This document discusses contract management challenges in South African organizations based on an interview. It finds that legal, procurement, and contracts groups often lack clear strategies and metrics. Leadership is also a major issue, with groups just maintaining the status quo rather than innovating. There are some exceptions, but overall much work remains to be done to improve contract management practices, technology adoption, knowledge management, and risk management. Career opportunities may exist for those who can help transform these functions into more strategic, value-adding roles.

1. Contract management languishes in
limbo
Gregg Barrett
A FEW minutes before writing this article, I was on the phone with the head of IT of a
large South African blue-chip organisation. We were discussing contract management.
I must mention that we had been discussing contract management at the organisation in
question for about four years now and agree it is a critical area that must be addressed.
At this organisation, IT plays a supporting role with business taking the lead on systems
that need to be implemented.
However, I feel this is the correct approach at a company where there is no-one in
business who is taking a leadership role in addressing this critical business requirement. It
is for this reason that contract management is in a state of limbo and at the very least, is
exposing the organisation to serious risk.
This is a problem I encounter daily and I delved into a Q&A session with Tim Cummins
of the International Association for Contract and Commercial Management (IACCM) for
the April edition of the Contracting Excellence publication. I responded to questions he
put to me. Here is an extract from the session.
Q: Based on your experience, how would you rate the quality of leadership and strategy
in the contracts/ procurement/legal groups with which you deal? What do you see as
some of the most common shortcomings? What have you observed in terms of
excellence?
A: Out of the groups that I deal with – and generally, legal is probably one of the worst in
terms of strategy and leadership – it is extremely rare to see or hear of “strategy” in the
legal department of organisations I have worked with.
In legal, the approach most often is to just keep on doing what “we” do. When I ask what
they do, I almost always get something about “protecting the business”. Clarity on (a)
what they are protecting against¹ and (b) how they are protecting against it,² is usually not
very clear and forthcoming.
Still on the legal front, as scant as their strategy is their use of metrics. It does not take
much to work out that the two are related. As the saying goes:
You can’t change what you can’t manage, you can’t manage what you can’t measure, you
can’t measure what you don’t know.
Legal’s major weakness is technology adoption. I have found legal to be almost
backward in understanding and applying technology. There are some notable exceptions
but they are few and far between. Although legal tends to be cross-functional in nature, I
can’t say that they always understand other areas of the organisation and their respective
challenges.
For example, many legal people I have spoken to know little about finance, operations

2. and procurement.
Most companies in South Africa do not yet have a standard enterprise-wide clause and
template library (an aspect of knowledge management) to support contract creation off
their own paper. But that is changing (albeit slowly) with many firms at least making an
effort to establish such a knowledge base. The problem is that there are many people who
are still far from this frame of thinking.
Without such a knowledge base, enterprise risk management is nothing more than a pipe
dream at this point. There are still too many individual, let alone functional, silos.
Procurement
Procurement tends to be a little better on the strategy front – most firms seemingly have
one. However, many of these strategies tend to be focused on simple price/cost equations
and do not take into account the bigger picture of innovation and value creation in the
organisational value chain.
I also don’t always see strong evidence of a link between procurement strategy and the
attainment of key strategic organisational objectives – sometimes procurement strategy is
just that – procurement-centric and lacking alignment to the chief executive’s agenda.
I think procurement needs to stretch its legs into the rest of the organisation to build a
greater knowledge of it, its needs and relationships with internal stakeholders. This will
go a long way to help it attain procurement objectives and broader organisational
objectives.
It’s like when you cross the street and you need to look both ways – in this case inward
and outward and not just outward at the supply base.
Contracts³
The contracts group is easy. We have yet to see some sort of definition of this group in
most organisations with parts of the contract lifecycle being undertaken and executed by
disparate individuals and functions. The problem – no central responsibility and
accountability for the contract lifecycle/relationship.
To sum up, “excellence” is still confined to a few organisations. For the majority, there is
much work to be done.
Q: A high proportion of IACCM (www.IACCM.com) members indicate that a “lack of
leadership” by their management is a source of major concern and limits their career
opportunities.
A: In the book, The Essays of Warren Buffett: Lessons for Corporate America, he warns
against the “institutional imperative”. It is a pervasive force in which institutional
dynamics produce resistance to change, absorption of available corporate funds and a
reflexive approval of sub-optimal chief executive strategies by subordinates.
Contrary to what is often taught in business and law schools, this powerful force often
interferes with rational business decision-making.
The ultimate result of the “institutional imperative” is a follow-the-pack mentality
producing industry imitators, not industry leaders – what Buffett calls a “lemming-like
approach to business”.

3. If the “leaders” are not leading, step up and fill the void. Perhaps this is easier said than
done, but if you simply continue to follow the herd on a road to nowhere, expect to land
up in Foolsville.
Q: Contracting and procurement tend to be tactical and transactional. This situation – be
it reality or perception – inevitably limits the value placed on the function by executive
management, hence its influence and status. This inevitably limits career opportunity, the
quality of people attracted and also creates threats to the question of whether this should
be a “retained” or “core” activity.
A: If these functions simply automated their respective transactional processes, they
would have more time to focus on more strategic value-adding activities providing
executive management with ample evidence of the importance of their role and would, in
all likelihood, attain greater status, budget and attract better talent.
Being stuck in transactional fire-fighting simply leads one all the quicker down the road
to an outsourcing hub like India.
Q: Finally, you understand the community that IACCM represents (contract and
commercial management community). Would you recommend this field to younger
people? Does it offer interesting job opportunities and a potential career path for leaders
of the future?
A: I would like to think that it does offer opportunities and careers for future leaders.
Hopefully, this is not merely in our own thinking. Two factors that I think will make or
break this:
1) Organisations that succeed will be those with the strongest value chains.
These value chains are built and managed on relationships. One would like to think our
community is well positioned to play a leading role in this successful positioning of the
organisation and the building of these relationships.
2) If our community does not stand up to be counted, then expect to be left on the
sidelines.
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¹ See: Protecting Your Company’s Corporate Reputation – CLASA, Incorporate,
Summer 2008, Vol3 No4
² See: The Legal Adviser’s Role in Protecting the Company’s Reputation – and
Managing their Personal Reputational Risk, Tim Cummins http://www.clasa.co.za/-
index.php?subid=120-259
³ See: Contract Lifecycle Management (CLM): Hitting the Mark with Centralised
Management, Aberdeen Research Brief, December 16 2008, William Browning