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Complexity Management

Project Management

Contract Management

Portfolio Management

What is Complexity Management?

Complexity management is a business methodology that deals with the analysis and optimization of complexity in enterprises. Effective complexity management is based on four pillars: alignment with the overall strategy of the company, transparency over all costs and benefits of complexity, identifying  the optimization benefits, related measures and managing the trade-offs between parts of the total value chain (the totality of all the company’s activities), and sustainable infrastructure such as IT tools, incentives and processes. Complexity management has recently been enabled by new technology, leading to detailed analysis and simulation of complexity, optimization measures, and their effects down the entire value chain.

All companies must grow. It’s an imperative that drives companies to create new products and services, enter new regions, and move into new businesses. As they expand, they inevitably become more complex. Their organizational structures develop layers upon layers, their reporting lines become tangled, and their people – from senior management through to the front line – find it harder to get work done. When time, energy, and resources are spent on activities and interactions that don’t create value, complexity starts to damage a company’s performance. But complexity isn’t always a bad thing.

When we analyzed drivers of perceived value  creation, we found that some of the most important tend to create complexity as well as value.1 The number of customers you have; the number of products or services you deliver; the extent to which people cooperate and multi-task within your organization; the number of countries you operate in; and the number of people you employ all increase the level of complexity in your company as well as helping you to make more money. Handled well, this kind of complexity helps rather than hinders your company’s performance. On the other hand, some factors destroy value as well as adding complexity. The amount of regulation in your industry and how quickly it changes; the extent of duplication of activities, roles, and responsibilities in your organization; the frequency of change in your organization structure; and the rate of new entry and change of strategy by your competitors all tend  to make your company less profitable and more complex. This is the kind of complexity that you may well want to tackle.

What is Project Management?

Project management is the process of leading the work of a team to achieve goals and meet success criteria at a specified time. The primary challenge of project management is to achieve all of the project goals within the given constraints. This information is usually described in project documentation, created at  the beginning of the development process. The primary constraints are scope, time, quality, and budget. The secondary challenge is to optimize the allocation of necessary inputs and apply them to meet pre-defined objectives.

The objective of project management is to produce a complete project which complies with the client’s objectives. In many cases the objective of project management is also to shape or reform the client’s brief to feasibly address the client’s objectives. Once the client’s objectives are clearly established, they should influence all decisions made by other people  involved in  the project – for example project managers, designers, contractors and sub-contractors. Ill-defined or too tightly prescribed project management objectives are detrimental to decision making.

A project is a temporary endeavor designed to produce a unique product, service or result with a defined beginning and end (usually time-constrained, and often constrained by funding or staffing) undertaken to meet unique goals and objectives, typically to bring about beneficial change or added value. The temporary nature of projects stands in contrast with business as usual (or operations), which are repetitive, permanent, or semi-permanent functional activities to produce products or services. In practice, the management of such distinct production approaches requires the development of distinct technical skills and management strategies.

What is Contract Management?

Contract management or contract administration is the management of contracts made with customers, vendors, partners, or employees. Contract management includes negotiating the terms and conditions in contracts and  ensuring compliance with the terms and conditions, as well as documenting and agreeing on any changes or amendments that may arise during its implementation or execution. It can be summarized as the process of systematically and efficiently managing contract creation, execution, and analysis for the purpose of maximizing financial and operational performance and minimizing risk.

Common commercial contracts include employment letters, sales invoices, purchase orders, and utility contracts. Complex contracts are often necessary for construction projects, goods or services that are highly regulated, goods or services with detailed technical specifications, intellectual property (IP) agreements, outsourcing and international trade. Most larger contracts require the effective use of contract management  software to aid administration among multiple parties.

A study has found that for “42% of enterprises… the top driver for improvements in the management of contracts is the pressure to better assess and mitigate risks” and additionally, “nearly 65% of enterprises report that contract lifecycle management (CLM) has improved exposure to financial and legal risk.”

Contract Management Process

  • Effective contract management is essential to any business, and as  more companies start to  understand the value of process automation, contract management solutions are becoming  more sought after than ever before.
  • Contracts (contract agreements) are the formal, finalized agreements between businesses,  necessary for legal protection between parties. They are used to dictate the respective roles between a company and its vendors, partners, customers, and employees. Managing  contracts, then, involves the process of overseeing the creation, signature, storage, execution, and review of contracts. This  process poses a growing challenge as a company matures through the business cycle from start-up to enterprise.

The contract lifecycle can be broken down into these integral steps:

  1. Initiation – A company proposes to enter into a business relationship with a vendor, partner, customer, or employee. This is where the need for a contract emerges.
  2. Negotiation – The company and interested parties meet to decide how to arrange an agreement mutually beneficial.
  3. Generation – The contract is drawn up, based on the agreed-upon terms. This step may involve filling in a simple template, or a complete contract may have to be authored anew. If a contract has to be written from scratch, this process typically involves members of a legal team.
  4. Approval – Each party reviews the contract and signs their legal consent to be bound by its terms.
  5. Execution – The contract goes into effect. Compliance needs to be assured by both parties here. If there is a problem on either side, various termination triggers, damage clauses, and other liable effects might take hold.
  6. Renewal or termination – The contract comes up for review after a specified time. If the contract is designed to be ongoing, it might be renewed, amended, or renegotiated. If it’s designed to be a one-time execution, the contract terminates successfully.

What Is Portfolio Management?

Portfolio management is the art and science of selecting and overseeing a group of investments that meet  the long-term financial objectives and risk tolerance of a client, a company, or an institution. Portfolio management  requires the ability to weigh  strengths and weaknesses, opportunities and threats across the full spectrum of investments. The choices involve trade-offs, from debt versus equity to domestic versus international and growth versus safety. Professional licensed portfolio managers work on behalf of clients, while individuals may choose to build and manage their own portfolios. In either case, the portfolio manager’s ultimate goal is to maximize the investments’ expected return within an appropriate level of risk exposure.

Passive management is a set-it-and-forget-it long-term strategy. It may involve investing in one or more exchange-traded  (ETF) index  funds. This is commonly referred to as indexing or index investing. Those who build Indexed portfolios may use modern portfolio theory (MPT) to help optimize the mix. Active management involves attempting to beat the performance of an index by actively buying and selling individual stocks and other assets. Closed-end funds are generally actively managed. Active managers may use any of a wide range of quantitative or qualitative models to aid in their evaluations of potential investments.

Portfolio management involves building and overseeing a selection of investments that will meet the long-term financial goals and risk tolerance of an investor. Active portfolio management requires strategically  buying and selling stocks and other assets in an effort to beat the broader market. Passive portfolio management seeks to match the returns of the market by mimicking the makeup of a particular index or indexes.