially well-grounded planning methodology. While your organization's standard process for assessing business value and return on investment is a good place to start, it is unlikely to anticipate special factors associated with CLM transformation.

A better approach is to tailor your framework to the principle challenge, which involves alignment of broader corporate business imperatives to recommended change in contract management business practices, processes and tools. The planning phases you will want to leverage in building a strong CLM business case are goal-setting, scoping, project planning and technology assessment.

Goal-setting

The purpose of the goal-setting phase is to help your organization align the contract lifecycle management call-to-action with real business imperatives. In some ways, it is an outside-in exercise whereby you look outside of the contracting function at the larger organizational environment. By leveraging business drivers — those factors most directly affecting performance of your organization by presenting opportunity or risk — you can increase the priority level of a CLM initiative.

An example of a business driver that presents an opportunity is one that has the potential to markedly differentiate against competition by focusing on responsiveness to customers in an industry with historically low customer satisfaction.

Once you have determined your business drivers and begin to undertake the initial activity of goal-setting for your CLM initiative, be sure to outline your response strategies, which are approaches to addressing each opportunity or risk.

As you approach the goal-setting phase, be mindful of the common pitfalls. Understanding what they are ahead of the game reduces potential organizational resistance later in the process.

Common mistakes include anchoring the priority or materiality of an opportunity to the wrong stakeholders. For example, it is important to avoid driving the opportunity too low in the organization. This pitfall is likely to elongate decision cycles and reduce the probability of buy-in. Recognizing that the people at the top are empowered to move rapidly when there is sufficient business rationale, it is critical to have bold ambitions about the audience for your call-to-action.

At the same time, it is typically important to prepare a compelling case for your senior audience, since first impressions are lasting. Common pitfalls when approaching senior management include assuming your targeted stakeholders are choosing from only one or two possible strategies in response to the business driver, when they are actually choosing from a portfolio of strategies; the strategy your team has outlined is not a near-term priority for the target stakeholders in addressing the business driver; or the strategy outlined is not sufficiently material in its contribution to the business value to achieve the interest of target stakeholders.

Alignment of the CLM opportunity with business objectives is achieved when the call-to-action is both sufficiently material and prioritized in the eyes of the target stakeholders.

Scoping

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