Powering enterprise-wide contracting excellence
December 4, 2024
Establishing a Contracting Center of Excellence (CCoE) is a critical step for organizations seeking to drive contract efficiency, mitigate risks, and optimize supply chain performance. A well-implemented CCoE provides the necessary operational framework to support enterprise-wide contract intelligence, enabling companies to realize the full value of their contracts.
The webcast highlighted how creating a CCoE can enable enterprise-wide contract efficiency, performance, and intelligence.
Panelists discussed the following topics:
Assessing readiness and securing executive buy-in
Conducting an organizational readiness assessment survey is recommended before implementing a CCoE. This assessment sets the baseline of the current level of satisfaction with the contracting process across different organizational functions. It also provides insights into organization’s change readiness.
The survey should assess the sentiment towards the current contracting process, including access to contract data and documents, time taken to set up a contract, and overall satisfaction levels with the overall contracting process. Measuring satisfaction at the beginning of the transformation enables the tracking satisfaction increases or decreases as the implementation progresses. Repeating the survey at multiple points in time helps gauge the change impact.
Identifying training and initiative champions is crucial for success. The readiness survey helps identify potential detractors and champions within the organization. It also highlights the need for effective change management and communication strategies to address concerns and ensure a smooth transition.
Obtaining business buy-in is essential for the success of a CCoE. Engaging stakeholders from different functions and ensuring they have a seat at the table is crucial. The effort should ultimately meet the needs of the business and deliver the desired outcomes effectively. Without business buy-in, the initiative may face challenges in achieving its goals.
Aligning people, streamlining processes, enabling with technology
A CCoE enables putting all the contracting expertise into one location within the organization. It allows having domain experts in one place to improve contract efficiency, transparency, compliance, and data-driven decision-making. The CCoE provides the management framework and the right people to effectively use the data and technology after implementation.
When creating a CCoE, it's important to look at the core components—people, processes, and technology. This includes setting up the organization, identifying the core people aspects, examining and streamlining processes, implementing tools and technology, and defining analytics and return on investment (ROI) metrics:
- On the people side, it's crucial to assess organizational readiness for change through surveys, establish appropriate staffing levels, recruit the right talent internally and externally, and provide robust training on both hard skills and soft skills.
- Processes should be thoroughly mapped out, identifying areas for improvement and eliminating unnecessary steps before automating. Policies and standard operating procedures need to be well documented. The future-state workflows and service offerings can then be defined.
- From a technology perspective, the contract lifecycle management system enables formalizing the streamlined processes in a consistent and standardized way. A thoughtful data strategy is essential to intentionally utilize the wealth of data from the contract lifecycle management (CLM) system for decision-making, compliance, and process improvement, potentially leveraging artificial intelligence (AI) and advanced analytics.
The people, processes, and technology need to work in harmony to drive optimal results. Your implementation partner can offer valuable support through training, helping overcome process bottlenecks, enabling data migration and reporting. Defining the right key performance indicators (KPIs) based on success factors, industry benchmarks, and leadership input is important for measuring ROI and effectiveness of the CCoE.
Developing an intentional data strategy
Before generating reports and analyses using automation tools, it's important to think through the logic of how the data will be used. One of the biggest benefits of new CLM system tools is access to previously unseen data. However, rather than relying solely on the data applications to determine what to look at, it's crucial to develop a data strategy that outlines how the data and analyses will be intentionally used to drive decisions.
This data strategy should be considered for not only data analytics but also data compliance and technology. Leaders and managers should think about how the data will enable them to make better decisions. They should then structure how the data will be used for reporting, compliance checks, or process improvements.
The data strategy should also include the technology that will be used to analyze the data. For example, in the first year, the compliance team might use basic reporting, but they can start thinking about how AI can be leveraged to better review compliance and identify anomalies or variations. Similarly, on the data analytics side, technology tools can be used to identify data variations that could provide insights into new go-to-market strategies.
There are two key aspects to consider: understanding new data and intentionally thinking about how it can be used to make better decisions, and then using technology to identify new directions that might not have been considered before. As a data-driven organization, there is a huge opportunity to utilize data in new ways and help identify previously unrecognized insight.
Establishing KPIs to measure success and ROI
Establishing baselines and identifying KPIs is crucial for measuring the success and ROI of a CCoE. It's important to consider the pain points and success factors identified in the project charter to determine the appropriate metrics. Some common measures include wide-ranging processing time, value leakage, cost savings, and process time improvements.
To identify the appropriate KPIs, it's helpful to review literature and industry benchmarks to understand what other firms consider successful outcomes. Consulting with your implementation partner can provide valuable insights into effective performance measures. Initially, a comprehensive list of 20–30 measures can be compiled based on a review of the contracting literature. Engaging with an organization’s leadership teams is essential to understand their priorities and the top 5–10 measures they would typically review daily to assess organizational performance. Additionally, it's crucial to evaluate the available data to determine which measures can be realistically tracked based on available data.
Through this process, the list of KPIs can be refined to a more manageable list of 10–12 key measures. Specific KPIs mentioned by KPMG include contract renewal rate, timeliness of renewal, stakeholder sentiment, number of contracts escalated to legal/risk, increased profitability through value leakage reduction, end-to-end processing time, contract quality and compliance, and CLM system adoption.
It's important to note that the selected KPIs may vary based on the organization's specific needs and may evolve over time. The chosen measures should align with the identified success factors and pain points to ensure the CCoE effectively addresses the business's requirements.
Unlocking the potential of contracts
The future of contract management looks promising with the adoption of CCoE and CLM solutions. As organizations continue to recognize the value of streamlined processes, centralized contracting functions, and data-driven decision-making, they will be better positioned to tackle the challenges of revenue leakage, compliance, and supply chain optimization. The journey towards a fully optimized contract management process may not be easy, but with the right combination of people, processes, and technology, companies can unlock the true potential of their contracts and drive long-term success.
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