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Avoiding the 4 Icebergs of Hidden Business Risks

Aug 17, 2007
There are the business risks we're all aware of. And then there are the ones that lurk in the fog of day-to-day corporate life. Like icebergs, what pokes above the surface only hints at the danger. Here are a few tips to recognizing and dealing with these hidden risks.

Think you're working too hard? Odds are you're right. Organizations are lean, and expectations are higher than ever. The 50-hour plus week has become the norm.

With few exceptions, we are responsible for our own correspondence, calendars, and coordination. Our email boxes are stuffed, lunch is a sandwich gobbled while hunched over the keyboard.

The result? Too many of us spend the great bulk of our time reacting. We're so busy putting out fires that we can't even think about issues that aren't screaming.

This is workable in the short run, but the matters we aren't getting to today are often the major expenses (or lost opportunities) of tomorrow. The bottom line: neglecting issues that are important but not urgent can destroy an organization over time.

Avoiding this iceberg requires building a healthy corporate culture able to achieve a balance between the short and long term. This means changing how people see themselves, their co-workers, and their organization -- and changing how they behave.

First, recognize that no one can be effective 24/7 and encourage everyone to regularly power off.

Second, discourage face time. Reward productivity and accomplishment, rather than the sheer number of hours spent on the job.

Third, throw a life raft to people who are drowning. Help them identify tasks that are unnecessary or can be offloaded to others.

Fourth, limit the number and length of meetings, involve only people who truly need to attend, and use a written agenda to maintain focus.

Fifth, establish a mechanism for identifying and ranking longer-term issues. Then free up or acquire appropriate resources to focus on the top priorities.

The steps are simple. The challenge (and path to success) lies in the consistency of their implementation.

Everyone recognizes the value of a good deal, and negotiating contracts is important. But once a contract is signed, it often disappears into a file drawer.

Doing the deal may be more exciting than managing the agreement. But inadequate contract administration can have nasty consequences that you won't even see coming.

What's involved in contract management? That depends on the type of agreement and the industry, but here's a taste:

- enforcing price caps
- preventing unwanted auto-renewals
- providing required notice of cancellation
- avoiding multiple contracts for duplicate or overlapping services
- ensuring that payments aren't made on expired contracts
- renewing trademark registrations
- reviewing agreements in a timely manner
- reducing the risk of litigation by tracking compliance with contract provisions

Finding and implementing a contract management solution became a top priority for one technology company when it discovered that it had just signed an excellent multi-year agreement for telecommunications services. Unfortunately, their existing contract for the same services still had more than a year to run. The overlap cost them more than $100,000.

Litigation due to non-performance or lack of enforcement of contract provisions can, of course, cost many times more.

Fortunately, the fix for this problem is relatively easy. Technology comes to the rescue in the form of readily available software designed specifically to manage contracts.

Once you've shone some light on the issue, the next steps are to identify, acquire, and implement the right contract management solution.

You may even find that reducing this risk has an unexpected upside. One small city recovered $70,000 in overpayments for expired contracts in the first six months after implementing contract management software and an additional $200,000 in the next fiscal year.

It's a non-intuitive truth that creativity thrives within limitations. And limiting the reach and life span of a group tasked with solving a specific problem is essential. Lack of restrictions too often leads to an overgrowth of scope that results in a bloated project that drags on indefinitely.

Fortunately, avoiding deadly project creep is far from rocket science.

First, take a common sense approach to getting things done. Insist on defining projects up front, establishing succinct written goals.

Second, remember that when it comes to the size of committees, more is often less. Keep the project team as small as practical, and select a leader who is able to maintain focus and push the process along.

Third, delegate both responsibility and the necessary authority.

Fourth, require that the team create a set of milestones tied to a firm timetable.

Fifth, ensure that the reporting relationship is clear, and establish a pattern of consistent follow-up and feedback.

Finally, encourage a corporate culture that drives open issues to closure rather than conducting endless explorations. Reward completion.

You've identified a significant risk. The next step is to address it as expeditiously as possible. But you're being lured by the siren song of the big fix.

The temptation to seek a larger solution that simultaneously addresses myriad issues can be almost irresistible.

The logic may seem unassailable. Who wouldn't want a systemic solution with broad, long-term benefits? But holding out for the big fix has two major downsides: time and money.

Fact-finding, planning, sourcing, and implementing a global, integrated solution can take years and consume major resources. The problem you initially set out to solve will fester in the meantime.

What to do? Don't disdain the interim solution. Spending relatively small dollars now allows you to maintain your focus on the problem that started all this in the first place -- the risk you need to deal with ASAP.

An affordable interim solution that can be quickly implemented will buy you much needed time. You can use this to fully explore the big fix before you commit major dollars and substantial resources.

This prevents you from having to choose between an easily implemented solution of limited scope and the desirable, more powerful integrated system.

It may seem counter-intuitive to move in multiple directions at the same time, but the wisdom of following parallel paths is time-proven. This strategy allows you to reach your initial goal quickly while giving you a better shot at ultimately making the ideal solution a reality.
About the Author
Judy Tucker works with emerging companies in planning, project management, and communications and helps them get the most out of contract management systems. Find out more about how contract management software can save time and money at www.contractassistant.com 877-509-7500.
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