Most companies are constantly evaluating how to run their businesses to ensure maximum productivity, efficiency, and, of course, revenue and profit margins. Companies are essentially trying to figure out how to employ a results-oriented management style. This is true in various sectors and for many different segments of business, including contract management. Here are a few things to keep in mind when aiming for results-oriented contract management:
Align Contractual Obligations with Company Priorities
A company’s contracts must first be considered in the context of the business’s overall priorities. The scope of this consideration varies depending on the nature of a business and its contracts. At a minimum, companies must consider the financial ramifications of its contracts to ensure that there is adequate room in the budget for any issues that may arise.
Any company that has numerous contracts with significant financial consequences will want to implement a rigorous and structured contract lifecycle management system. For companies with fewer contracts, or ones that will not drastically impact a company’s operations and/or budget, a more flexible contract management process can be employed. Ultimately, to maximize results, any contract management system adopted must be based on a company’s unique circumstances and goals.
Establish Objectives for Contract Portfolio Management
It would be difficult to determine how best to manage a company’s contract portfolio without first establishing the objectives for those particular contracts. For example, if a company has entered into contracts to outsource some aspect of its business in an effort to improve efficiency, this may necessitate a project management approach.
On the other hand, if the primary goal of a company’s contracts relates to decreasing the costs of production, this may require a contract management approach that is a bit more specific and tailored, such as milestone management. The only way to attain the desired results is by establishing clear objectives from the outset.
Evaluate Effectiveness and Progress
In addition to establishing objectives, companies must create specific targets or performance metrics to determine whether those objectives have been met. Monitoring performance and evaluating progress are fundamental to goal attainment and success.
Regardless of which contract management style a company utilizes, to ensure the company sees the results it wants, there must be a fairly regular contract review process, and it should be clear what will be measured and how.
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Contract Management Tip #4: Run a Contract Portfolio Review