The Problem Procurement Teams have with Post-Signature Contract Management
I’m frustrated whenever I work with a client and they put zero effort into the post-signature contract management activities, after they’ve sourced a new service.
I’m thinking about:
Post-Signature Contract management (the pre-signature work is critical too).
Supplier relationship Management (at least focus on some sort of relationship building if you forgo the rest)
Performance Management
Exit Management
Too often, each of these activities fall to the wayside as yet another sourcing activity is needed.
We all understand the essential nature of sourcing the right suppliers.
But if we sign and forget, we are leaving vast amounts of value on the table.
What can we do about this?
Every procurement team should have a contract manager. You don’t need many, even one could do the trick.
A contract manager is someone who will be responsible for:
Pre-Signature Contract Management
Post-Signature Contract Management
Contract Reviews and assisting negotiations on the “legal & contract points”
Owner of your contract database/CLM solution
Improving time to contract by building best in class processes out
With a contract manager in your team, you’ve got someone who is always monitoring and working on your contracts and relationships.
This means you can start to do each of the four key activities noted above.
Not to mention the ease of improving exit management if you create automations around renewals management in your CLM. Yes, it really is possible to start renewals without the procurement team chasing for information.
Performance Management
Depending on your setup, you could create a contract management team that is solely there to manage contracts once the procurement team has carried out its sourcing activities.
I’ll be open, I like this approach but there is one weakened that has to be addressed early on.
Procurement teams cannot handover poorly executed contracts.
If you’re going with this method do this.
ensure that you have at least 2 contract managers responsible for the contract negotiations. They will ensure that no bad contracts come the way of the contract management team.
Have the sourcing team and the contract management team come together for a handover. This will involve the creation of a plain language contract summary (this could be captured by your contract manager reviewing the terms in your CLM). You will need a plain language contract management plan (again, you could build out this as a section in your contract record in your CLM so that you can compare and contrast the points across all of your contracts). this ensures that the entire team is connected on what’s important and what needs to be focussed on. I’d suggest that you include people outside of your procurement team here and include the end user and anyone else that has an interest or will contribute to the delivery of this contract. That should be a mantra that is never forgotten from inception to completion.
If you get this set-up, I’d say that you’ve got a exceptional chance of managing your supply base. Even if you’re a lean team, you could still look to split out the team to ensure you’ve got the coverage pre and post contract signature.
Now that you understand the focus areas, you can deploy a process for monitoring this.
This could include:
regular contractual meetings with a fixed agenda for you big ticket contracts
Less formal and infrequent meetings to address any potential risks/developing concerns
Continuous monitoring of your suppliers credit score, cyber health and ESG
Internal reviews of the suppliers performance (scorecards)
Supplier reviews (end of year if scorecards isn’t sufficient)
SLA/KPI tracking (build this into your contracts to ensure the supplier gives evidence on a set cadence)
Compare and analyse similar suppliers to benchmark performance across your supply base
This is what a dedicated contract management can get on with whilst part of your team is solely focussed on new sourcing activities.
Supplier Relationship Management
Supplier Relationship Management deserves a single spot light. It’s oven poorly implemented within a procurement team and the wider business. Procurement teams get elements of it correct such as supplier segmentation but often fail to get buy in for any of the wider initiatives and struggle to create true partnerships.
I’m not sold on the idea that the sourcing and contract management team can do this. This needs dedicated resources which might lend itself to the existing within a business that is further along and is more mature. This is going to be, at least in its current form or an evolution of SRM, much needed capability as we move out of the covid era into the economic downturn that covid, war, broken supply chains and many other factors that have created the current economic world we exist in.