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Contracting and Change – How They Can Happen Together


{#/pub/images/ContractingandChangeHowTheyCanHappenTogether.jpg}The phrase ‘change management’ has almost become a cliché in the business world.  Many companies and consultants claim to be experts in the subject, but indeed, it's doubtful that any have become masters. Yet why would this be the case?  Because every company, culture, function and situation can be different, and there is not one common recipe for change management that applies to all.  Thus, when thinking about driving change in the contracting arena, it can be even more challenging to drive change amongst processes and procedures that are typically rigid and established as such for very good business reasons.  Contracting processes must be thorough and properly address the business needs, and it is often challenging to convince stakeholders that contracting processes will benefit from any type of modification.  Let’s discuss some effective ways on how change can be success in a contracting environment.


One of the first steps in understanding how change can be driven in a contracting function is to identify the critical elements of change management, so that a plan can be formulated accordingly.  While the identification of those critical elements must be specific to both a company’s contracting processes and the company’s culture, there are macro level change elements that can be considered when developing your strategy.


It may be relevant to share a recent experience that may help outline those elements.  This engagement was with a major utility company, and their goal was to develop a strategy that would help support a recent decision to launch a centralized contracting function.  It was interesting to work with them at this stage of their journey because not only was this an exercise in communication, it was also an exercise in education.  The intent was to communicate and educate stakeholders about how processes and procedures should and would change as a result of centralization.  The effort required the development of a unique approach – specifically addressing the contracting function - that would be effective in a timely manner.


When outlining the approach, the critical elements became clear:

1. Define the gaps

2. Develop the communication strategy

a. Develop a roadmap that addresses short, medium and long term goals

3. Find your advocates

a. Identify the stakeholders for communication, support and training

4. Define current and future processes

5. Determine the right training program to achieve your goals

6. Establish clear contracting metrics, both tangible and intangible 


So what makes these elements uniquely successful for a contracting function?  Let’s explore each element while discussing lessons learned and business impact.


Six Critical Elements To Transform The Contracting Function


ONE: Define The Gaps


The first place to start is to identify any gaps in understanding what needs to change or what is changing about the contracting function.  Gaps can be uncovered through various methods, whether it is via interviews with key stakeholders as to what role the contracting function plays, discussions with internal clients regarding their needs from the contracting function, or through analysis of the work processes that the contracting team employs each day.  It is also critical to explore how efficient those processes are to accomplishing the business’ objectives.  


In the case of the utility company scenario, the primary gaps uncovered were in two areas.  First, although there was top down leadership support for the centralization, that support was sporadic and many senior executives did not understand the business value that the contracting function would bring.  Second, roles and responsibilities needed to be defined for the newly formed contracting team, and those responsibilities had to be aligned with efficient contracting processes.  


The lesson learned was to design contracting processes that aligned with the roles of each team member, assign goals and objectives to the team, and conduct a session in the executive staff meeting that clearly communicated the intent of the group.  


TWO: Develop The Communication Strategy

Developing the material to communicate within the organization that provides information regarding processes, tools and techniques is important.  However, it is equally important that a larger strategy and subsequent action plans accompany the expectations set with leadership.  It is important to ensure that the contracting team knows what leadership expects them to do in driving culture change at the time they are formed as a function.  The company can utilize tools such as the internal internet, town meetings and newsletters to communicate the function’s charter and role in the organization.

In the case of the utility company, a documented communication strategy was published on their internal internet site under the Supply Chain/Contracting function that allowed anyone in the company to be informed about the changing face of contracting in the organization.


THREE: Find Your Advocates

The identification of stakeholders for any effort is critical to success.  Contracting organizations must be strict in their processes, and must strive to be flawless in their execution.  A key component of driving change is to quickly identify which stakeholders are supportive from the start, and which ones are a bit slower to support the effort.  The stakeholders who are quick to jump on board play an instrumental role in the communication plan, and as success is realized, they are influencers to other stakeholders who were later to realize that contracting change is for the better. 


FOUR: Define Current And Future Processes


The distinction between current and future state processes for a contracting function undergoing change is the most critical element of all.  The root of change lies in this distinction, and must be deeply embedded as the main focus of the organization’s communication strategy.  The organization is keenly aware of how the contracting processes work today, so if processes are changed, it is important to highlight what will be different in the future, how roles and responsibilities will change, and how it impacts specific stakeholders and/or functions.  


In the utility scenario, the contracting group was a new group, so both processes and roles were unknown by the organization.  The focus of their communication strategy was to highlight how the company would be impacted by new contracting processes, who needed to interact with the new group, and the overall benefit to the company that the new contracting group would bring.



FIVE: Determine The Right Training Program To Achieve Your Goals

An important point to remember when developing a training program intended to communicate and educate is to get the right people in the room for the first session so they can be the forerunners for future training attendees.  This concept ties closely to the point of finding your advocates – the stakeholders who are onboard earlier in the change process will be in a position to influence the other leaders who are lagging in their support.  A training program gives those stakeholders vital information to help communicate the change and ensure that the contracting effort is a success.

In the case of the utility company, it was clear that the culture was one where employees learned from leaders, and the leaders led by example.  For the training development, the organizers chose the first session participants carefully based on who would make the biggest impact and set the best example for the organization.  It was also important in this case to choose an effective facilitator for their sessions.  The facilitator had to demonstrate the ability to create dialog that brought those leaders and their experiences with a successful contracting function into the discussion, so that the delegates could clearly glean the value that the group would bring to the organization.


SIX: Establish Clear Contracting Metrics, Both Tangible And Intangible.


Metrics are a vital part of any organization, but are particularly useful for a contracting group to measure not only their performance, but also their impact on the business.  They are in place to ensure the organization does not lose focus on contracting compliance, forget the intent after training has occurred and/or to measure savings that occur as a result of proper contracting processes.  It is also important that a reporting system is developed and implemented so that again, it can be a vital part of the communication strategy.  If the impact on the business is visible, it is easier to keep the organization on track for continuous improvement and hence, change.

For the utility company, two primary metrics that demonstrated success and drove change from the previous state before the contracting group was in place were:

    • Cost savings – the group was very effective through the establishment of contracting processes and rigor of driving significant savings by leveraging key suppliers, rationalizing the supply base, and improving the skill sets of the organization through better negotiation tactics and consistent use of tools and templates.

    • Compliance – utilization of the contracting group was a key element of success, for use of the contracting group minimized risk, which was reflected in a reduction of fines that the company had experienced the previous year because of engaging with suppliers who were not approved by certain regulatory entities.  The company reached 87% compliance in year 1, with 100% compliance reached in year 2 after the group’s implementation.  As in many scenarios, reducing fines can be a strong motivator for driving change.


In summary, a centralized contracting function takes time to implement, and often more time to achieve success. It is important to build a comprehensive infrastructure, incorporating the elements discussed, remembering to give it time as change does not come immediately.   It is a challenge to shift an organization in a new direction, but with compliance, communication and measurement, it will be a success.  




Written by Julie Brignac, Principal, Vantage Partners, and a member of the firm’s sourcing and supply chain management practice.  She has worked as a transformational leader in globally matrixed organizations, with over 20 years of strategic and operational experience in supply chain management, international outsourcing, sales and operational planning, procurement transformations and business process improvement initiatives. She is the inventor of The RoSS Model®, an end-to-end project benefit financial validation process that helps organizations predict, report, and reconcile project benefits to financial statements, specifically in the supply chain arena. Julie is an Associate Adjunct Professor for the Undergraduate School of Supply Chain Management at the University of Maryland, as well as an Adjunct Professor of Online Learning for the Whitman Business School for Syracuse University. 


Do you have a question for Julie?  Post it in our Purchasing & Supply Chain Community, she will be happy to help: Ask an Expert


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