Are contract managers as equipped as they should be? Here’s an article that was published in Edge, the member magazine of the Institute of Leadership & Management
Numerous media stories have highlighted the problems with significant contracts in both the public and private sectors. High-profile incidents in recent years include significant problems with the delivery of some prison service contracts and the maintenance of Ministry of Defence-owned accommodation for armed forces personnel. There have also been supply chain issues where high-profile brands have been potentially compromised due to poor practice.
These examples are ‘media-worthy’ due to the sums of money involved. Yet they also draw attention to the fact that if issues can arise on these sorts of contracts, where one might assume that more experienced contract managers focus, what might be the position on other contracts that fall under the executive radar? Poor contract management practice is known to create numerous issues including sub-standard supplier performance, poor quality products, unnecessarily inflated costs and reputational risks.
What is the scale of the issue? There is no definitive valuation of the scale of global procurement and so the potential importance of contract management is not readily apparent. The scale can only be estimated, although the value is significant. In the UK, for example, the government has annual procurement spend in the region of £250 billion. In the US, government procurement is estimated at US$7 trillion. Meanwhile, it is generally agreed that for most private-sector organisations, the annual value of bought-in goods and services is equivalent to at least half of the organisation’s turnover.
Given the number of high-profile contract issues that exist, perhaps current practices are no longer sufficient to cope with the complexities and rigours of the modern world, particularly when organisations are increasingly using third parties? This was the question I sought to answer through a study that was part of a Master’s in Research at the University of Leicester.
The Research
The research was driven by a hypothesis – in light of media coverage around poorly delivered contracts – that management of procurement-related expenditure could be better dealt with. In particular, the research had two key objectives:-
• to identify competencies for highly effective contract managers; and
• to ascertain the necessary level of preparedness of contract managers to undertake their role effectively.I surveyed 130 experienced contract managers, evenly divided across the public and private sectors. The overwhelming majority (96%) did not have a relevant qualification when they commenced their first contract management role. Only 2% of respondents had a qualification in procurement and supply while the other 2% had a law qualification.
When I asked them about their first year as a contract manager, 82% of respondents stated that they had received no formal training at all, yet all were involved in managing contracts of substantial value (most were responsible for contracts with a value of £1 million or more). A further 8% stated that they only received unstructured ‘on-the-job training’. In other words, 90% received no formal training at all within their first 12 months in post.
In addition to ascertaining the levels of preparedness of those new to contract management roles and their experience of initial training programmes, the research also attempted to identify the key skills considered necessary to deliver enhanced value through a more proactive approach to managing contracts. While one might have expected some significant variations in views from public and private sector staff, the results demonstrated very limited differences in approaches.
The tables below show the top 10 skills (as selected and ranked by the survey respondents). Nine of these skills were generic, ie applied to both the public and private sectors. Unsurprisingly, ‘Understanding the regulations’ (ie the Public Contracts Regulations 2015 or the Utilities Contracts Regulations 2016) was important to public sector staff. These regulations do not apply to those managing contracts in the private sector.
Source: ©Colin Linton/Gidea Solutions Limited (2017)
Implementing Contract Leadership®
Source: ©Colin Linton/Gidea Solutions Limited (2017)The start point is to determine the profile of the contract. The matrix above (left) shows the broad approach to profiling. In reality, however, the approach is often not so clear-cut, for example some contracts which have a low level of formalisation may still be incredibly important and therefore require high levels of proactive engagement, ie Contract Leadership® (per the matrix above right).
Not all contracts require leadership. Indeed, not all contracts require management. But the first step in figuring out what is needed is to ensure that all contracts are properly recorded (administration). For some, this is all that is required. Others will change, over the contract term, and will therefore require ongoing maintenance, but little effort in terms of proactivity. For those that require proactive engagement, while remaining relatively static over their term, conventional contract management techniques will be sufficient. For more complex contracts, where change is a regular occurrence and formality vital, and where continual engagement (with stakeholders internally and externally) is needed, a Contract Leadership® approach should be adopted. People involved in these contracts should be skilled across the competencies identified in the tables above.
So, what’s the difference between Contract Leadership® and contract management? Contract Leadership® requires high levels of proactivity with all relevant stakeholders. The contract leader takes ownership of the contract, collaborating closely with the supplier. Potential issues are identified as soon as they arise and are dealt with promptly, before they become too serious. The contract leader has a high level of interpersonal skills and uses emotional intelligence to manage relationships and drive value. Contract leaders have thorough market knowledge and can quickly recognise the potential impact on contract delivery of any changes that arise within the market. Contract leaders are comfortable dealing with conflict situations and have a wide range of skills to help them do so.
Conclusion
Ultimately, the findings of my research suggest that insufficient attention is paid to the support provided to staff who manage contracts and suppliers within organisations. Not only are they generally inadequately prepared when they begin their role, they are given little help to develop relevant skills during their first 12 months in post. Whilst it is feasible for people with no or very limited experience to succeed from the outset in dealing with significant contracts, the potential risks for the organisation can be high. So properly tailored formal training and development programmes should be established for staff who deal with supplier relationships where a Contract Leadership® approach is considered necessary.
Ultimately, leaders need to adopt a more proactive approach to their organisations’ key contracts. Conventional ‘contract management’ will be sufficient for some areas of expenditure, but the most important contracts need more than just ‘management’ today – it’s time for Contract Leadership®.
Footnote
Since this initial research was undertaken the high profile collapse of Carillion Plc has sent shock-waves throughout the contract management communities in both private and public sectors, especially the latter. There is no doubt that ‘Understanding supplier financial data’ is now being given increasing recognition as a key skill and so should be added to the lists shown in the table above. This only serves to demonstrate the fluidity of the business world and reinforces the importance of an ongoing programme of research in this area.
About the Author
Colin Linton MRes MBA PGCHE DipM DipFS FCIB FCIM FCIPS FCIEA FHEA FInstLM is an academic and trainer in procurement, marketing and leadership. His research contributed to a Masters in Research at the University of Leicester. His research studies continue. Contact him at: colin.linton@gideasolutions.com.
Copyright
The original article was published in the Edge, Yule 2017, pages 56/57 (published by the Institute of Leadership & Management). Re-use in any form is not permitted. Similarly, Contract Leadership® is a registered trademark and can only be used with the express written permission of its owner, Gidea Solutions Limited.
Contract Leadership® 