By Güenther Bader, SAP SE
Is contracting key to value creation in your organization? These Key Performance Indicators can demonstrate the big difference you’re making.
IACCM’s 200-strong Contracting Performance Management Community of Interest1 has been working together to help members do just that. The result is a new Contracting Performance Management Handbook2, written by Günther Bader, Global Contract Management Services, SAP SE, Waldorf/Germany in association with IACCM.
If you can’t measure an activity you can’t control it
Designed to serve as a reference for IACCM members, the handbook contains information about a set of commonly agreed Key Performance Indicators (KPIs) including the definition, benefits and methods for each single measure.
The handbook is a resource for Contracting Performance Management (CPM), the discipline of continuously measuring and improving the performance of the contract management process and function within an organization. Think of CPM as a new integrative business discipline that focuses on the value of enterprise contracting processes. In complete contrast to the administrative function it is sometimes perceived to be, contracting holds huge value potential.
If you can’t measure an activity you can’t control it. Without dependable measurements, intelligent decisions cannot be made. To manage and improve contracting processes, it is important to define how to measure the performance of contracting management.
To improve contract management, companies must define a common nomenclature and create transparency across different contract types and business entities. They must establish a reporting system with KPIs providing the basis for defining improvement activities according to specific conditions. These typically differ across contract types and business entities.
Sharing and learning from experiences and insights
With a sound measurement system, we can now use the defined measures to manage internal contracting performance, enabling us to:
- define goals for the respective measure
- establish best practice across departments to identify how to relate to global standards
- run benchmarking internally as well as externally.
The desire to see the big contracting picture is one reason why Contract Performance Management (CPM) has emerged as a corporate discipline. CPM goes beyond just enabling the execution of contractual obligations, and the reaping of contractual benefits. It encompases processes, people, technology and content.
IACCM research indicates that, on average, good contract development and management could improve a company’s profitability by the equivalent of over 9% of annual revenue, for example by avoiding the costs of failure to comply with contractual obligations, and by simply taking advantage of contractual benefits and opportunities that have already been agreed.
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- IACCM Communities of Interest (COI) are members who share a common interest to meet, exchange ideas and share knowledge. Each community benefits from dedicated forums, targeted news, research and events, and networking opportunities.
- Contract Performance Management Handbook -- The first focus of the the COI was to document and agree on a common set of key measures which can be used across LOB’s or business units. The results were documented in the handbook (now available in the resource library of the IACCM website).