The Contract Scorecard
by Sara Cullen
It is not often that I can sum a book up in five words – this book makes business sense!
How often have contracts for outsourced services been created, because they ‘had to be’, and then just left on the shelf to gather dust? How many of us see a contract as a key tool to help deliver a business benefit which the organisation requires, as opposed to a legal article that is only used if we are suing the supplier or they are suing us? To both of these questions, I would suggest the answer goes something like ‘most of the time’. This is a worrying situation. My view is that yes we need to be aware of the legal consequences, but a contract should not be established for this reason alone – it is not just a bat to be wielded when a contract goes wrong – we need to take control long before this.
A significant amount of time, effort and resource is often put into a contract, so why is it left unused once it has been signed off? As a significant amount of finance is undoubtedly being leveraged to outsource to a supplier, shouldn’t the contract actually help the business to achieve the benefits it requires? Why not make the contract work for the business as a tool to leverage and ensure the desired benefits are realised? Cullen states in the book that ‘the benefits you seek to gain from any contract will not inherently result from the mere act of signing it’ – successful contracting requires the benefits to be clearly understood and specified and a management process to be established to ensure the desired benefits will occur.
The Contract Scorecard provides a structured step by step process for developing a successful commercial outsourcing framework and contract. The book is aimed at business users (as opposed to legal folk) and helps to establish business requirements, develop these into meaningful and relevant key performance indicators (KPI’s), and then form these into schedules and charters for inclusion in the contract. The essence of the book is ensuring that the contract and KPI’s are relevant to the business, measurable and allow management, control and adherence to the contract – all of which is geared at delivering the benefits required – not battering the supplier. From experience, setting up contracts that are appropriate, and work, takes time – putting the effort in up front however, always pays dividends. As project managers, we know the importance of planning and control, this should also apply to the contracts underpinning our projects.
The book is based on PhD research and experience undertaken by Cullen across many sectors, countries and contract sizes. The core of the contract scorecard is based on four quadrants – quality, relationship, finance and strategy. The book begins by discussing the need for a contract scorecard, and what the four quadrants mean and relate to. The book continues with individual chapters discussing the development of meaningful KPI’s (a seven step structured process), detailed development of each of the quadrants, and how all of these fit together.
For me, the book had many moments when I would simply say ‘huh’, identifying a moment of eye-opening or recognition. This book is excellent, it is easy to read, directly applies to those operating at the coal face, and immediately demonstrates how the contract can be used to control, measure and improve success at delivering business benefits. I must complain at this point though – I found the headings and layout a little difficult to use… ok, complaint over – the content is key. The inclusion of multiple case studies, examples and sample documents and templates is a success factor for this book – the theory is given, supported by examples and documentation– a well thought through approach.
Cullen provides very clear advice and examples on ensuring appropriate, and specific, KPI’s are utilised. For example, if a KPI states that the average availability of equipment is to be 98% during working hours, there are 100 pieces of equipment at 100 sites – if 2 sites have zero availability and the other 98 operate at 100% availability, and the supplier averages across all sites, then they have met the KPI. However, if the KPI had been specified per piece of equipment, then the supplier would not have met the KPI. We need to ensure we know what we want, that it is actually needed, how we want to measure it, and that this is clear in the KPI’s and the contract.
To conclude, I would suggest this book is a welcome, and critical, addition to any project manager, or other professional, that is beginning to become involved in setting up contracts, or has been for many years, to enable then to leverage the contract to help deliver the business benefits that the contract is being set up for.
Why waste time and effort on a document and process that you will never use; let’s make the contract work for us. As Cullen concludes – the choice is yours.
For more details on the book visit Gower Publishing