A mature contract and vendor management program occurs over
time. Organizations must actually evolve and develop an
increasing level of experience to successfully implement
such a program. The account presented below describes how a
concept borrowed from Information Technology Architecture �
i.e., a maturity model -- assisted the author during the
implementation of a new contract and vendor management
program.
Background
In early 2002, the Information technology (IT) group within a
PNW-based financial firm began a program to better manage
its portfolio of service- and technology-related contracts.
The responsibility for this initiative was assigned to the
IT Program Management Office (PMO) of said firm. Moreover,
it was at this time that the author moved (from the IT
Architecture Group) into the IT-PMO to help initiate and
manage this new program.
Almost
immediately, questions arose about where to being, how to
communicate our progress, and how to proceed. To address
these and other questions, a maturity model was developed to
provide focus and support for the program.
This
article concerns the progression on how that maturity model
was developed. It is presented as an object lesson about
using a maturity model for help in supporting a
non-technology business problem. This account is broken
into steps that, to the best of the author�s recollections,
roughly identify the events leading to the development and
fine-tuning of a Contract and Vendor Management Maturity
Model.
Step 1
The first task was to get an accurate inventory of all
existing IT contracts. At the beginning, contracts were
dispersed among many different individuals and file
cabinets. Identifying these individuals and acquiring a
copy of the contracts was essential. Moreover, in many
cases this identification effort required reviewing invoices
to determine what exactly had been purchased, and then
running down the associated contract. But in spite of these
challenges, a workable initial contract inventory and vendor
list was developed.
While this
contract inventory and vendor list was being produced,
questions began to arise.
Some of
these questions were quite specific, e.g.,
-
How
would the IT organization leverage this inventory to
eliminate waste, maximize contract value, manage vendor
risk, drive down operating and capital expenses, and
just plain save money?
-
How
would the inventory be maintained and kept accurate?
-
How do
we justify the expenditure in this new contract
management program?
-
What is
the best way to report back to IT Management and other
stakeholders on the achieved savings?
Also,
strategic questions arose. Some of these questions
included,
-
What
exactly did the IT want to accomplish with this new
contract management initiative?
-
What
was the desired future state visualized by IT and the
PMO?
-
How
would the program transition from the current situation
to the desired future state?
-
How do
we ensure ongoing stakeholder by-in and support?
Most
importantly, however, management expectations were being
articulated. For example, IT Management began questioning
why the program was not yet leveraging our newly discovered
information across the both the IT organization and
corporation as a whole. While deemed reasonable on
management�s part, these questions highlighted their lack of
understanding about the steps necessary to move from a
simple contract inventory to actually leveraging our
contracts and vendors relationships. Indeed, no discussions
had even yet occurred that would clarify what �leverage�
even meant!
These
questions were a wake-up call for the IT-PMO. We had to
find a way of managing expectations while maintaining
management by-in. Not only that, we also needed to
communicate our progress, and to educate all interested
parties as to what we were doing and how they would be
involved and benefit.
It was
clear to this author --
from experiences and lessons learned while working with
IT Architecture � that meeting these challenges would be
greatly aided by using a maturity model concerning contact
and vendor management. Fortunately, the IT-PMO Director was
very open to new ideas and quickly bought into the idea.
The reader
can reference an
earlier article in this series for how a maturity model
can provide support and value to any project, program, or
initiative.
Step 2
After searching the Internet and contacting several of IT�s
consulting vendors, it became clear that a contract and
vendor management maturity model did not already exist � or
if it did, we sure couldn�t find it. Hence, the author
built a series of �straw man� maturity models that were
reviewed, discussed, and refined.
Constructing these draft maturity models was not as
difficult as one might think. Different maturity models
have a number of common characteristics. For example, each
has a �Stage 0� representing some beginning and undesirable
start-point, and a �Stage n� that represents some desired
end state. What makes the maturity model relevant is the
set of intermediate steps that are defined � steps which
apply to the specific organizational problem or situation
being addressed.
Exhibit 1 below is the Contract and Vendor Management Program
Maturity Model (CVMP MM) ultimately created in this step.
Contract and Vendor
Management Maturity Model
|
Stage |
Name |
Focus is on . . . |
|
5 |
Leverage |
How do we get the most out of the program? |
|
4 |
Refinement |
How do we increase efficiency and effectiveness? |
|
3 |
Alignment |
How do we implement to achieve the vision? |
|
2 |
Vision |
Where do we want to go? |
|
1 |
Awareness |
What do we have? |
|
0 |
Reactive |
How do we put out this fire? |
|
Exhibit 1 |
With this initial model in place, it was possible to now
begin educating management about our program. Specifically,
we could communicate that the program was only in the
�Awareness� Stage (i.e., building our inventory). If we
were to finally leverage the organization�s contracts for
maximum benefit, a number of intermediary steps needed to be
accomplished. And, management participation was critical to
defining these intermediate steps.
Step 3
As good as this initial CVMP MM was, it was still lacking.
What it lacked was information about how each stage was to
be accomplished and the deliverables/benefits arising from
each stage. Such information was important to both IT
management and other departments involved with this contact
management initiative � e.g., Legal and Purchasing.
To address
these shortcomings, the model was expanded by adding more
columns. Exhibit 2 illustrates the maturity model�s
progression after these changes.
|
Stage |
Name |
Focus is on . . . |
To accomplish . . . |
Results in . . . |
|
5 |
Leverage |
How do we get the most out of the program? |
Process integration, Continuous program
improvement |
Increased value from contracts; commonality
across organization |
|
4 |
Refinement |
How do we increase efficiency and effectiveness? |
Standards, process improvement; metrics |
Effective and efficient tools and processes
|
|
3 |
Alignment |
How do we implement to achieve the vision? |
Identified core competencies, |
Program fitting organization�s specific needs |
|
2 |
Vision |
Where do we want to go? |
Vision statement, principles; roles and
responsibilities |
A program design that will work as the
organization changes over time |
|
1 |
Awareness |
What do we have? |
Inventory, simple reports |
Immediate savings from ability to �harvest� low
hanging opportunities |
|
0 |
Reactive |
How do we put out this fire? |
|
Wasted time and effort; errors; no repeatable
processes |
|
� Copyright 2012, Steve Huhta, May not be used
without prior written permission |
|
Exhibit 2 |
| |
|
|
|
|
|
Step 4
As the Contract and Vendor Management Program progressed and
matured, our CVMP MM became an ever more important communication
tool. Ultimately it became beneficial to add additional types
of information to the model. Unfortunately, the �grid� format
presented above would not support this ever increasing amount of
information types.
It was at this
point that the model�s format was changed to mimic a �stair
step.� With this layout, the additional information could be
added at the bottom of the model, rather than as an additional
column to the right. See Exhibit 3 for the basic stair step
version of the model.
Contract and Vendor Management Maturity Model
Step 5
With the �stair step� in place the other needed information
could be easily added. The information chosen to be added was
determined by what needed to be communicated to an ever growing
set of stakeholders. The stakeholder set increased because of
our early program successes in consolidating agreements,
eliminating waste and, thus, in saving considerable amounts of
money. For example, the
Sample Stage
Metrics
section was added to define the appropriate
metrics and measurement drivers for each stage � information
of interest to both the CFO and Accounting because it simplified
measuring the Program�s progress and performance.
A partial
version of the resulting Contract and Vendor Management Maturity
is provided by Exhibit 4 � enough detail is provided to give the
reader an idea about the types of information added and
expanded.
Just Enough Contract & Vendor Management � Just in Time
As the model grew, it risked becoming so visually busy as
stop being a good communication tool. In an attempt to
alleviate this risk, colors were strategically added to improve
its readability. [Not all these color changes are shown in
Exhibit 4.] Also at this time, the title above the model was
changed to what you see in Exhibit 4. This particular change
was made to reinforce the nature of a maturity model
representing a gradual, focused progression
towards increased Program maturity and increased benefits.
