Increase your profit with Contract Management
There is room for improvement when it comes to contract management in Danish companies according to Professor René Franz Henschel, who teaches the MBA-course Contract Management. Get a few tips on how on you can work more proactively with contracts as a strategic managerial tool.
Save at least 2% of the contract sum
According to a study by the UK National Audit Office, you can save an amount corresponding to a minimum of 2% of the contract sum through better contract management.
“Too many people work with contracts on a reactive level. They see contracts exclusively as legal documents to be dusted off in the event of a breach or when something has gone wrong. Contracts are considered a risk management tool. Instead, you should work with contracts in a more proactive and dynamic manner,” says René Franz Henschel.
See contracts as interdisciplinary and dynamic managerial tools
According to René, contract management can be improved by seeing contracts more as a managerial and financial tool. That is, you should regularly evaluate and adjust your contracts in relation to the company’s business objectives.
“In this way, you can become much better at using contracts to set and describe your business objectives as well as the nature of the relationship with your suppliers instead of focusing so much on how to complete to task. This requires a more interdisciplinary approach to working with contracts, where the parties’ mutual value creation and strategy are also taken into consideration. You can’t describe everything in a contract, which is why a number of managerial processes must be set up around the contract, so that the objectives are adjusted regularly and followed up on,” says René.
Remember your relations with strategic partners
René Franz Henschel also advises companies to balance the relational with the transactional when it comes to contract management.
“If, for example, your contract’s conditions are too strict, it can damage your relationship with important strategic partners - which may potentially harm efficiency improvements and innovation, so the interdisciplinary approach is important here as well,” says René.
- As an MBA alum, you can choose to take an extra MBA course to update or renew your knowledge within a specific area.
- The Contract Management MBA course will introduce you to the theory behind contract management. At the same time, you will work on how to use contracts more effectively in your own organisation. The elective will be offered again in the autumn of 2017. The application deadline is 1 May 2017. Read more about the course here.
- Professor René Franz Henschel will publish a new book on Contract Management in the spring of 2017. The book contains tools for how you can work more effectively with contracts in your company.