KPIs That Matter Most When It Comes to Contract Management
Key performance indicators (KPIs) are invaluable to ensuring that a company is efficiently operating. Every company, no matter what industry they’re in, should have set goals, and a way to see if these goals are being met is through KPIs.
Since contracts are largely variable depending on situations, contract management KPIs are tricky. That said, SMART KPIs are the ideal example of a contract management tool. SMART is an acronym that stands for:
- Specific Goals
- Measurable Goals
- Attainable Goals
- Relevant Goals
- Time-Bound Goals
So no matter what the contracts you’re managing exactly say, these KPIs are what matter most:
Price terms aren’t the only thing to consider here. There has to be financial sense for each phase of the contracting process. How long the contracting cycle is can make a difference with costs; performance can affect costs too, whether good or bad. Time and resources being invested that were not part of the initial plan are not helpful contractual relationships at all.
The parties involved in valuable contracting relationships uphold their end on time, efficiently, and to the letter as the contract states. There should be no difference in quality consistency whether or not it’s a matter of goods or services. There shouldn’t be constant pushback in company timelines or consistent needs for internal change in order to accommodate inconsistencies.
If a contracting partner’s ability to perform is not reliable, problems will arise from the short-term alone. Any desired results will end up being delayed considerably. In turn, long-term objectives will end up running into issues as well. That’s because contracting processes will end up having resources redirected to make up for whatever problems have come up.
Everyone wants their profit margins to improve, and a key way to achieve this is through efficiency. Contracting processes are usually not quite that. Drafting can take several back-and-forth exchanges, performance phases usually have breakdowns, and negotiations will stall. Companies really need to pay close attention to their contracting cycles’ length.
That way, any contracting partners that are weighing things down instead of helping things along can be eliminated. Any possible improvements that can be made will also be determined at this time. During that process, a company will likely find an errant vendor or some steps that are consistently tangled. By making the necessary adjustments, you can avoid making the same mistakes.
Even if a stellar performance is delivered, if that happens months down the line, there’s really no point or value to it anymore. Deliverables should always follow timeframes, which is why timeliness needs to be tracked. When everything is on time and consistent, it is easier to evaluate if the long-term goals are being met. This also allows you to have some wiggle room for addressing any challenges or setbacks that may occur down the line. Because of this, you’ll come prepared and make the necessary adjustments even before issues occur.
Contracting cycles have several elements, and determining their KPIs can be tricky. The best way to go about it is by using SMART goals. Pay attention to timeliness, cost efficiency, and cycle length.
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