Contract Management:
An Overlooked Driver of Business Agility and Financial Performance
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Is your business leaking millions - and you don’t even know why?
Contracts touch every dollar of revenue and cost, yet in most organizations they remain a blind spot: fragmented, slow, rigid, and unintelligible to the people who should rely on them to do their jobs.
Our research shows the average business loses almost 9% of value annually through poor contract management. The best performers lose about 3%; the worst, 15% or more.
In today’s unpredictable markets, where agility and insight are essential, this hidden drain on performance must be addressed, or it will become even worse. Think for a moment of all the changes you have led, yet through it all, your contracts most likely remain unaltered – instruments of illusory control, rather than frameworks for business enablement.
This paper lays out the evidence, the risks, and, most importantly, a roadmap for turning contracts into a source of speed, resilience, and competitive advantage. With the recent launch of a global Contract Management Standard, there is now a consistent framework that you and your cross-functional teams can use to shape a high-performing contracting lifecycle.
The evidence: How contracting fails to deliver
Consider these statistics:
- The average value erosion (the deviation from expected results) is 8.6%. Without action, market conditions will make this worse.
- Only 39% of commercial practitioners believe their contracts are effective in delivering the desired outcome.
- Only 16% of those practitioners believe that contract negotiations focus on the right topics.
- Almost 90% of business users say that they find contracts difficult or impossible to understand.
Building on these findings, WorldCC’s global research highlights the cost and consequence when organizations fail to pay attention to their contracting lifecycle:
- While poor contracting practices erode an average value equivalent to almost 9% of annual revenue, for those in more complex industries this is often 15% or more.
- Cost overruns, invoicing errors, delayed delivery, arguments over scope, missed entitlements, avoidable disputes - these are among the many contract-related factors contributing to value erosion and loss.
- On average, contract-related data is scattered across 24 different systems, making it nearly impossible to track commitments or optimize decisions on a timely basis.
- 83% of executives say their contracts are too rigid to adapt to change, locking them into outdated terms and preventing innovation or rapid adaptability when confronting challenging markets conditions or wanting to capitalize on new opportunities.
- The average contract cycle time varies enormously across organizations, with the best performers operating almost 4 times faster than the worst.
The call to action
Executives who grasp the opportunity to address inconsistent and fragmented contract management are equipping their organization to compete and flourish in today’s demanding business environment.
By acting now you will unlock a powerful source of competitive advantage:
- Faster, more agile responses to change
- Better use of emerging technologies like AI
- Stronger alignment between financial and operational goals
- Resilience and adaptability in uncertain markets
Written by
Sally Guyer
Tim Cummins
An international, cross-industry career that has moved from corporate management to extensive research, advisory and capability development services to public, private and third sector organisations. Tim has lived and worked in the UK, France (3 years), and the United States (20 years), building an impressive research and entrepreneurial record with a demonstrated commitment to delivering social benefit. As Founder and President of World Commerce & Contracting (formerly International Association for Contract & Commercial Management), Tim has built a 72,000-member worldwide non-profit association which increasingly influences commercial policies and contracting practices in major corporations and governments. In September 2019, he was presented with the Financial Times ‘Market Shaper of the Year Award. Tim was, until recently, Professor and Chair of International Commercial & Contract Management at the University of Leeds, School of Law, where he taught and led the development of inter-disciplinary commercial programs. Prior to founding World Commerce & Contracting, Tim was on the Chairman’s staff at IBM Corporation and led the development of worldwide commercial processes and skills. His early career included management roles in the banking, automotive and aerospace industries, where he led negotiations up to $1.5 billion in value. He has served in advisory roles for government departments in various countries, including the US, UK, Australia, Canada, and Japan.
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