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Redefining Contract Management: Beyond Monetary Metrics
Arjen van Berkum |
November 27, 2023 |

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One of my personal observations when I talk to people in #sales and #procurement is their almost maniacal approach on the monetary aspect of the deal. As if size matters :).

Old school thinking considers the monetary scope of a contract as the most important element when appraising its relevance for the organization. However, this perspective fails to acknowledge the changing dynamics of contract management in the modern business landscape. Here are a few reasons why this view is considered old school:

 

1. Value-based approach: In recent years, organizations have started to embrace a value-based approach to contract management. This approach focuses on evaluating the strategic importance of a contract beyond its monetary value. It considers factors such as long-term relationships, added value, and alignment with the company’s goals and objectives.

 

2. Risk management: Contracts involve various risks, including legal, operational, reputational, and compliance risks. Simply looking at the monetary scope of a contract may not provide a comprehensive understanding of these risks. Modern contract managers prioritize risk management and assess the potential impact of a contract on the organization’s overall risk profile.

 

3. Non-financial benefits: Contracts can bring non-financial benefits to an organization, such as access to new markets, technological advancements, intellectual property rights, and enhanced brand reputation. Focusing solely on the monetary aspect may overlook these valuable non-financial benefits.

 

4. Flexibility and adaptability: The business landscape is evolving rapidly, and organizations need to be agile and adaptable. Evaluating a contract’s relevance based solely on its monetary scope may hinder flexibility and prevent the organization from taking advantage of emerging opportunities or changing its strategic direction.

 

5. Relationship management: Contracts often involve building and nurturing relationships with suppliers, partners, and customers. The value of these relationships extends beyond the monetary scope of the contract. Modern contract managers recognize the importance of fostering positive and mutually beneficial relationships to drive long-term success.

 

So it is time to think about new relevances. Business continuity, innovation, value creation, risk to name just a few. Let’s push it and bring #contractmanagement in the right place to get to success.

Lets push it forward.

Author: Arjen van Berkum

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