Implementation and Use of a Contract Management Methodology

Implementation and Use of a Contract Management Methodology Introduction to contract processes and to the fundamental aspects of contract roles Ole Horsfeldt oho@gorrissenfederspiel.com Practical experiences from contract methodology implementations

Introduction Contract and vendor at the core of the (outsourced) enterprise VISION A clear vision and strategy on what it takes to be an outsourced enterprise PROCESSES Ability and processes that link business technology with business strategy in an proactive manner CONTRACT MANAGEMENT A formal contract implementation with clear roles and task descriptions integrated with contract manuals/playbooks HR STRATEGY Knowledge retention and appropriate HR strategy covering skills and incentives Use of a common contracting platform (templates) for all types of outsourcing contracts Implementation of a service agnostic risk system

When implementing a contract and vendor methodology, we face two main challenges Contract is in reality performed in a cross organisational manner but contract is most often organised in a silo and Most organisations don t have a clear understanding of which informal processes they actually use and which processes would serve contract purposes well Contract procurement Delivery and obligations tracking Issue legal Recipient/ user Domain experts finance D&O reporting Service Incident Performance Issue qualification is there a dispute? Escalation, negotiation Dispute Dispute resolution processes

Contract practices is the deciding factor whether customers and service providers are successful in creating robust and efficient relationships therefore don t rely just on well-crafted and negotiated agreements. Having drawn this conclusion, we changed our focus from traditional legal work to contract. This presentation tells our journey from inventing and designing a role based contract and vendor methodology to implementing it with a variety of buyer organisations.

Introduction to Gorrissen Federspiel s contract methodology Contract is done by individuals and groups of individuals collaborating in a coordinated manner with distinct responsibilities The core of our philosophy Contract is about: o use of well structured know how in a Consistent manner and o taking appropriate discretionary decisions o in other words decisions taken by well-trained people applying years of accumulated knowhow ) based on a. Contracts b. understanding of the organisational attributes of your own and the supplier s organisation c. the involved personal dynamics and relationships The core ability to do contract is not about automation, storage of contracts, and software solutions but can benefit greatly from being supported by such systems

The framework - Gorrissen Federspiel s contract methodology The philosophy Each person must understand her role that requires detailed role and task descriptions and work flows

The framework - Gorrissen Federspiel s contract methodology The philosophy and you must add training and easy-to-use event based playbooks that double as contract manuals thereby giving your contract managers an understanding of details of their specific task and role and where they fit into the overall picture

The framework - Gorrissen Federspiel s contract methodology The Contract and Vendor Management Framework Service and contract generic contract specific or agnostic Tasks for roles Roles Processes Workflows between roles Playbooks/contract manuals

The framework - Gorrissen Federspiel s contract methodology The 6 contract processes Performance Financial Optimization Compliance Dispute Time To ensure performance of the services and to enable enforcement of such performance Financial control, budget compliance and foreseeability and to avoid overpayments and value leakages and to use financial incentives to drive behavior To extract value the parties contracted for and to optimize the value beyond the original expectation To enable the Customer to remain compliant with legal requirements relevant to its business So that disputes and disagreements are dealt with efficiently and quickly without a detrimental effect on the relationship between the parties So become aware of and use the rights and strategic opportunities that apply at particular intervals

The service and contract generic or agnostic - roles and role descriptions Tasks for roles Roles Workflows between roles Processes

The service and contract generic or agnostic - roles and role descriptions The 6 contract processes Performance Financial Optimization Compliance Dispute Time This layer not always used 1. You assign roles to each of these 6 contract areas who together have the responsibility for managing that area 2. Roles are allocated to people 3. One person can have several roles

The service and contract generic or agnostic - roles and role descriptions Role description setting out overall/general responsibilities for that role PROACTIVE TASKS and REACTIVE EVENT-BASED The 6 contract processes Performance Financial Optimization Compliance Dispute Time Transition Manager Performance Manager Multiple Vendor Manager Change Manager Risk and Security Manager Technical Architecture and Policies Manager Retransfer Manager Budget Control Manager Financial Change Manager Audit Manager Benchmarking Manager Innovation Manager Relationship Manager Contract Information Manager Data Protection Manager Regulatory, Policies and Confidentiality Manager Dispute Manager Time Manager 12

The service and contract generic or agnostic - roles and role descriptions The hierarchy among roles If you are a contract manager today where would you fit in? But the big difference is that today many contract managers are mostly on their own with responsibility for just about any imaginable contract task while under the contract framework you will be part of a virtual or formal contract organisation with clearly defined tasks, areas of responsibility, and work flows

The service and contract generic or agnostic - roles and role descriptions Example of role description for a Performance Manager under Performance Management 15

The service and contract generic or agnostic - roles and role descriptions Example workflow

The service and contract generic or agnostic - roles and role descriptions Just take a moment to reflect! Now you should be thinking: This sounds good and well-structured but isn t it overengineered, too bureaucratic, too much of a SAP-ish monster? But consider the very basic elements of this: You pick only those roles you wish to implement Work will be allocated to the expert You will use check lists developed by many organisations and your people will exercise sound AND CONSISTENT judgement on that basis Your work processes will be connected

The implementation project

The implementation project What will think We need a contract manager We need to buy a system We have a vendor organisation, they can run our contracts Let s be clear about the challenges! Implementation is easy, just get it done quickly What needs to understand Everyone who interacts through personal interaction or through email with the supplier performs contract you need to be able to work together in a consistent manner You never need a system before you have the knowhow and the right people Contract is done across the organisation by the ITSM organisation, by finance and internal audit, by legal, and by vendor : you re one team Implementation is a fundamental change project that needs to be driven from top down

The implementation project Organisational approach: a group of dedicated contract managers handle many contracts and fulfil a specialist role (typically just one role) in relation to many contracts The two implementation models Contract approach: The separate team per contract approach where dedicated individuals manage only one contract and each individual will have multiple roles Apply to all relevant major contracts Add playbook/contract manual for each new contract No matter the model, the key is resolving the cross organisational riddle and the assigning of persons to roles

The implementation project The organisation approach recommended: Large company with many business critical outsourcing contracts (this is an outsourced company) Performance Financial Optimization Compliance Dispute Time Transition Manager Performance Manager Multiple Vendor Manager Change Manager Risk and Security Manager Technical Architecture and Policies Manager Retransfer Manager Budget Control Manager Financial Change Manager Audit Manager Benchmarking Manager Evolution and Innovation Gain Sharing Manager Relationship Manager Contract Information Manager Data Protection Manager Regulatory, Policies and Confidentiality Manager Dispute Manager Time Manager Groups of persons for each manager role a person can have main responsibility in relation to a particular contract or domain of contracts Implemented across many contracts ITSM or similar roles mainly manned by separate organisation And remember most organisations implement this step by step and not all roles at the same time!

The implementation project Both implementation models recommended: Medium sized company with one major outsourcing contract and additional outsourcing contracts Performance Financial Optimization Compliance Dispute Time Transition Manager Performance Manager Multiple Vendor Manager Change Manager Risk and Security Manager Technical Architecture and Policies Manager Retransfer Manager Budget Control Manager Financial Change Manager Audit Manager Benchmarking Manager Evolution and Innovation Gain Sharing Manager Relationship Manager Contract Information Manager Data Protection Manager Regulatory, Policies and Confidentiality Manager Dispute Manager Streamlined roles with essentials Lead manager can have other roles within that area One person can have more than one role SMEs will possess contract manager roles Time Manager

The implementation project Contract approach recommended: Smaller companies with one business critical outsourcing agreement Performance Financial Time and Optimization Compliance and Dispute Several processes collapsed into fewer processes One or a small team per contract area One person can have more than one role

The implementation project Existing delivery/services processes are connected to the contract processes through process maps This is an essential part because this is where the end to end process is created that enables efficient contract 24

The implementation project Example of the performance manager role mapped into a RACI chart for incident manage R=Responsible A =Accountable (Approver) C= Consulted I= Informed Responsibility User/Custo mer Service Desk ITSI Vendor Create Incident R Provide Info R Resolution confirmation R Analyze Incident R C I Resolve front-end issues R I, A Responsible for S2-S4 issues I R A Forward back-end issues to vendor R A I Inform customer, Service Line and ITSI I R I I I Close incident I R I I I Incident follow up C R C Responsible for S1 issues I R, A I War-room creation I R I Escalation (If SLA not met) I R I Create change or problem I R I I Reporting R Analyze incident I I R I Solve incident I I A R I Contract Manage ment Perform ance Manager 25

The implementation project How will you measure your success? Limited service provider up sale Reduction of time to market of implementation of changes Significantly reduced number of disputes Reduced time (and resources) to resolve disputes Increased user satisfaction with services Increased contract manager job satisfaction Increased contracts per contract manager ratio

Recap and more time for questions

Recap and more time for questions The 6 contract processes Performance Financial Optimization Compliance Dispute Time Processes Roles Tasks for roles Workflows between roles