Do you believe that contract managers are there to strike a good deal? Or to protect the organisation from risk? Or to make sure that the contract wording reflects the deal that has been struck? Or to advise senior management of the implications of the contract? Or to be an internal champion and advocate for “best practice” in the structuring and negotiation of contracts? Or all or none of the above?
Does your organisation give the contract manager the power to veto deals? To refuse onerous liability terms? To certify whether deal terms comply with company policies and accept or reject contracts accordingly? Or are they there as a facilitator and coordinator, with the real power resting elsewhere?
Do you expect the contract manager to be skilled at marketing, negotiation, contract drafting, handling legal and regulatory issues, understanding the technology, products or services at issue, and generally being the representative “face” of the organisation? Or is their role limited to only some of these areas? Do you provide in-depth training to allow the contract manager to excell at all of their allotted roles? Who is responsible for the areas that the contract manager is not expected to cover?
Most importantly of all, have you told your contract manager what you expect them to do, and how you expect them to do it? Or do you assume that they are a skilled professional, that they must know what they are doing, and if they are unclear as to their responsibilities it is up to them to tell you? Do you judge them on whether they make their internal “customers” happy, regardless of whether they are protecting the organisation? Or do they also have a responsibility to protect the organisation, that other voices in the organisation may not have? Do you support them in making unpopular decisions? How do you weed out the mediocre and the incompetent, while rewarding and encouraging the excellent? In fact, do you have any objective criteria for assessing performance?
In some organisations, people know what they are expected to do, are given realistic goals and assessed against those goals. In others, people seem to do what they do because they have always done it that way, and because no-one is looking critically at the role or performance in the role.
In the area of contract management, several factors conspire to make it difficult to assess whether a good job has been done. These include:
- organisations that do not have clear policies or guidance on acceptable or unacceptable deal terms
- senior management who decide, on grounds of expediency, to go ahead with a deal even if it doesn’t comply with the policies or guidance (if they exist) or against the recommendation of the contract manager. This may be done, for example, because the CEO wants to hit a sales target, or because a university president wants to keep a powerful professor happy
- organisations where the only expertise in contracts resides with the contract managers, and not with senior management, so contracts do not get critically reviewed at a senior level. IP Draughts recalls a shocking conversation with a university vice-president in charge of the university’s commercialisation activities, where the VP stated that he didn’t like looking at contracts
- heavy workloads for the contract manager that make it impossible to undertake a thorough review and processing of all contracts
- under-resourced contracts departments that don’t have the ability to hire outside professionals to fill in the gaps of knowledge and expertise within the department
The answer to many of these problems is planning. In IP Draughts’ view, in well-run organisations that enter into contracts:
- Someone in senior management will have responsibility for managing the contracts managers and setting ground rules. They don’t need to be a contracts specialist, and probably they won’t be, but they need to take seriously their responsibilities in this area, and ensure they have the necessary knowledge to oversee this area of specialisation. They need to be someone with real power in the organisation (probably not someone who has been moved sideways to ease them out of another role) and they should generally support and back up their contract managers in internal negotiations.
The organisation will have written guidelines on preferred and unacceptable terms. Those guidelines will be understood by both contracts managers and senior management, and will generally be followed. There may be cases where they are not followed, but this should be the exception rather than the rule.
- If the workload of the contract manager is too heavy to give full attention to all contracts, the organisation must either (a) promptly recruit the necessary number of managers and/or (b) institute a triage system, under which contracts are risk-assessed and allocated to different types of contract review (or no review at all, if that is considered appropriate). High value and high risk contracts should be given whatever resource they need, including external legal and regulatory support if required. The risk assessment should be reviewed periodically, and refined if necessary, but the assessor should be given space to make some mistakes.
- The terms of signed contracts should be reviewed periodically to inform (a) whether the guidelines are being followed, (b) whether the guidelines should be revised, and (c) the performance of the contract managers against those guidelines
- Contracts managers should have regular reviews of their performance, as should the senior manager mentioned in point 1 above. Best practice should be encouraged and rewarded.
- When resourcing contracts departments, a sufficient proportion of the resourcing should go into the above areas, rather than just the front-line firefighting.
Are these the right areas on which to focus? Are they realistic? Your comments, as ever, are welcomed.