There is no doubting that Contract management is now established as a recognised discipline in modern business. This is welcome and not solely because it provides improved opportunities for individuals, it is encouraging the development of training, research and a network of peer support to take the whole discipline forward. There certainly seems already to be an embracing of this culture amongst the more forward looking of organisations of whom many have already experienced significant commercial benefits by adopting principles of the discipline. The public sector is also now starting to make the right noises too at a macro strategic level although at the level of service delivery focus stubbornly remains focussed on delivering contracts “cheaply” rather than seeking to maximise innovation and potential value.
The role of Contract Manager in the public sector is far from defined. For the time of which I have been involved with public sector contract management there continues to be an uncertainty of the role and scale of the job. I have seen project management, data analysis, investigations, negotiations, change management, and coaching, all pushed my way either as part of the life cycle of a contract, or else in response to an incident or problem. It is the failure to properly define roles and attach importance (and occasionally resources) which I believe is often a major weakness in the current general approach in the public sector. Today it is still the case that many public sector contract managers remain focussed on outputs whereby outcomes might be more fruitful, on meeting targets which might out of date but “in ink” rather than innovation.
Although outsourcing or “contracting out” is a firmly established business tool in all sectors of the economy, in my experience the manner in which the process is “managed” is disparate and too often regarded as an administrative or managerial task. It is understandable that since the risks and benefits are mostly financial that for many it is considered to be about financial control, and measuring auditable outcomes as priorities. For this reason many contracts are managed from finance or procurement teams, often the lead person is a “contract manager” but what does this mean? More often than not different things to different people, there needs to be re-think of what we are doing and why.
My view would be that the nature of some outputs, like production, this approach might be wholly appropriate, and any addition management (at least on a daily basis) would simply add cost to the operation. However, the majority of outsourcing contracts will allow for innovation, and certainly encourage ever-increasing efficiencies. It is these opportunities which will not be realised, and definitely not encouraged, if the contract and the contractor are managed at arms-length viewed from a spread-sheet.
The direction of travel over recent years, in an attempt to tighten up on the quality of “the” contract, has been to encourage and legitimise the role and involvement of procurement professionals at all stages of the contracting process. There will be very few people who work in this field that will not recognise the need to improve the quality of contracts, including the commercial management or technical aspects including change procedures, penalties, mitigation, incentivisation etc. However, when the bar swings too far and the input of the operational staff, the users and wider stakeholders is not appropriately considered you introduce risks and issues as fundamental as any flawed contract.
“Talent wins games, but teamwork and intelligence wins championships.”
I propose that a balanced team approach works best; ensuring that your procurement, finance and operations people agree with the overall direction of travel. It would be this process which I would describe as contract management – defining the outcomes, process and costs not just of the product but how your organisation will work in future. Procurement professionals are critical in setting the framework and structure of the contract, ensuring legal and financial obligations are met, but they will not ordinarily understand the operational needs or aspirations of the organisation, or the hopes and wishes of your stakeholders.
Investopedia.com defines “Relationship management aims to create a partnership between the organization and its audience rather than consider the relationship merely transactional. Consumers who feel that a business responds to their needs are more likely to continue using the products and services that a business offers. Additionally, maintaining a level of communication with consumers allows the business to identify potential sources of costly problems before they come to a head.”
In the past I have worked under a number of job titles but the roles have always been explained in contract management terms. For my part, and many colleagues worked to the same job description in different ways, I have always worked – albeit subconsciously – on terms as described above. My success in delivering of new contract starts, and continued good level of service delivery, has worked on the basis of building positive relationships with all stakeholders. Not to say that all parties will always be content (and some may never be so) but at least ensuring that there is honesty in the exchanges and sincerity in commitments which are made.
“You don’t develop courage by being happy in your relationships everyday. You develop it by surviving difficult times and challenging adversity.”
The main responsibilities for a Relationship Manager are to keep stakeholders content, to resolve problems, and ensure that the contract remains current and meets future needs. The meeting of contract targets, the application of penalties or the award of bonuses should be measures which contract management team will advise and commend, but of course this will be invaluable information to the “Relationship Manager” in their dealings with the contractor.
The best way your organisation can gain access to, and influence the contractor, is through the pursuit of positive relationships. The point at which discussions are only formalised, and the focus is on the percentage delivery for a given month for example, this should raise concerns. You will only see and hear what you are required to, there will be defensive presentations, discussions will always open with the mitigation, there will be an unwillingness to innovate or risk-take for fear of criticism or penalty.
“Call it what you will, incentives are what get people to work harder.”
A contract manager might be considered fulfilling a “policeman” role, one which typically was played out in the early days of outsourcing. It was not just the literal and immediate application of penalties but they might actively look for low level failures. This approach has mainly been dropped over time but some organisations and some “professional” contract managers will still wear this badge – you might recognise someone by the description? If you deploy “sleeping policeman” as Contract Managers you will almost certainly fail to innovate, and encourage any creativity or enterprise – think about the cultural impact of your business model.
Those contractual elements which have legal or performance elements must continue to be monitored, reported and actioned. The contract management “team” will have defined the formal meeting structures, the processes for reviewing performance etc. But outside of the formal structures the relationships should be open, constructive, challenging and supportive. This is why the needs to be a defined and distinct relationship manager role.
My approach has always been to engage with contractors as you wish them to engage with your stakeholders. I believe that the personal motivation should be the success of the contract – which is distinct from the success of the contractor although one will surely follow the other. It should matter to you if your contractor is facing difficulties, or needs assistance, this should be about the contract delivery being met – this is particularly important if you delivering a public service. If you are satisfied by the failure of your contractor or the award of penalties then you are in the wrong job – and until this behaviour is removed we cannot evolve the relationship. This goes to the core of my approach; solve the problem, review the circumstances, learn, improve, and maybe commit to change. If a penalty is appropriate then it is applied but it is not my priority, and should not be given with glee.
I just don’t believe that currently there is sufficient recognition or use of relationship management as a strategy. It should be a planned intervention to maintain and develop the relationships between and organisation, the contractor and the wider stakeholder community (or customers within the private sector). I propose that at best there are occasional uses of this approach but generally when performance dips when of course the foundations are simply not there to sustain it.
Why this is of fundamental importance to me is that there are obvious skills needed to successfully fulfil such a role. Until your organisation decides to adopt this approach people will be sought and trained to work in a way which is at times the polar opposite of what is needed to make this successful. This will impact the type of person you recruit, the training which you provide, and a different set of interactions within your organisation too. All the while I would suggest negative behaviours being encouraged by your contractor.
“I have always been an honest trader. I come from a school of traders where there was honour in the deal. No contracts, just a handshake and that’s it, done. That’s the way I prefer to do business but it’s not always possible these days, sadly.”
I think it is important for me to underline the advantages of working this way, in partnership if you will. It provides a firm foundation on which to encourage innovation and maybe the occasional request outside of the strict term of the contract – which otherwise would be a dead end. There is nothing more rewarding than to solve a problem or provide an improvement based upon the trust of your working relationship.
Within the public sector presently, and this is regrettable, there is limited opportunity to broaden and develop opportunities and benefits but it must be emphasised that such potential does exist. Of course, companies will be looking to exploit opportunity for profit, but if there is genuine opportunity for stakeholders this must be encouraged – and hopefully in future contracts will allow them to be pursued.