What Drives Contract Management Inefficiency — Part 1: Lack of Definition

What is contract management? Ask ten different contract management professionals and you'll get ten different answers. From large organizations to small, no one can seem to agree on what contract management actually means.

The good news is your definition of contract management doesn't need to be complicated.

Watch this video to learn how to turn your contract management process into a clear definition that everyone can agree on.  

Video Transcript

Hello and welcome to our three-part video series on What Drives Inefficiency in a Contract Management Process.

Today, we're going to be talking about the first factor, which is a lack of definition.

What do we mean by lack of definition?

I've been in this industry for over 20 years. I've worked in different levels of procurement. I've done all sorts of contract management and contract negotiations.

The one consistency that I've seen is whenever I would talk to my colleagues and my peers and ask them, "what does contract management mean to you?"

I would get a variety of answers, from the very complicated to "we use a filing cabinet to store our contracts" -- and that was the extent of their contract management.

You would think that the big organizations would be the ones with the complicated solutions and the smaller organizations would be using filing cabinets. But it's actually all over the place.

We've been brought in to do consulting for large organizations with thousands of contracts. They just can't get a handle on them. I always begin by asking the question -- what is your contract management process? Define it for me.

Large organizations will say "contract management -- what that really means to us is once the contract is signed, we go and we store it in a filing cabinet. That's where our contracts go to die. That's it."

On the other hand, I've talked to smaller organizations -- with 500 to 1000 contracts -- and I'll ask them the same question -- what does contract management mean to you?

They'll go into this long diatribe about how contract management is a combination of these intricate processes and tools and ERP systems that they use to manage their contracts, create contracts and execute contracts. But when I ask them to show me where their contracts are -- to actually find a contract for me -- I get the blank stare. They don't know.

Because they're trying to force fit a solution that they don't have into some definition that they think makes sense for them, when in reality, contract management should just be whatever processes that you're using today documented, socialized and communicated within the organization.

Once you do that, that's your process. That's your baseline. And when you have your baseline, then you can conduct a gap analysis against industry best practices, find out where the gaps are and then really take a look at the ones that you can easily overcome; fix those gaps and then start thinking about making your contract management process a little bit more robust and a little more intricate.

That's it. That's the definition of contract management.

Thank you very much for watching our video and please check out our next video where we will talk about then second key contributor to contract management inefficiency, and that's decentralization.