![]()
Part 1
Introduction
| Introduction | Commercial Management |
| Chapter 1 | Commercial Management in Project-Oriented Organisations |
![]()
Introduction
Commercial Management
Learning outcomes
After reading this introduction you will be able to:
- Define the terms âcommercial managementâ and âcommercial managerâ
- Identify common activities undertaken by commercial managers (practitioners)
- Describe the position of âcommercialâ within global, project-oriented organisations
Additionally, this introduction seeks to provide an overview of the format and context of the book.
Introduction
Commercial exists as a distinct management role in many organisations, particularly those originating from the UK, although it is becoming more accepted globally as a valuable business activity. Despite this, while a basic internet search will generate numerous job advertisements for commercial managers, executives and directors, academic management literature is decidedly quiet on the subject. Building upon the previous publication Commercial Management of Projects: Defining the Discipline (Lowe with Leiringer, 2006), this text seeks to redress the situation by defining and describing in a normative way, precisely what âcommercial actorsâ (practitioners, managers, specialists, executives, etc.) actually do. It also provides a framework for the application of the principles and underpinning theory that support effective commercial practice.1
Increasingly âcommercialâ is viewed as a dynamic capability within organisations. The changing nature of business-to-business (b2b) exchanges (economic transactions), resulting from the processes of globalisation, servitisation and collaboration, has necessitated the formulation and management of complex Âinter-firm contracts, agreements and relationships across the resulting value networks. The commercial function within organisations is primarily responsible for the design, negotiation, award and management of these b2b transactions.
What is commercial management?
The terms commercial management and commercial manager have been used for some time, predominantly, but not exclusively, in the following sectors:
- Telecommunications, electronics and ICT
- Services and outsourcing
- Energy and oil
- Defence and aerospace
- Financial services
- Pharmaceuticals and health care
- Engineering and construction
Table I.1 Definitions of commercial management.
|
| The process of controlling or administering the financial transactions of an organisation with the primary aim of generating a profit | Lowe et al. (1997) |
| The management of contractual and commercial issues relating to projects, from project inception to completion | Lowe and Leiringer (2005, 2006) |
| The identification and development of business opportunities and the profitable management of projects and contracts,from inception to completion | International Association for Contract and Commercial Management (IACCM)/The Institute of Commercial Management (ICM) (IACCM, ND) |
Definitions of commercial management
Despite its usage in practice, there is no universally acknowledged definition of the term commercial management; although a few suggestions have been proffered. These are presented in Table I.1.
Based on an investigation into the role of commercial managers in the UK construction industry, Lowe et al.âs definition focuses on the financial aspects of the function. Their results suggest that within the Âconstruction supply sector the role was based around âlooking afterâ the profits of an organisation, which entailed minimising its costs and maximising its income, and managing âcash flowâ. This definition was subsequently modified by Lowe and Leiringer following a study of the commercial role across three, predominantly project/programme-based industry sectors: construction, telecommunications/ICT and defence/aerospace (Lowe and Leiringer, 2005, 2006). Although not explicitly stated in either definition, both Lowe et al. and Lowe and Leiringer acknowledged the centrality of risk management to commercial management.
The definition adopted more recently by the International Association for Contract and Commercial Management (IACCM) and The Institute of Commercial Management (ICM) reflects the application of the term beyond project/programme-oriented organisations and industry sectors, emphasising the functionâs involvement in recognising and realising new business opportunities. However, in doing so, the definition is open to criticism: being a rather general delineation of the commercial contribution to an organisation â that is, one that could equally be applied to a more generalist management role.
While all three definitions are concise, they each fail perhaps to convey the breadth and multifaceted nature of the function. This is not surprising. The task of framing an appropriate definition that encapsulates all aspects of the role would probably run into several pages and include numerous exclusions and provisos. It is also hampered by the use of the term to describe the use or exploitation of natural resources, for example, land (forestry and quarrying), fish stocks (fish farms) or animals (poultry, pigs, etc.). Additionally, in a global context there are issues concerning the use of the word âcommercialâ; for example, the French translate the word as âsalesâ, which has the potential to cause confusion as âsalesâ is a recognised function within organisations and an established academic discipline.
Definitions of commercial manager
Derived from the above definitions of commercial management, two definitions of the term commercial manager have been framed (see Table I.2). However, the reservations expressed in respect of the definitions of commercial management, equally apply to these definitions.
Table I.2 Definitions of commercial manager.
|
| ⌠a person controlling or administering the financial transactions of an organisation with the primary aim of generating a profit | Lowe et al. (1997) |
| ⌠is someone whose primary role is in the Âmanagement or execution of such opportunities or projects2 | International Association for Contract and Commercial Management (IACCM)/The Institute of Commercial Management (ICM) (IACCM, ND) |
Table I.3 Definitions of contract management.
|
| Contract management is a niche within the procurement profession, but it has a very broad perspective in terms of the responsibilities assigned to a contract manager. The job scope ranges from the administrative skills of managing, organizing, and planning, to the excitement and challenge of negotiating a major contract | National Contract Management Association (NCMA, 2011) |
| Contract management is the process that enables both parties to a contract to meet their obligations in order to deliver the objectives required from the contract. It also involves building a good working relationship between customer and provider. It continues throughout the life of a contract and involves managing proactively to anticipate future needs as well as reacting to situations that arise | Office of Government Commerce (OGC, 2002) |
| Contract management is the process of managing and administrating the ⌠contract from the time it has been agreed at contract award, through to the end of the service period ⌠| Public Private Partnerships Programme (4Ps, 2007) |
| Contract management is the phase of the procurement cycle in which a supplier delivers the required goods or services in accordance with a procuring authorityâs specification | OGC (2009) |
| Ongoing monitoring and management of the provision of services in line with the agreed terms and conditions | Victorian Government Purchasing Board (VGPB, 2011) |
Definitions of contract management
Alternatively, the terms contract management and contract manager have been adopted as descriptors for the âcommercialâ role in organisations; however, as shown in Table I.3, there is some confusion over the precise meaning of the term contract management. For example, it is often taken to imply a âback-roomâ, administrative, task-orientated or procedural-focused role, and in many organisations the role is restricted to post-award activities in the procurement cycle (those carried out after a contract has been entered into); see, for example, the definitions OGC (2009) and VGPB (2011). In other organisations âcontract managementâ is viewed as a more dynamic capability involving the drafting and negotiation of complex b2b Âcontracts and agreements. However, as is evident from the following review of the tasks undertaken by commercial practitioners, while contract management (in its broadest sense) forms a major area of activity, individuals with the title âcommercialâ rather than âcontractâ manager generally have a wider sphere of involvement both throughout the project life cycle and in the breadth of activities under their control (for example, relati...
