Sales contract management for operations

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good morning everyone and welcome to the first of our seven part webinar course the art of successful contract management today we kick off with the topic what is contract management so let's get started I'd now like to introduce you to our presenter Gregory management consulting as dr. defined gasma Japan leads grove news procurement and contracting practice he helps our clients transform their procurement function manage high stakes procurement projects and improve their Supply Management Stefan has trained over 300 people in the art of successful contract management he has a PhD in procurement and is also a lecturer for a strategic procurement at the University of Technology in Sydney so I guess you could say he is pretty passionate about all things procurement and contracting so over to you Stefan thank you very much Jade welcome everyone to this first webinar it's as Jade already alluded to it the first in a series of of seven and I know that some of you have sign up for all of the seven and others are just looking and getting a feel of what this webinar might be able to provide to them which is great before we get stuck in I'll I'll introduce to you our agenda for today we've got about 45 minutes set aside for this today you have ample opportunities to ask questions and to participate this is actually the first time that we're running this as a webinar we have run it as workshops many times but not as a webinar and so I mean quite keen to see how the participation with you as the the audience will actually work out and how that's all working technologically excellent so here's here's our agenda that we prepared so for today the first one what is contract management we'll talk around expectations and reality when it comes to the performance of a service provider we'll also talk about what is actually contract management what does it entail and what are the sort of benefits that you get from contract management the next webinar will then cover how to set up a successful contract so what can you do straight away when you put your contract together to set up the contract in a way that it can be immensely managed successfully afterwards and so that you really get the benefits out of the contract that you want to get out of the contract webinar 3 is around how you implement this contract so what you need to do to set up the relationship that really suits the contract and what do you need to do during those first critical 3 months of a contract to implement it so that it really generates the benefits there are certain traps that you want to avoid and there's certain contract law fundamentals that we need to cover many times managing contracts that is the subject of the webinar number 4 because performance management is such an important part of contract management we've actually allowed two webinars to cover performance management so there's part one which is webinar number five and part 2 which is webinar number six we'll talk about why would you measure performance how can you come up with a performance management framework which is wider than just defining KPIs and then once you have defined all of these performance management initiatives how do you actually go about measuring them and managing them look we all know that people are not perfect organizations are not perfect so things will go wrong throughout a contract as well and and what do you do when that happens and how do you deal with say variations with issues when they come along and probably even with disputes when they come along so that's webinar number seven so that's what we've prepared all of the webinars are about a month apart they run for 45 minutes and you're Kent you can always log on and also get the recordings from each of those before we get stuck into it I wanna introduce to you the course book that we've prepared so this is the course book and for those of you who have paid for the whole series of webinars you have already been given a copy of this the idea of this is the course book is and I'll just quickly run through it a bit you see it's a written narrative of what we're actually talking about here it also has several exercises in it that you can then use that your own time to go through and and sort of validates that the sort of context that you have been given during the webinar so for the people who have this feel free to use it as you want a lot of people use it as a reference guide sitting on their desk alright so the first slide here is why contract management and I have brought to you this this cartoon that probably explains a bit why contract management is so important and so what I like you to do is just have a read of this and then tell me which one is your favorite of these cartoons my favorite to be honest is probably how the business consultant described it as top right-hand corner because that is obviously my daily business to do and I've also seen that to be very very truthful about the view of our clients at times another one that I really like is how the project was documented a lot of people can associate with that as well any virtual hands risen at this time I can't see anyone so no one has a favorite feel free to use the questions pane if you want to share one with me look the real key takeaway here from this slide is really the bottom right hand corner what the customer really needed was to be search provider to create a doll right but everyone involved in this project or on this contract has got it wrong and so some people well actually everyone got it wrong because they built a robot and some people got that robot better than others but everyone still got it wrong and that then led to that the customer was built exorbitantly high and also that the support of the project wasn't really there so I've just been using project and contract sort of synonymously what you actually see is that contract management has a lot in common with project management but it's a bit more complex than that and so it is bit more complex because there's not just several people trying to achieve the one outcome which is producing the doll it's actually several organizations trying to achieve that one right outcome and so communication plays a pivotal role in in this and also a clear expectation setting and and this is what we'll explore throughout this webinar does any of this sound familiar to you so normally how you become a contract manager is someone walks into your door of the office hands over contract to you and says congratulations you're now a contract manager go for your life and get the most performance out of this contract that you can possibly get that's that's great right but for you it creates a lot of uncertainty so there's no explanation of what is actually required there's no formal training of how you monitor the service providers performance and there's certainly no phone number that you can call any other question the big issue for you is you just don't know what you don't know so how do you actually get the performance out of the surprising moment you'll see a lot of the feedback that I get from this slide is actually there people say well no one ever actually even walked in my office and gave me a contract because that's someone's just said so there's a contract somewhere no please to go get the most performance out of that contract well you set yourselves up for failure from the beginning if that is the case so if any of you are managing a contract and you don't have a copy of that contract that's all of your first action item make sure that you get a copy of the contract have a good read of it a good understanding of it and then you can start managing a contract appropriately alright we already said that contract management is a lot about expectations and this sort of slide and the next time let's talk to that so you see at the beginning of a contract the performance can either be high or low right and at the beginning of your sourcing process of your procurement process you know really have an expectation that the performance is going to be probably somewhere in the middle between high and low so you expect that the effort that you have to put in and that the effort that the service provider will put in are probably at this mid-range of of the scale and then you secretly hope that and this is the dotted line here at the time when the contract starts that the performance will slowly improve over time reasons for that is you know that new technology will come online over the five years of the contract duration you also know that they will get to know your organization better you will get to know the service provider better and as a result you hope that the performance will steadily increase so this is what we said on this slide is the sort of future vision of what the performance should be in this contract so through contract management stage you hope that the performance will increase and so everyone gets a bit excited at the beginning of a procurement process because they hope that the performance will be really good well is reality the same well probably not let's have a look and so usually you start the procurement process at about halfway through you get the tender responses in and you see this yeah red line here is surely he below the blue line so that shows that there's a gap already between your expectations and what you now think you can actually get do you read the tender response and you have a bit of a moan to say oh is that all I'm gonna get all right and so tender responses are also sales related so they still have quite a positive spin on what the expectations should be because they obviously want them in the work so what then happens after the contract commenced you actually see that the actual performance is even lower than that they promised you the world they really wanted to win the contract it was business development people that proved that any response together they can't really really fulfill sorry the people on the ground delivering the contract now can't really fulfill what they have promised to you in the tender response and so the actual performance is even lower if you now don't do something actively against that at actual performance to bring it up to where your original expectations were you'll see after about three months into the contract your actual performance is even going to Road further and then it's almost too late to do something about it and here contract management comes in so this disappointment gap between the eroded sort of performance and what your future vision was can be bridged using contract management so the benefits of contract management really are you want to make sure that that actual performance before it starts dropping off even further through active contract management will be brought up right to where your future vision was or at least to the expectation that you had when you started the procurement so we want to close the disappointment gap through contract management we want to maximize the benefits that we thought we will get out of this contract when we started the sourcing process for the contract you also want to minimize the risk the operational risk the risk of a supply shortage for example also reputational risk to our organization we want to keep the provider honest mind you this service provider has gotten in the door because they were assessed by us as being better than everyone else so phenol don't hold them up to what they promised in their tender response that's very unfair against everyone else who missed out on this contract so it's only fair to the people who missed out to do contract management so we keep this provider the winning provider honest to be honest to be honest with you a contract management is actually not hard a lot of it is very common sense there's lots of support available everyone everywhere and these webinars is one of those instances and it's also in your very best interest to do it because it makes you and the service provider both look good so contract management should sort of be a no-brainer that said a lot of people struggle with it because it is just something that's added on to their daily work so when the manager walked into your office handed over the contract to you for management what they didn't say is please go manage the contract and here is an extra two hours every day that you can spend on managing this contract so it's a matter of prioritization and what I want to get out of this webinar today is that you know making sure that everyone is where of the tools that are available and of the importance of contract management and that you then also know how to prioritize your work and what you can do to make it as smooth as possible by the way if you do have any questions just raise your virtual hand or put something in the questions pane I'm more than happy to keep this interactive okay talking about interactivity I would be interested in on a scale from one to five how much value do you think you're actually getting out of the contract that you have so if you have several contracts just think of one and then think of a number if you get very low value out of this contract give you the one if you get excellent value of contract give it a five so how much of the value in participated when you started the contract do you think you've actually received under this contract and trade I think we've prepared a poll question for that yes I'll just launch it now and then you'll all be able to provide your answers perfect so this is the the poll question here if everyone can just quickly fill that in hit the submit button and then we hopefully get a result for all of the participants said I'll let you run this part again as well I'll just probably wait a bit longer seconds no everyone was voted ok and close ok so we received 33% of you or said that you got little value I'm pre milk from your contracts 44% were yeah sort of okay value and 22% of you were good value none of you luckily I've said you get poor very poor value and unfortunately though none of you are getting excellent value either okay excellent so to me that try as most of the people probably sitting sort of in the middle of this of this sliding scale here and you know that probably shows why you're attending the webinar because you want to know how you can get more out of your service providers so so that's great now I'd be also interested in seeing why you think you're not getting quite the the value out of this contract what are the sort of sticky points and based on that I can then probably tailor some of the future webinars to really address those issues so let's spend a couple of minutes on this one here and this is the little boy that's really frustrated if I could get you to write in your questions pane and just down three reasons why you think your contract doesn't achieve as much value as it could so why is your contract only half way sort of on that on that scale that we just had why did you give it the score that you have just given it all right so just write in your questions pane I'll give you two or three probably even five minutes to do that and I'll talk to the responses as they come in that's order if you're coming in encourage everyone to participate it's gonna make it definitely more relevant for you and other webinars come up why is your contract not achieving as much value as it could it's the question still some coming in that's excellent I'm just just gonna wait another minute or so and then we move on from there okay perfect great thank you everyone for putting in some really good questions so I'm just going to go through the sort of list quite a few people struggle with the clarity of specifications of service level agreements and this one person actually said the specifications were written by us so we weren't clearly sort of communicating our expectations with the service provider at the time of the tender for example there's also unclear accountability for contract management so again I think that is an internal thing so here is really a kind of a for managing a contract it's a really good question which will be obviously different in every organization and there's no right or wrong answer important these that they someone assigned to it right changing all posts through the life of the contract is another issue so when we talk about variations later on in the webinar I think that one will be different coming through again variations always have a bad reputation if they don't need to be as you know there's not just bad variations there's also good ones to actually make sure that those change in goal posts can be put into the contract and again to manage the expectations that come with that businesses are working outside the contract that's in place so that sounds like the that's probably written by a procurement person the business just do whatever they want and they probably don't even know what's in the contract so they ask for out of scope work again something that is typically covered through variations not enough time spend on understanding contracts that were handed over absolutely so when when someone walks in your office gives you the contract they don't even give you an introduction of what that contract is all about some then again going the direction of incorrect kpi's a lack of reporting or poor scoping all stuff that we have already covered for communication this person said is especially typical for IT people then there is a lower price offered by other supplier so that sounds like the procurement process there was something wrong with that not flashing the right value for money there then less knowledge on how to actually manage contracts contract managers are operational managers with the preference to get things done that's a really good one so we typically talk to about contract managers being the ones responsible for getting the performance out of the service provider rather than getting things done so being an escalation point being appointed of discussion with someone in your organization that's removed from day to day and we'll talk about that when it comes to the set up of the contract what you can do around your governance structure to ensure that then again unclear kpi's ever-expanding scope that's a good one too and this is especially a problem in professional services contracts I guess there is unreliable reporting off contracts spend and na commenter that's treating different parts of organization differently which is probably alluding to whoever screams most it gets also serviced first which is probably not the most professional way of solving issues but there's probably also something that we can do as a contra mentioned to make sure that there is no mitigated at risk excellent look I think there was a really good list of of ideas here thank you very much for sharing that with us it's much appreciated now I wanna I want to move on to the to the next slide if that is okay with everyone if you do have any further questions just use that question pane now everyone knows exactly how to use it so that's an advantage of having this question here so just let me know if you have any questions or raise your virtual hand all right so the next slide is really over the next two slides are talking about ok so now we talked about in a why contract management and how you become a contract manager but what you know is it so what is contrary management and on this slide here I've plotted the seven steps of what happens through the life of a contract right some people say it's 11 steps others say it's 5 other sites or all of that is correct I've just put into this 5 and now it typically starts with planning a procurement right so you have a bit of a view of this is what our need is this is what the markets can probably offer these are probably some of the service providers out there I have a bit of an understanding of all of these things what are the capabilities what are the requirements then there is often formalized in a procurement plan on a procurement strategy and you go to market so you go to market you put together a set of specifications that are hopefully very clear and not very gray they'd hopefully have some sort of performance measurements in there that hopefully have a governance structure around how you put how you will manage the contract going forward and then you engage the markets say for a tender process or an RFQ request for quote and you get responses back here evaluate those you make a best value for money decision in your water contract to the best suited contractor now when we talk in the next webinar around what you can do at this stage to make contract measurement more successful we'll actually go into all of these three first steps again in a bit more detail and talk about in each step what are the sort of things that you need to be aware of to make sure that your contract can be ultimately successful the blue bubbles on this slide the implement to manage the review and the decide on close a door extension that is actually what we traditionally call of being the contract management process so the year at the yellow bubbles were the sourcing process of the procurement process and the blue bubbles are the contract management process now implementing means the sort of first three months how do I make sure that the contract is implemented in the right way that all of my systems are set up to measure those KPIs how is everyone aware of what is the scope of this contract how is everyone aware of is there a contract management plan who's the person to ask questions on both sides actually and if you want to have regular performance new meanings with the service provider this is the time to slot them in to actually schedule them in the first three months after that it's more of a day-to-day management of the service service provider so this is around making sure that stuff gets done on your side it's around with risk mitigation it's run continuous improvement it's about keeping an eye on the service provider and ensuring the compliance with the contract review is the the sixth bubble and that one really talks about making sure that you get the performance out of the sirs product that you need to get out of things so making sure that this disappointment gap that we saw before is narrowed down to as much as possible right so there you get the actual performance up to where your expectations were at the beginning of this contract life cycle and this is all about monitoring kpi's but then also having the tough discussions and the web the two webinars that we'll have on performance management will focus exactly on this review step after that it's a decision the contract is up for expiry and so typically contracts are say five years long and and they might have extension options in there those might have already been you stop and you might make a decision whether you want to go back out to market or if you just use the same contract and extend their contract if you're in government that's not always as easy as it sounds what is important is that you leave yourself enough time at this stage to make a decision because if you think about this to light you make a decision by default it basically means we don't have the time to step through this sourcing process again before the contract expires so it's just going to extend the current contract then is never a good decision a decision by default because we ran out of time you're just gonna have to put a new contract in place that's never good because things have changed over the life of this contract so you want to make sure that you can fall of that we've run a study two years ago now and we asked leading Australian procurement organizations how long does it typically take for you to step through those first three steps the go-to-market and the award and overwhelmingly they came back with saying it takes us six to nine months it is a very long time and I'm sure some of you are a bit shocked by that and it's reality and it's actually not too different from big private sector organisations to public sector organisations so that's the sort of a benchmark a complex procurement project takes six to nine months again it's important to have that in your mind it comes about goes to expectation management and it also goes to leave yourself enough time to make that the extension decision at the end of the contract because you will need six to nine months if you want to go back out to market these three steps are typically facilitated by your procurement by your procurement team and the goal is to just have a signed contract alright as soon as the contract is signed procurement goes away and they throw it over the fence to you to manage that's great but then the reveal work actually even starts all right so contract management as you see in this blue box is actually very more difficult because you don't just have to have a signed contract you actually want to have a successful contract you want to have a contract that performs to your expectations and to all of your stakeholders expectations when we talk about value for money too often value for money is just assessed at that award stage and not at the end of the contract it's all well and good if you want to get all of these savings out of a contract all of these additional benefits that are non-monetary but if you can't realize them over the life of the contract which might be several years then that is very then is not a good outcome all right so active contract management is required to make sure that those benefits are materialized they they materialize over the whole life of the contract all right so you might have an hour question around okay what is it that I actually need to do well this is answering that this fight is hopefully answering that so throughout those first three steps of the previous slide throughout the sourcing process what is your responsibility well your responsibility really is to make sure that the sourcing team the procurement team excuse me has enough knowledge of the subject matter is possible so say you work in IT and you see someone running a procurement process that has a clear IT component to it and you are not asked to be participating in the project working group that is for you to then raise the red flag and say well you know what guys you need me on there because I know the market best I also know our internal needs best so I need to be having some sort of input into this procurement process too often unfortunately organizations run procurements and then only think about contract management as an afterthought once the contract was signed it's very important that straight from the beginning at that planning stage at the very beginning of the lifecycle of the contract we actually think about how do you want to manage this contract going forward and that's for it's vital to have a subject matter knowledge available at Alette sourcing project next week you'll see that you know if you get anything wrong in in the actual contract you can never have a successful contract so the subject matter expertise becomes absolutely critical at the implementation stage and now we're entering the contract management process what do you want to make sure is that there is a plan of how you want to manage the contract it doesn't necessarily mean that needs to be a document that says this is the contra management plan what you want to make sure is that that that you have thought about it that everyone is on board with that plan of how you want to want to manage the contract you also want to make sure that the appropriate resources have been assigned to manage the contract so again if you have someone manage the contract on your behalf make sure that they are able to prioritize whatever they have to do to manage their contract over their other day-to-day work contra management is definitely critical in the success of the delivery of the contract so therefore people need to be able to breathe and actually be able to have the time and to manage the workload that comes with contract management we also want to make sure that there's appropriate transition arrangements agreed so that means for the operations to commence you might have to transition something from an old service provider to a new so and the project management around that is an absolutely critical success factor for the overall success of the contract if you don't manage your transition well you're actually from the on the back foot from day one when the contract commences so spending a lot of time and a lot of diligence there is absolutely vital for you together successful the day-to-day management of the contract is is the next step so making sure that the service providers responsibilities are tracked so being aware of what do they actually need to do and that everyone knows about that the Surfrider as well as your internal customers you also want to make sure that the goods and services are delivered as as require required so this all goes to making sure that the compliance part with the contract is monitored the budget needs to be tracked and payments need to be approved then those will be different from from organization to organization so what really this slide does is that someone needs to make sure these things happen and typically the accountability stays with you but feel free to office Lea delegate this right so contract management is always a group effort and it doesn't need to be all done but I you the contract manager you also want to make sure that appropriate records are being kept simply because if there is a bigger issue later on and you have to escalate it to someone it's great to have this is what the issue was this is what we have tried to resolve it and then as a result this is you know not happening so I need I need to escalate it before I go on to the next part I've just seen a question pop-up so I'll just quickly jump in and answer that the thank you for asking the question so the question was can you please give an example of up-to-date plan so I think that goes into the implementation phase up there so an up-to-date plan if you're working government you might have come across something that's called a contract management plan it basically is a bit of a summary of of the contract it doesn't verbatim state exactly what was in the contract it summarizes it quite often in plain English quite often at a very lower level detail the story at a higher level detail not as detailed as in the contract needed references should you go through a variation process this is the process that set out and this is the corresponding clause in the contract itself it also details things like who's the contact at the service provider how often do we meet with the sauce driver so the reason why you want to keep all of that up to date is that if you ever go on leave a good contract management plan is some is one that you can easily hand over to the next person and they can step in and manage the contract know everything they need about that contract such as what are the current sticky points with our current issues and it ensures business continue it I hope that answered your question if you didn't just ask a follow-up question I'll get back to that the next part is around review so this is all around making sure that the performance of the search party is monitored and also managed if you have 50 KPIs in your contract you spend all of your time measuring those KPIs and actually not managing the performance so we'll talk about that in a later webinar obviously you want to make sure that the relationship is healthy and communication is effective that variations are dealt with appropriately and that there's clear processes how you raise and resolve issues so that they don't become personal and that they don't become a strain on the relationship at the end you want to make a decision of whether to close out this contract of if you want to extend it you want to make sure that there's a robust and informed decision that can good and you want to make sure that the timing does not preclude the option to really procure because you know you gave yourself three months time we just heard it take six to nine months to go through a procurement process well you have made a decision by default as we said it's never a good decision so basically this slide here and you see the little tick boxes this can always inform you to see how well you are managing your contract and/or how well your contract is managed and for those of you who have already got the the course book because they sign up for the whole seven parts of this webinar on page 14 I believe it is there is actually their checklist and you can tick them off to sort of give yourself little health health check that would say how your contract is actually being managed and you will also see throughout the webinar series that we touch on every single one of the points on this slide and talked about in more detail what you need to do so that you can get a more successful contract all right so at this stage I like to thank you very much for your participation today and I'm very happy to take any questions and I think Jade you'll facilitate that if you're happy to do so so please use the the questions pane to ask the questions or if you're comfortable raise your virtual hand and I will hand over the microphone to you and I'll try to answer the questions as well as I possibly can oh we've got one here can contract law be learnt by contract managers that's a very good question thank you for asking it contract law there's a lot of courses out there a lot of the law firms offer those training courses there's unique courses that you can do on contract law what I'll actually argue in in in webinar for when we talk about the traps to avoid is that contract law is something important but it is actually not that important for managing a contract contract management is all about relationship management it's all about performance management and those two together are sort of preventative they act preventively so that you don't ever have to go into a dispute a formal dispute they would make that may lead to legal proceedings so contract management really if it ever goes to the point where you have to know about contract law something has gone wrong before so we want to make sure that in the webinar will actually cover enough tools for you so that it can avoid actually being confronted with contract law a lot of the people that I asked their question have you ever been involved with contract law they actually say no I've never been in the course where someone even has been to court over a contract dispute and that just goes a long way of saying that the importance of contract or is probably a bit overstated do you have any other questions if you think of anything else after the webinar feel free to email it to Stefan or myself and we'll give you those details shortly so thank you Stefan and thank you everyone for attending the first webinar of this series if you have any other questions like I said please contact either part of myself as you leave today's webinar you'll receive a survey on the presentation we'd appreciate if you will complete that and provide your feedback in the next 24 to 48 hours you'll receive an email with a link to view the recording and slides from today if you joined us as a trial attendee today and would like to purchase an all-access pass for the rest of this series as well as the contract management court book course book and other resources simply visit our website so that's about it so on behalf of grosvenor and our presenter dr. Stefan GAO's now thank you again for joining us and we look forward to your participation at their second webinar titled setting up as a successful contract and that will be held on Wednesday the 4th of May so thank you and enjoy the rest of your day thank you very much