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IACCM Sparks Debate on the Best Approach to Compliance Management

August 31st, 2006 · by Tim Minahan · 1 Comment · contract management

I am pleased to welcome back Supply Excellence guest blogger, Tim Cummins, President and CEO of the International Association of Contract and Commerical Management (IACCM), the preeminent industry association for contract management professionals and research. Today, Tim tackles a subject that has become a touchstone in corporate America: compliance management.

With increasing regulatory pressures, compliance control has become job one for many companies. It has also become a major cost center. AMR Research estimates that U.S. companies have spent more than $12 billion over the past two years on technology and resources to meet compliance requirements, particularly the Sarbanes-Oxley Act. And such compliance investments and policies are beginning to receive backlash within office corridors.

Below Tim shares some of IACCM’s research into the good, the bad, and the ugly of corporate compliance initiatives. His comments serve as a preview for just some of the issues he will showcase in his keynote presentation on contract management excellence at Empower 2006.

How do we best ensure control and compliance?
 
That is a question that worries many in the contracts and procurement community - not to mention those in Finance and Legal. It is a valid concern, driven by fundamental issues of risk management and now amplified by Corporate Governance and other aspects of regulation.
 
It is a concern that has driven many application investments, as well as growth of internal resources dedicated to review and approval. (In the US, investments in technologies and resources to foster compliance are up 11% on average, according to our 2005 study.)
But while there is consensus that ‘rules’ are important, there is no universally accepted answer to how they are best implemented, as we discovered recently when we asked our members to share their approach to ‘rules of engagement’.
 
A majority went for the traditional solution of issuing lists of “do’s and don’t’s” — mostly along the lines of “don’t do anything without specific approval.” But there are signs of growing pushback to this (increasingly discredited) approach.

“It must always bring a smile to your face when you see these lists”, commented one [IACCM] member. “I see our community is still setting itself up for a fight.” Another warned of being seen as ‘empire-builders’ if we rely on such approaches.
 
All the evidence suggests that executives - and I mean the top executives - are becoming increasingly frustrated by internal bureaucrats that slow down the business (see McKinsey Quarterly, Q2, 2006). I don’t think control and compliance is a very good place to be these days. My advice is to automate or outsource these aspects of your job as fast as possible - and concentrate on empowering others to make good decisions and then be accountable for them.
 
The role of maintaining the systems, deriving strong market and business intelligence from them, leading change and empowering others to be more efficient and effective should keep us quite busy - and ensure far more positive visibility to executive management.
 
So does that mean we are wasting corporate resources on pointless activity? Does it mean we are deploying applications to serve the wrong purpose, or under-utilizing its true capabilities? In my opinion, yes! I share the opinion of another senior member who commented: “As a profession, lawyers, contract managers and procurement staff have a reputation of being rigid, narrow-minded bottlenecks. My concern with the list of rules provided is that it solidifies this reputation.”
 
But that is just my view. We decided to bring together a panel of senior managers to discuss this whole topic of authorities, empowerment, reviews and approvals in two live conference calls, being held on September 5th (www.etouches.com/principles1) and 7th (www.etouches.com/principles2). Click on either link to join the battle at 11:00 Eastern on either day!

Thanks, Tim. We look forward to getting your wrap up on the highlights of the debate over this contentious issue. I guess we need to add this to the list of inevitables of life: “Death, taxes, and compliance headaches.”

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1 response so far ↓

  • 1 Supply Excellence » Is a ‘Contracting Bible’ Right for Your Company? // Sep 22, 2006 at 1:34 pm

    [...] In a previous post, IACCM, the leading industry association for contract management professionals and research, triggered a debate on the need for companies to have a common set of contracting principles or “rules of engagement” as well as how to define these. IACCM President and CEO Tim Cummins hosted two conference calls on the subject, featuring panelists from cross-industry and multi-national organizations. The audio transcripts of the sessions are available online in the IACCM member library. However, Tim has been gracious enough to share some highlights with Supply Excellence readers: Overall, [participants] felt that organizations need defined contracting policies - but they are reluctant to see them issued as ‘rules’. Panel members highlighted the need to encourage good business judgment. They were against processes that funnel everything to central groups or ‘review points’. There are some crown jewels, some areas of unacceptable risk - and these need to be communicated. But there are many other ‘risky’ areas, both in terms of negative risk and also missed opportunity. Overall, the panel sought to identify means to educate and empower. They were united in the importance of automation to support any efficient implementation of bid and contract principles. One listener outlined a ‘best practice’ approach that resulted in templates and associated guidance: “Another best practice I saw in my previous organization and brought to my current organization is a Contracting Principals Guidebook.”  [...]

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