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2 Understanding the Contracting Capability Maturity Model: How Competitive is Your Organization s Contracting Function? March 24 th, 2011 Presented By: Huron Legal in cooperation Association of Corporate Counsel and the Law Department Management Committee

3 Introduction Nancy Jessen Managing Director, Huron Legal Katherine Kawamoto VP Research and Advisory Services Verona Dorch Assistant General Counsel & Assistant Corporate Secretary

4 How Competitive Is Your Organization s Contracting Function? Session Overview It is common for companies to struggle at benchmarking their current enterprise-wide contracting performance. Lacking key inputs, firms may not understand how to measure obstacles or understand the steps necessary to overcome roadblocks in order to be a mature and high-functioning organization. In this session we will review the contracting capability maturity model, which provides a framework to help companies evaluate their contracting performance. We examine several key inputs to the maturity model and discuss how to structure next steps toward achieving a world-class contracting organization. 4

5 About IACCM The International Association for Contract & Commercial Management enables both public and private sector organizations and professionals to achieve worldclass standards in their contracting and relationship management process and skills. It provides executives and practitioners with advisory, research and benchmarking services, and worldwide training and certification for contracts, commercial and relationship management professionals. IACCM is a non-profit membership organization that supports innovation and collaboration in meeting the demands of today's global trading relationships and practices. 5

6 Our globally scalable businesses serve major, long-term industries that are fundamental to world economic growth and progress 5 Divisions Infrastructure Metals Minerals Rail Industrial Headquartered in Camp Hill, PA Global in 50+ countries 2010 revenue: ~ $3B 2010 employees: 19,300 6

7 Delivering Value Driving Results Collections with R3con Digital Evidence Services Discovery Managed Services with Sp3ctrum Enhancing Organizational Effectiveness and Reducing Legal Spend Outside Counsel Management Document Review Matter Management /E-Billing Huron Legal Integrated E- Discovery with V3locity Law Firm Management Records Management & Document Management Law Department Optimization & Organization Redesign Cost Reduction and Efficiency Improvement with IMPACT Contract Management 7

8 Why Assess Your Contracting Capabilities? To understand your company s position relative to competitors To increase performance, reduce cost, and mitigate risk To become a better vendor AND customer To identify initiatives needed to meet business objectives To establish a baseline to demonstrate improvement 8

9 Background IACCM Contracting Capability Maturity Model History Created in 2007 to benchmark the status of your contract and relationship management processes against characteristics of world class organizations Model Originators IACCM Rockwell Automation BT Grainger TPI Siemens Cisco CommitMentor 9

10 IACCM Contracting Capability Maturity Model The 9 Measurement Inputs Leadership Customer / Supplier Experience Execution & Delivery Solution Requirements Management Financial Information Systems / Knowledge Management Risk Management Organizational Development Phases 1 (0%) - start-up 2 (25%) - under development 3 (50%) - discipline is functional 4 (75%) - continuous improvement 5 (100%) - world class Strategy People Development 10

11 Harsco s Core Ideology provides context for defining and adopting a new vision for enterprise contract management Core Purpose To build teams that win with integrity anywhere in the world Core Values Uncompromising integrity and ethical business prac7ces People the A Team Con7nuous improvement Value crea7on discipline Proposed Vision for Enterprise Contract Management Recognize and manage contracts as enterprise-level assets to optimize the value of commercial relationships, reduce operational risk and increase internal efficiency. 11

12 Compared to Industry Benchmarks, Harsco is at the start-up phase in each of the nine areas of measurement. Contracting Capability Maturity Model Comparisons Start-up World Class 4 5 Leadership H 2.6 Customer / Supplier Experience H 2.9 Execution and Delivery H 2.8 Solution Requirements Management Financial H H Information Systems/Knowledge Management H 2.2 Risk Management Strategy People Development H H H Rating Scale 1: start-up 2: under development 3: discipline is functional 4: continuous improvement 5: world class 12

13 Key Areas of Focus Strategy & Policy: Transform the prevailing business culture regarding contracts from a focus on administrative processes to an organization and culture that is aligned with achieving the proposed vision for ECM. Process & Workflow: Develop and leverage a balanced and standardized contract management process based on established best practices to improve consistency and reduce risk across the organization. Roles & Responsibilities: Redefine roles throughout the contract management lifecycle and leverage defined escalation criteria to drive appropriate participation of resources. Systems & Information Management: Design and implement solutions to meet Harsco s highly prioritized requirements, not all possible requirements, with a focus on local usability, as well as, on-going support and improvement. 13

14 Interactive Poll In the next section, we present examples of these inputs and actual contracting capability maturity model questions. Please answer the questions based on an assessment of total company capability, indicating the score for each question on a scale of 1 to 5: 1 (0%) - start-up 2 (25%) - under development 3 (50%) - discipline is functional 4 (75%) - continuous improvement 5 (100%) - world class 14

15 Interactive Poll Answer the following statement: I believe my company s enterprise-wide contracting processes are Next: Leadership 15

16 Interactive Poll Leadership (1 of 2) Answer the following statement: Degree to which our company-wide commitment management processes & process ownership is established 16

17 Interactive Poll Leadership (2 of 2) Answer the following statement: Degree to which business leadership incorporates commitment management as a key element into marketing strategy 17

18 Interactive Poll Leadership Poll Questions: Company-wide commitment management process, & process ownership established Business Leadership incorporates commitment management as key element in marketing strategy Benchmark Survey Response: Roughly 75% of survey respondents rated their leadership maturity as 3 or less. Discussion Topics: What is Commitment Management? Impact of inconsistent messaging by Leadership Next: Customer / Supplier Exp. 18

19 Interactive Poll Customer / Supplier Experience (1 of 2) Answer the following statement: Degree to which the contract is viewed as a tool to plan and track business relationships 19

20 Interactive Poll Customer / Supplier Experience (2 of 2) Answer the following statement: Degree to which both parties openly discuss interests and desired outcomes 20

21 Interactive Poll Customer/Supplier Experience Poll Questions: The contract is viewed as a tool to plan and track business relationships Both parties openly discuss interests and desired outcomes Benchmark Survey Response: A majority of respondents believe customer / supplier relationships are mature Related questions tracking contract use as a goal-setting tool scored much lower Discussion Topic: Translating strong relationships into measurable contracting policies Next: Execution and Delivery 21

22 Interactive Poll Execution and Delivery (1 of 2) Answer the following statement: Degree to which process are well-aligned and capable with tight control limits 22

23 Interactive Poll Execution and Delivery (2 of 2) Answer the following statement: Degree to which there is no tolerance for non-compliance 23

24 Interactive Poll Execution and Delivery Poll Questions: Processes are well-aligned and capable with very tight control limits There is no tolerance for noncompliance Benchmark Survey Response: Responses indicate a large spread among companies (72% either weak or strong) Comparatively small portion of average respondents Discussion Topic: How does a company s business model effect execution and delivery Next: Info Systems / Knowledge Mgmt. 24

25 Interactive Poll Information Systems / Knowledge Management (1 of 2) Answer the following statement: Degree to which a contracting tool is deployed and utilized for all contract capabilities 1 (0%) - start-up 2 (25%) - under development 3 (50%) - discipline is functional 4 (75%) - continuous improvement 5 (100%) - world class 25

26 Interactive Poll Information Systems / Knowledge Management (2 of 2) Answer the following statement: Degree to which the ECM tool is part of an overall enterprise information system (e.g. ERP, content management) 1 (0%) - start-up 2 (25%) - under development 3 (50%) - discipline is functional 4 (75%) - continuous improvement 5 (100%) - world class 26

27 Interactive Poll Information Systems/Knowledge Management Poll Questions: A Contracting Lifecycle Management software tool is deployed and utilized for all contractual activity The [ECM] software tool is part of the overall enterprise information system (e.g. ERP system) Benchmark Survey Response: Nearly 40% of respondents do not have an enterprise contract management tool (ECM) deployed Even fewer respondents indicated any integration Discussion Topic: Moving from a segmented management process to an ECM Reasons for lacking a strong ECM tool 27

28 Interactive Poll Summary World Class Organizations Seek to Improve Fundamental Maturity Building Blocks Process Define processes and develop measurable success metrics such that inputs can be evaluated and refined in future phases Technology People Risk / Reward Utilize an enterprise-wide solution for each input where appropriate, and ensure that data extracted from the tool is robust, comprehensive, and complete Train the appropriate people to ensure competence and adaptability in addressing the input. Engage senior management for buy-in and development of strategic initiatives Evaluate all inputs and strive to reduce risk while increasing rewards 28

29 From Assessment to Implementation Conducting a contracting capability assessment is the first step. Driving change will require translation of results into agreed upon business objectives, an implementation plan and structured execution. For continuous improvement and evolution along the maturity model, organizations should implement a structured re-evaluation approach. CCMM Assessment Operational Alternatives Action Plan Current Contracting Capability Contracting Goals & Business Objectives Implementation Roadmap Execution Re-evaluation and Improvement Building Towards Maturity 29

30 Questions? For More Information, Contact: Katherine Kawamoto, IACCM: Nancy Jessen, Huron Legal: Verona Dorch, Harsco:

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