Most companies have both a Procurement department and a Legal department. But not all of them have a Contract Manager function or team.
Having worked in Procurement for over seven years, I have learned that contracts are not just for Procurement or Legal. They are the core of a Business and everyone who works within the Business has a vested interest in the contract review process.
That’s why it is so important for Legal and Procurement to be aligned. And Contract Managers can help serve as a valuable bridge!
Legal vs. Procurement
What you might discover, if you look closely, is that Procurement and Legal often don’t get it right with one another. This still baffles me.
These two departments are typically going through similar business challenges, such as:
Proving their worth to executives and internal team members;
Being considered as a value generator and not a revenue generator;
Struggling to engage in deals early on; and
Working against a ticking clock where time is always of the essence.
But yet, one common issue I see that largely stems from Procurement teams is the lack of early engagement with their Legal team. This approach is unacceptable, especially when Procurement are screaming for early engagement with the rest of the business.
With Legal, it’s often that they don’t get enough information from the business to properly draft or negotiate a contract. This frustration then comes Procurement’s way with lots of residual questions and back-and-forth emails. Delaying the contract review process instead of speeding it up.
It’s a mess of frustration and shows a lack of thoughtful process creation between the two teams. The key to resolving these challenges lies with the role of the Contract Manager who can unite the Legal and Procurement departments.
The Contract Manager’s Role
A Contract Manager has been defined in various ways online and within our industry. My definition is this:
“An individual, who has knowledge of contract law, the operations of contracts, risk and supply chain, who can undertake the review, negotiation and management of contracts in the business”.
This role is one that can sit in either Procurement or Legal. It doesn’t matter much from a practical standpoint. What matters is that this role has the full support of both Procurement and Legal teams, that it has escalation points in both teams, and that it should have a level of autonomy (much like a Solicitor would have in-house), to advise against anything that would harm the Business.
The role of a Contract Manager should be that of a conduit. A conduit is a connector, and I see the Contract Manager connecting:
Procurement and Legal
Commercial matters with the entire business
Suppliers with Procurement & Legal
The Contract Manager will work across the entire business, handle all contract reviews (perhaps with additional external/internal resources), protect the Business from key risks, and be responsible up to the point of contract signature for any issues, risks, negotiations etc.
Who is Responsible for Contract Lifecycle Management?
Once the contract is signed, the Contract Manager should assist the entire Business, including the end-user, in managing the contract throughout its life.
The Procurement and Legal teams are often too far removed from the day-to-day operations of the supplier to manage the contract across the entire lifecycle. Procurement teams are already focused on their next sourcing activity whilst trying to focus on their key suppliers to ensure that their services to the company are at the levels required. Legal is often called upon for other matters, responding to legislative changes, client requests, preparing for future investment rounds and the oversight of the supply chain. While they all recognize the importance of performance management, is never on their daily agenda.
You can see that this is problematic unless you empower your Business to manage the suppliers. It is impossible to manage all of those supplier contracts through Procurement and Legal.
This is where the role of the Contract Manager is vital – they can set out the escalation processes, they can join the performance management calls with the suppliers, they can assist the tracking of SLAs, KPIs and other metrics that you need. The Contract Manager can be that role that gives contractual and commercial expertise to the rest of the business to ensure that the contracts deliverables are met and potential exceeded.
Mastering Your Skills as a Contract Manager
To be successful, the Contract Manager needs to take the following elements into account:
This combination is needed so that the Contract Manager can talk to both Procurement and Legal, understand the priorities for both and bring them into the foreground to ensure that the business gets what it needs whilst delivering on the procurement and legal interests. Since I started out in the commercial world, at the intersection of Supply Chain, Procurement and Legal, I’ve always strived to be highly skilled in all five of these elements.
But how does a Contracts Manager learn these skills?
I wish I had an easy answer for you. The best Contracts Managers I have worked with have prioritized a mixture of academic study and learning on the job.
From an academic perspective, in my experience, I’d suggest the following:
Undertake a Law Degree, with a focus on Commercial and Contracts Law;
When learning skills on the job I would suggest the following:
Ensure you get to work in Procurement for a year or two. Take on a role that allows you to work with contracts, NDAs, framework agreements and one that gets you involved in the vendor selection (RFx) process from start to finish.
Work closely with your warehousing team, logistics team, trade compliance teams (if applicable in your industry). You will get exposure to them if you undertake work in Procurement.
Ask to be included in any and all commercial negotiations. These are largely focused on risk allocation, pricing and delivery schedules.
With these skills, a Contract Manager is going to feel at home talking with Procurement and Legal, highlight concerns to each effortlessly, and ensure the best results are reached for the entire business. This certainly isn’t easy but it is necessary if you want to bridge the gap between Procurement and Legal and make positive changes for your Business.
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