Contract managers can improve operations by taking more leadership initiative, reducing any skills gaps, and ensuring financial analysis is used effectively.
Colin Linton, director of business training and consultancy firm Gidea Solutions, spoke to CIPS in the podcast Improving Contract Management: Applying Contract Leadership about his research into contract management and the key skills and tools involved.
This work, which included a survey of 130 procurement professionals, revealed the top 10 skills regarded by the procurement community as the core foundation of knowledge required for contract management.
The top 10 are:
1. Understanding contract terms and conditions (85%)
2. Negotiation tactics and planning (82%)
3. Soft skills such as influencing and persuasion (76%)
4. Risk management (73%)
5. Financial analysis (70%)
6. Handling conflicts and dispute resolution (66%)
7. Managing internal stakeholders (65%)
8. Understanding contract law (60%)
9. Creating a performance framework for suppliers (56%)
10. Relationship management (55%)
Linton said that experienced contract managers are reinforcing the importance of soft skills more, compared to how the skill was considered in 2017. The survey found that 50% of the top skills are also based around soft skills.
“Soft skills play a large part in how procurement [professionals] can engage internal stakeholders. If we want that seat at the table we must be able to engage more effectively internally with stakeholders,” he added.
The research included an initial survey in 2017-18, followed by a second wave of data gathered in 2019, including interviews with half a dozen contract managers.
Use leadership initiative
Linton said that while contract management has long since been a key tool, contract leadership has been neglected.
“It’s interesting how we use the word ‘management’ a lot and ‘leadership’ not very much. We talk about contract management, performance management, supplier management, and category management, whereas the term leadership isn’t often used in the context of procurement-related activities,” he added.
Linton recommended that procurement professionals adopt a leadership role on the contracts which are “strategically important” to the organisation, and that they should be displaying the “top 10 key skills” while in a contract management leadership position.
Close the skills gap
The research showed that 82% received no formal training when entering their first contract management role, despite 90% of them being involved in the managing of a contract in excess of £1m, and only 10% had specific, formal training.
Linton recommended that both the individual and employer take responsibility to ensure that the contract manager has the skills required to effectively lead the contract.
Companies need to be ensuring there aren’t skills gaps and working with procurement professionals to develop training plans where necessary.
He said individuals needed to recognise what skills were needed to do the job and those that are starting in first-time contract manager roles should seek guidance from experienced professionals, either directly within the organisation or through platforms such as LinkedIn and CIPS.
Learn the value of financial analysis
Financial analysis was not considered a skill in 2017-18, according to the past survey, but it was flagged by 70% of professionals as a core skill in 2019. Linton believes the collapse of the construction giant Carillion in 2018 has had an impact on the procurement professionals’ agendas and was a leading factor in the increased attention to this area.
He added: “Particularly now, in these very challenging times, the facts are that companies will be looking for all of their functional areas to be contributing positively towards profit and cashflow. Financial analysis skills, to a level, are crucial for any function, particularly for helping cost reduction.
“Contract management is, in part, about risk management, and some of the risks that we deal with include reviewing finances of critical suppliers so that if they go bust we can get on the front foot and anticipate it.”
Linton highlighted that as companies are often driven by profit and cashflow, contract managers have an obligation to be more in tune with the finances, and if you can prove your value through this you could potentially earn more board access.
☛ Want to stay up to date with the news? Sign up to our daily bulletin.