Q&A: Tim Cummins, IACCM
This article originally appeared in Outsource Magazine Issue #28 Summer 2012
Tim Cummins is the renowned President and founder of the International Association for Contract & Commercial Management (IACCM). We caught up with Tim at the 9th Annual IACCM EMEA Forum in April to get his thoughts on shifting organisational models, the importance of accountability, and the need now more than ever to look beyond traditional structures and definitions…
Outsource: Tim, you’ve been a keen observer of the commercial and organisational landscapes for many years now. What do you see as being the key trends right now in terms of the development and evolution of business organisations – especially with an eye towards the outsourcing space?
Tim Cummins: I think businesses are actually becoming more adaptive or at least are intending to become more adaptive. The keynote speakers here today have been talking about how the CEO community is awakening to the fact that traditional relationships – particularly within their own industries – don’t address the emerging needs and expectations of today’s society. This drives a need to deliver projects in very new and different ways, through strategic relationships that span industries. Shell, for example, sees a need for strategic partnering with IBM and Unilever – not the sort of companies that historically would have been top of the list for executive focus.
And I think this cross-sector partnering lies at the heart of the outsourcing debate as well. To me, sustainable, long-term relationships are critical to businesses that are seeking more flexibility and the ability to respond faster and more appropriately to market conditions. In some ways outsourcing has been a proving ground for strategic partnering. But as we both know, it has had as many failures as it has successes. As The Economist observed a couple of years ago, when it comes to outsourcing, most companies are not very good at contracting. So one thing we can say with relative certainty is that organisations remain limited in their capability when it comes to building good trading relationships.
O: “Partnership” gets used frequently within outsourcing but there is a debate about how much genuine partnership there actually is…
TC: The word is used frequently but the behaviour is not there to match. If your view of having a partner is regularly beating them into submission. then some companies are pretty good at that, but of course in those cases the level of commitment and fidelity between partners is tested: there is not an underlying sense of fairness and trust.
O: Do you feel those attitudes are maturing – have you become more optimistic about the level of trust in commercial partnerships as time has gone by?
TC: I never stop being optimistic! I guess if I were not optimistic I might as well give up… So my belief is that we will get there. But I think part of the problem is that many organisations are confused about their goals and objectives; I think the measurement of management systems is too primitive to deal today with this new environment. They drive the wrong partner selection, inappropriate incentives and the wrong internal behaviours. Ironically, our response to complexity involves the creation of more and more specialist groups, which themselves become a source of complexity in decision-making, communications and enabling both internal and external relationships.
Part of our work at the IACCM is looking at the barriers to collaboration, and one of the key things I heard recently was from one of our board members who said “When it comes to negotiation, I’ve realised we spend more time fighting for functional interest than we do fighting for business goals.” Many organisations find it extremely difficult to build internal collaboration – so no wonder they struggle when it comes to external partners.
CEOs are very aware of the changes that are taking place; the C-suite increasingly understands the new dynamics and the extent to which market success will depend on new connections. Unfortunately, this awareness is not always translating into action. Far too often, parts of the organisation are waiting for instructions, focused on dealing with the problems created by today’s business environment rather than seeking ways to simplify, to do things differently… And that’s one of the biggest challenges I see around the partnering issue: it does require levels of leadership and accountability which are frequently lacking.
O: Do you see the accountability issue that you’re talking about as reflecting the obsolescence of traditional control structures?
TC: I think that’s right. An example we’ve encountered recently is that of a major PLC where the board had become aware of a number of significantly troubled contracts in emerging markets, where the quality of risk assessments and management of relationships was inadequate. Their traditional organisational model gave too little visibility into the risks that were being taken until things were going badly wrong. As a result, they found that cashflow and profitability were severely damaged by erroneous estimates of the investments that were going to be needed.
In this case, because these were seen as contractual issues, the Board turned to the General Counsel to recommend a fix; but the GC of that particular company was pretty much weighing up the question: “Do I accept some level of ownership, and have my head above the parapet as the person responsible for contract performance – or should I seek to duck down and make the point that this is much more about the way that commercial decisions are made? The contract is a problem, but it is a problem because of the business people’s lack of commercial judgment.” It was a difficult decision for that general counsel – and you see a number of GCs in that position where the word “contract” comes up as being the root of the problem.
The real question in this time of dynamic change is over the ownership of the contract and the commercial processes. The C-suite has responsibilities for pieces of it – but they don’t really get insights to much of the work that goes on in many, many commercial areas of relationships. Ultimately, very few organisations undertake ‘commercial assurance’ with anything like the rigour they apply to technical assurance.
O: Outsource was at a legal conference recently and a big topic was the changing role of the in-house legal team when it comes to involvement in these processes. A lot of legal professionals feel they are in a state of utter confusion because it is more than obvious to all observers that their role is changing, but at he same time no one really knows how – is this something the IACCM is looking into at the moment?
TC: It’s something that we are very conscious of and work with our members to address. Probably five or six years ago, in a McKinsey study (which we promoted actively at that time as it was so much in our line with our philosophy) they were talking about a need for organisational integrators – I am not sure that was exactly their term, but in essence what they were saying was that real value in future would be found in the people who could become business integrators.
Increasingly you have in-depth specialists – experts in risk or intellectual property laws, data privacy, whatever it might be – who might be sincerely trying to protect their business in their area of expertise; but if you allow them to dominate the discussion they will never make a balanced decision.
What we need is the ability to integrate across those specialisms and come up with harmonious solutions and I think that’s what we are struggling with – and why Legal often feels it is caught in the middle. We have the growing specialism – some of which is internal, some of which has been outsourced – but how does that get coordinated? Very often it’s left to nobody, or to senior management: but of course they don’t have the time or resource actually to provide the integration role. So then we often get kneejerk reactions, frustration, quick decisions that have no substance behind them.
Ironically most organsations are fairly good at the technical stuff. They have robust lifecycle management organisations, they have fairly good systems for professionals to undertake technical discussions. So that’s reflected in the fact that if you look at troubled projects and troubled relationships, it is relatively rare for them to be troubled for technical reasons. The majority are in trouble because of commercial terms that were not properly tested, escalation mechanisms that do not work, performance management criteria not appropriate to the context, inadequate scoping, or poorly aligned relationships and cultures. When things go wrong, it mostly comes down to the definitional element of that relationship and its management. We have a lot of commercial problems because we don’t have commercial assurance processes.
That’s where IACCM plays, and where we are trying to push for much better approaches. I would not say this is one-size-fits-all – and this is not about us saying “Hey, you need to have hundreds of commercial management or contracts specialists”: in fact, quite the opposite. That would just be another specialism and it would add to the complexity mix. Our point is that we need a more robust commercial assurance process and there are various models through which people can build that capability.
To give you an example, there was a company I came across the other day that’s moved to a model where for major projects, the project manager, finance manager, and contracts manager are viewed as being at the same level and have the same joint and several responsibility for successful delivery. It is very clear that it’s a no-blame environment: the guy in finance can’t point a finger at the project manager and say it is his fault, and vice versa. And that’s interesting because the complexity of many of the things in which we engage today suggests that perhaps modern organisational leadership is no longer appropriate. I think in politics globally, we can see many examples of this – but if you look at the corporate level, there are possible new models emerging. Companies like SAP and Deutsche Bank have joint CEOs, which everybody said was ridiculous and was never going to work, but look at how they did it and the results it is having. Maybe the alpha personality is not the right model for large corporations any more, our complex world depends on the ability to collaborate and share responsibility. I like the way the combination of project, finance and contract managers all sharing joint responsibility transforms leadership, via the concept of leadership as a team activity rather than an individual one. I think that could be an interesting shift.
O: The kind of challenges we’re facing globally are challenges that have typically, in the past, thrown up quite conservative reactions. Do you feel that this is the right time for the questions you’re asking to be coming to the fore?
TC: I think they have to come to the fore. I think we are seeing, as I said before, such a complex environment, with so many elements that have to be taken into account, and the power and influence amongst individuals is quite reduced – the ability to exercise substantive control is certainly compromised by the complexities of the global environment, so new models for organisation and management are no longer simply an option.