Jamie Liddell asked:
The International Association for Contract & Commercial Management is a non-profit foundation providing research and innovative learning techniques, and working with corporations, public and academic bodies to provide thought-leadership and understanding of ‘best practice’ contracting and relationship standards. SSON spoke with IACCM President and CEO Tim Cummins about how the Association is working with shared services and outsourcing organisations to establish best practice – and how old business models are simply unable to cater for today’s rapidly changing commercial requirements.
SSON: Tim, tell us a little about the work that IACCM is doing in the shared services space.
Tim Cummins: When I talk about shared services Iâ€™m really talking and thinking about the creation of shared services groups within an organisation, which is in a sense how do functions â€“especially some of the business support functions – interoperate into a more effective and more cohesive group. So in terms of our role, interestingly â€“ and unusually for any association â€“ we’ve already undertaken the amalgamation through our membership of three of those groups, being the commercial sales contracts organisation, the legal organisation, and the procurement/sourcing/supply chain organisation.
These are already well embraced within our umbrella, and of course a lot of our mission and motivation of that is to really try to help them to understand where their synergies are, from the point of view of their business contribution and of their skill-sets, and their procedures. And weâ€™re really trying to get them to look far more holistically at how through collaboration and cooperation they can bring greater value to the organisation. In that itself I suppose weâ€™ve got a fairly patent start point, and obviously within that weâ€™ve been exploring a lot of ideas around what best-practice service-delivery models will look like. I was highlighting, for example, one such model â€“ one to which my mind is one of the leading ones, being that at Procter & Gamble â€“ you may have noticed quite extensively in my blog recently.
I think the broader point is also however that we understand that shared service activity doesnâ€™t stop at the boundaries of our particular group; in that collaborative spirit, we as an association recognise that we really need to try to set an example to our members by our own focus on collaboration. So for example weâ€™ve signed formal alliance agreements with the International Project Management Association (IPMA) because we clearly see project managers as another component of that overall shared services mix, so we want to work with them as a community to say â€œOK, whatâ€™s the cross-learning? How do we empower your people to be more effective? How do we in our area of expertise equip you and provide you with on-demand capability?â€ We have a similar relationship with the Institute of Business Development (IBD). For example at our last major conference we actually had six partner associations representing other different groups that would usually fit in within the overall shared service model.
SSON: Why do you think it would be appropriate for an SSO, or individuals within an SSO, to become involved with the IACCM? And would there be a certain level of maturity or of scope at which that would become appropriate?
TC: Certainly in terms of the leadership of many of the shared services groups as Iâ€™ve just outlined we represent some leading-edge thinking in how you can actually get groups that traditionally perhaps have not cooperated well, have not really seen themselves as contributing well to a common business process, to rethink a lot of that. Certainly our view of the future of organisational design is that it is likely to be driven much more by the alignment of business process than by the alignment of business functions. The stovepipe model doesnâ€™t really work any longer, and Iâ€™ll expand on that for just a moment.
In the 20th-century business model we had the alignment of people within areas of specialism. And within a highly standardised, typically manufacturing process, where your goal was to deliver high volume and high quality, then having the rigour supplied by highly disciplined professionals and experts in a particular field was very much like the way that you would design a production line. So you saw everything as being something that passed through in a relatively unchanging process, where actually your issue was more about quality and consistency than about creativity or innovation.
That as youâ€™ll appreciate has changed dramatically as weâ€™ve moved to a networked world, with all the forces of competition, the forces of change, the forces of moving into new markets and having to handle them with far greater consistency â€“ you canâ€™t really allow any longer the levels of variation that the old country model used to create, yet at the same time you also need to be able to be creative around the differences that are really required. Businesses are having to become far more responsive yet at the same time, of course, the affordability of that old infrastructure has been proven not to be – affordable. So at the same time as organisations are facing all these new challenges, theyâ€™re having to rip their guts out by outsourcing large chunks of that activity. So weâ€™ve now suddenly got these broken enterprise models where theyâ€™re still trying essentially to manage it through the old functional organisations.
Thatâ€™s a lot of what our agenda is about really, how do you reengineer business process to manage a portfolio of trading relationships and how do you also coordinate internal resources â€“ the retained resource â€“ to actually ensure that the performance is not only sustained but differentiated from the competition.
SSON: Itâ€™s the internal bit obviously thatâ€™s of most interest to the shared services aspect of our network, so with what youâ€™ve just said in mind, how do you go about establishing, for example, best practices in such a rapidly changing dynamic environment? And to what extent do you think best practice is actually being hit at all?
TC: Good question. Taking the first bit: I think the key to this of course is to understand that that same power of network technology that is causing such disruption is also something that can cause great enablement. And the organisations that are rising to the top are those that understand the capabilities â€“ the unique capabilities â€“ that network technologies have now produced. So to give an example, at our association we have abandoned old models of things like country-based chapters and moved instead to global communities of interest. We know that itâ€™s going to be more relevant for somebody to be able to talk to a fellow expert in risk management, or performance management, or in service-level agreements â€“ obviously being connected into a global network of experts in that field is going to be a lot more relevant than turning up at a local chapter meeting. So we need to adjust and adapt. And I think thatâ€™s proving very very tough for many individuals.
Many of our us are from an older generation: weâ€™re not brought up in that world, we were brought up in a world where things were much more about personal connectivity. There are some big shifts in behaviour. At the moment we see many of our community as being victims of technology rather than beneficiaries of technology.
So who has become leading-edge? Well, I go back to companies like Procter & Gamble which clearly understood the dynamic impact that network technologies could have on their abilities to cooperate, share information, build knowledge, and therefore drive change and innovation rather than finish up spending all their
time fighting internal contention, or handling crises that occur because somebody over-committed, or under-committed, or failed to meet a deadline, or whatever.
So how can you use technology to devel
op better early-warning systems, how can you use technology to accumulate knowledge which becomes a driver and a force for change and update so youâ€™re actually staying ahead of the curve, rather than behind it? Thatâ€™s clearly a message that a number of top corporations have understood â€“ at people like IBM youâ€™ll hear that sort of conversation all the time. I think there are many in the UK whoâ€™ve probably understood it at board-level but are probably struggling with what that means from an implementation point of view.
SSON: Itâ€™s almost as if the logical consequence of what youâ€™re saying is that geography per se is getting less and less relevant, and individual national and regional idiosyncrasies are also getting less relevant â€“ the way youâ€™ve moved to a more global sphere-of-relevance model, rather than locality, is an example. Do you think weâ€™re looking at a true homogenisation of business or do you think there will always be the need to cater for local differences? Iâ€™m thinking in particular of China, and the way that itâ€™s assumed that in order to do business in China you need to cater for Chinese customs, guanxi etc â€“ that doesnâ€™t seem to be something thatâ€™s going to be easily overcome through any power of networking or communicative advances.
TC: I think thatâ€™s a very interesting question and itâ€™s one of course where the answer is very mixed. The forces of globalisation and network technology on the one hand are clearly seen by many of those who are currently in power as a very real threat. And so there may be controls based on limited access to the internet through to, obviously, other forms of control. When you look at governmental actions in response to the forces of globalisation, even those who are supposedly enlightened and are going to benefit from it are in fact instituting a lot of fairly restrictive practices.
Weâ€™ve seen for example a dramatic increase in the complexity of export-import regulations, in direct response really to these forces of international trade and the wish of governments to try to protect particular industries or markets; the US â€“ supposedly the bastion of free trade â€“ is one of the worst. So it isnâ€™t an unblemished field where everybodyâ€™s moving forwards on a gradual mission. In fact Iâ€™ve written quite a lot on the blog on this and weâ€™ve had very active debate in our board about this: the question of â€œwas globalisation inevitable?â€.
And itâ€™s very interesting because thereâ€™s a study on this we came across, a fairly large research study of that question among CEOs â€“ which is what sparked our own debate. I think 89 per cent of CEOs said that yes, globalisation was inevitable â€“ and I presume the other 11 per cent said â€œnoâ€ rather than â€œdonâ€™t knowâ€! But thatâ€™s a pretty damning statistic if thatâ€™s truly what CEOs believed, in the way that they expressed it; it certainly implies that theyâ€™re not particularly proficient risk managers. Because there are many, many things that could really derail globalisation. There are very real cultural issues; there are clearly threats â€“ you know, what is global terrorism and why and how is it being driven? There are many communities out there that feel very threatened by all this and many of the people who are currently in power â€“ including many of our own politicians â€“ obviously on one level embrace it where itâ€™s bringing benefits to their countries but then fight it where it isnâ€™t. So I think itâ€™s far from a foregone conclusion.
On another point, we at this very moment are doing a very interesting piece of research on exactly the point you were just raising â€“ although actually weâ€™re doing it more generically around Asia-Pacific; we went out with a question to our Asia-Pacific members earlier this week on exactly this: how much of an effect is globalisation having on your local approaches to business relationships, trading relationships etc etc. To date weâ€™ve had somewhere in excess of 100 replies. From those Iâ€™ve read so far the message is very loud and clear that it is having an effect, a substantial impact; that certainly the principles of contracting and the involvement of the legal elements of the contracting process has been driven up very substantially towards what we would typically think of as the western model.
So to your point about China, the Chinese input suggests that in fact there is a very real change coming round more to the model that we would be familiar with. Having said that, will there be some counterbalancing influences? I think there will be some; certainly I think the traditional strong transactional focus of many western buyers â€“ particularly procurement organisations â€“ is getting shifted. I think people are realising that actually relationships do have importance, and that perhaps at the global level they have even more importance than they did nationally.
We used to have a common set of values and principles that we could broadly presume, so if I was doing trade with someone in the UK I knew they were going to care about their local reputation, I knew that when I spoke to them they would understand what I was saying â€“ so we didnâ€™t have to put the same disciplines into communication and management of the relationship which are absolutely critical to success in the global market. So one of the things that weâ€™re all learning from the east, in a way, is some of the importance of taking a bit more time, being a bit more precise, having more tolerance of building some degree of relationship and concern for each other that goes beyond just â€œOK, Iâ€™ve got a deal for you: whatâ€™s your price?â€
SSON: Well, that sounds niceâ€¦ But is that genuinely a shift youâ€™re noticing? Particularly in the face of the current slowdown, is there enough time for time, as it were; is there enough space for that kind of civility?
TC: Again, some very interesting components to the answer to that. One is of course that again because of technologies and other things we can be increasingly sophisticated in our relationship segmentations. Is this a one-size-fits-all? Of course it isnâ€™t. There are some transactions that are transactions, and there are some relationships that are relationships, and if you get the two confused youâ€™re going to mess up.
Our research shows that cycle-times for more complex relationships have in any case been increasing, not decreasing; that the complexity â€“ and I would put that in part down to some of these shared services issues â€“ the inefficiencies of organisations, their inability to coordinate across the various stakeholders (particularly as many of those stakeholders are now outsource providers) is actually debilitating business from making decisions quickly. Again this is a real driver for a fundamental change in the way they organise â€“ and weâ€™ve seen dramatic variation in the cycle-time between best-practice organisations as they look at for example entering into complex relationships, outsource deals etc â€“ tremendous variations in the cycle-times depending on whether theyâ€™ve really understood these dynamics or not.
To return to your question, I would say that yes, there is absolutely evidence of it occurring. Weâ€™re dealing with a number of major corporations at the moment and one of the key issues for them at the moment â€“ buy-side and sell-side â€“ is â€œhow do I become easier to do business with?â€ Weâ€™re preparing an article right now on this, on the ease of doing business. â€œHow do I make myself a customer of choice?â€ â€œHow do I make myself a supplier of choice?â€ Thatâ€™s one of the commonest questions Iâ€™m
getting right now. And that clearly indicates to me that yes, there is executive management concern about this: does it flow down? Do they have definitive answers? Well, thatâ€™s where IACCM works, and one of the biggest research projects weâ€™re doing at the moment through a series of interviews with best-practice organisations is an understanding of what are the components that make up best practi
ce post-award contract and relationship management.