Enhancing Contract Management

There is an increasing awareness that contracts – at least as currently used – are not fit for purpose, and that they often work against the quality and effectiveness of the relationship:

• They can’t anticipate or respond quickly to unexpected developments, creating gaps and a rush to try and renegotiate or redefine terms.
• They usually aren’t readily understandable, applicable and usable at the front line – especially where quick decisions are needed.
• Most of all, they can’t capture the crucial subjective Things That Matter.

Whilst contracts will remain an indispensable tool, providing crucial legal and operational detail, something else is needed to help contract and relationship management keep pace.

Our Contractual Relationship Diagnostic provides a powerful first step here.

It illustrates – and provides a starting point for – how Value Management can be used to reach a mutually-agreed complement to the contract that focuses on the (primarily subjective) Things That Matter that the contract doesn’t/can’t cover.

It’s illustrative in that its contents aggregate learning from across relationships, rather than being specific to any one relationship; it’s a starting point, because it can be adapted over time in any given relationship.

Otherwise, the way that Value Management is applied in contractual relationships is:

• The Three Step Process is used to clarify, personalise and agree the Things That Matter between the parties, expressing strategic value in a shared language: a completely new approach to encapsulating the relationship.
• As well as then keeping these “alongside” the contract, the agreed Things That Matter can be published and circulated so that everyone knows what is valuable and so that actions taken are consistent with what has been agreed to matter.
• This could be global – everything shown to everyone – and/or targeted subsets of Things That Matter highlighted to specific groups.
• The Things That Matter are then reworked into Value Codes, such that agreed priorities are expressed as to how they look in practice and can be added to the contract complement.

Finally, the Value Codes are assembled into a diagnostic: a completely new way of managing the relationship, where – alongside existing contract management activities – the parties evaluate and agree current performance levels, set targets and take action in key areas where this was previously not possible.

At scale, the Value Codes are evaluated by all involved, with the option for them to propose improvement actions; divergence is discussed and resolved; a current state and a desired state are agreed for each Value Code.

As things improve, the contract complement can be updated – a dynamic expression and management of the relationship in a way that a traditional contract never can be.