Organizations gain expertise and perfection over time when they repeatedly award, execute and manage contracts. It is important to evaluate an organization’s contract management process capabilities. Contract Management Maturity Model is a tool which evaluates how good a particular organization is, in managing its contract management processes. The organizations are analyzed and rated on the parameters of this model. These ratings are guidelines for improvement of contract management processes of the organization and an organization may fall in between the stages.
How mature your contract management processes are? Are you a beginner or have you managed several contracts effectively? Contract Management Maturity Model can answer these questions. It is a journey to achieve perfection in contract management processes. By using this model, you can understand, at which stage you are in this journey and you can improve yourself to jump to next level of maturity.
Effective contract management saves a lot to the organizations in terms of money as well as time. The clients approach to the organizations, which have demonstrated best contract management practices in the past. Therefore, achieving perfection in contract management processes is a necessary requirement to survive and to deliver results in today’s scenario. Any organization may test itself on this model to evaluate their process capabilities.
Once the evaluation based on this model is complete, the organizations may adopt two types of strategies. One is continuous improvement and another is breakthrough improvement strategy such as Six Sigma.
Five Stages of Contract Management Maturity Model
Stage 1: Beginner
Contract management processes are practiced and management understands the importance of contract management processes. The processes are not well defined. They are not system oriented but left to individuals to operate. Agreements are not well formed and not up to industry standards.
Stage 2: Basic
Basic contract management processes exist but only for critical contracts. The contract management processes have not been adopted throughout the organization. For small contracts, these policies do not exist. After expiration of contracts, they are stored locally and available to key local personnel only.
Stage 3: Structured & Defined
At this stage, the contract management processes have been fully developed and adopted throughout the organization. Templets, documentation, review processes exist. Some processes may be automated also. Senior management is involved in contracting strategy formulation, according approvals, decisions, etc. An integrated contract management tool is required at this stage.
Stage 4: Integrated and Proactive
Contract management processes have been fully developed and integrated at this stage. The processes extend from the organization to end user. Contracts are digitalized and stored at a central place and can be tracked online from anywhere. Risk management processes are in place. Compliance audits are made regularly. The performance of contract management processes is measured periodically and decisions are taken to improve the processes.
Stage 5: Optimized
This is the highest stage of maturity model where contract management processes are fully integrated with the organizations core processes and extends up to end user. Risk management processes are fully employed and practiced regularly. Performance of processes is regularly monitored and outcome is analyzed to improve the processes. Contract management professionals within the organization are competent and have knowledge and experience of best practices related to contract management. Fully integrated contract management system is established and contacts are fully digitalized, where the performance of contacts can be monitored online from anywhere. Continuous efforts are made to improve the contract management processes.
(1) It is important to evaluate an organization’s contract management process capabilities.
(2) Contract Management Maturity Model is a tool which evaluates how good a particular organization is, in managing its contract management processes.
(3) There are five stage of Contract Management Maturity Model, i.e., beginner, basic, structured, integrated and optimized.
(4) At the beginner stage, contact management processes exist but are not well defined.
(5) Stage five, i.e., optimized is the highest stage of Contract Management Maturity Model where contract management processes are fully integrated with the organizations core processes and extends up to end user.
(6) Organizations may use the Contract Management Maturity Model to test their contract management process capabilities and can improve their level by taking appropriate actions as per the analysis based on this model.