Management Skills and Successful Contract Management: Part 1
Automation should be considered an absolute necessity in contract management. Without it, an enterprise will be hard-pressed to efficiently manage its contracts to maximize cost savings and revenue opportunities.
But automation doesn’t work in a vacuum, and it’s not an instant panacea. To realize the many benefits of automation, an enterprise also must have contract managers who know how to utilize the software and possess certain critical skills.
A recent article on the website of the International Association for Contract and Commercial Management (IACCM), The Competencies a Contract Manager Needs: A Process Perspective, examines the skills that contract managers need to maximize the value of contract management software. The article breaks the necessary skills down into five areas, each focused on a specific stage of the contract management process.
“In Contract Management, the Contract Lifecycle model provides the high-level framework to approach contracting as a business process,” the article states. “But even the most carefully designed contracting process supported by sophisticated Information Technology infrastructure will not succeed without capable Contract Management professionals.”
This article examines the contract management skills necessary in the first three stages of the contract lifecycle: Initiate, Bid, and Development. A second article looks at the last two stages: Negotiate and Manage.
When approaching contract creation, the contract manager must be fully aware of how the contract fits into the enterprises overall strategy and any specific operational strategies.
Contract management software can supply invaluable assistance in this stage — with pre-approved contract language and templates, as well as analysis of historical contract performance to guide decision making. But human intelligence is still required, and a contract manager must be able to assess a contract’s desirability within the context of considerations such as competitive advantages, market differentiation, scalability, and protection of intellectual property.
Automation can flag contracts that fall outside of the enterprises accepted parameters, but the contract manager must be able apply experienced insight, awareness of the enterprise’s strategic goals, knowledge of the enterprises operational limitations, and plain-old common sense in evaluating whether to initiate a particular contract.
During this stage, contract managers must be attuned to the financial implications of contract terms. They must appreciate that contracts have financial ramifications that extend beyond obvious costs, in areas such as taxation, legal compliance, and crucial financial ratios. They also need to be able to identify the all-in costs of contracts in order to accurately formulate bids.
Automation in these areas is an indispensable resource — particularly with its business intelligence capabilities — but a contract manager who isn’t fluent in the fundamentals of accounting and finance won’t be able to make astute use of the information provided.
In the bid stage, a contract manager also needs to be able to lead the process of selecting suppliers and distributors. The IACCM article recommends forming a task force representing all stakeholders to design weighted criteria to evaluate each candidate. But ultimately the contract manager will need to be able to guide the process toward selection of the enterprises that are most-consistent with financial and strategic goals.
Contract management software readily supplies a library of approved contract templates, but the contract manager needs to understand the structure of each of these contract templates, the implications of each structure, and the internal approval requirements of each contract type.
During development, a contract manager needs the skills necessary to gain approval, as well as stakeholder buy-in, for the contracts being developed. Understanding the enterprise’s approval process and performance criteria will help the contract manager achieve the necessary internal support.
“People skills” are of course also critical in this area.