From Operational Control to Strategic Impact – How Do We Measure the Value of Contract Management?
Which KPIs actually show whether Contract Management is creating value?
Many organisations today measure what is relatively easy to track: on-time delivery, SLA performance, compliance, spend, savings and cycle times. These are important measures – but they do not necessarily tell the full story of the value created through Contract Management.
Within the NSCCM Network, we have therefore explored which KPIs are most relevant when seeking to demonstrate the value of Contract Management – from day-to-day contract performance to broader business outcomes and strategic impact.
This work builds on the Network’s previous work on KPIs and value creation, the practical experience of its members, WorldCC research, and the new global Contract Management Standard™ (CMS™). The CMS™ does not prescribe a fixed set of KPIs. Instead, it emphasises that measurement should be aligned with the intended outcomes of the contract and should address areas such as risk, quality, compliance, financial performance, delivery, collaboration and change management.
On this basis, we have identified 20 key KPIs for Contract and Commercial Management – ranging from operational measures to strategic indicators.
→ View the list: 20 Key KPIs – From Operational Control to Strategic Impact
The work on the list also showed that the KPIs should not be viewed simply as 20 separate measures. They are interconnected and operate at different levels. This led to the development of a five-level KPI model, illustrating the progression from operational control to strategic business impact.
Five Levels That Build on One Another
The key point of the model is that strategic KPIs do not replace operational ones. Rather, the higher levels build on the foundation established through effective operational contract management.
If an organisation is to demonstrate how its contracts contribute to outcomes such as profitability, innovation and strategic objectives, it must first have the fundamentals in place – including reliable contract data, clear responsibilities, effective governance, delivery performance and performance management.
The model therefore consists of five interconnected levels, which together illustrate the progression from operational control to strategic business impact.
1. Operational Control
This is where the foundation is established. Does the organisation have control of its contract data, governance structures, responsibilities and capabilities? Are contractual obligations clearly identified and actively managed?
2. Performance and Compliance
The next level focuses on whether the contract is actually performing as intended. Are deliveries made on time and to the required quality? Are SLAs, agreed prices and budgets being met? And how efficiently are contracts and changes managed?
3. Commercial Management
At this level, the focus becomes broader. The organisation measures areas such as risk exposure, compliance, claims and disputes, as well as its ability to realise the rights, entitlements and commercial opportunities embedded in the contract.
4. Value Realisation and Collaboration
Here, the focus shifts from control to value creation. Is supplier or customer performance improving? Is collaboration leading to better outcomes? Are expected benefits and savings being realised? And is value leakage being reduced over the life of the contract?
5. Strategic Business Impact
At the highest level, Contract Management is linked directly to the organisation’s strategic objectives. Are contracts contributing to financial performance and cash flow? Do they support innovation and continuous improvement? Do they strengthen organisational resilience and adaptability? And are the business case and strategic outcomes that the contract was intended to support actually being realised?
The model therefore reflects a progression from asking:
“Do we have the contract under control?”
to asking a broader question:
“Is the contract delivering the value and business outcomes the organisation intended to achieve?”
We Still Tend to Measure What Is Easiest to Measure
Although there is growing interest in demonstrating a broader range of value, organisations still tend to measure the more tangible and operational aspects of Contract Management most systematically. This is understandable: the data is often more readily available, and the link between activity and outcome is more direct.
This was also reflected in a survey among members of the NSCCM Network. Financial performance, delivery times, quality, SLA performance and compliance were among the KPIs already being used in day-to-day contract management.
By contrast, areas such as collaboration, relationships and broader value creation are more difficult to measure and demonstrate. Network members identified relationships and collaboration as important areas, but also as areas where it can be challenging to establish meaningful measures.
The way forward is therefore not necessarily to introduce more KPIs, but to develop a broader and more value-oriented KPI portfolio.
A complex strategic contract, for example, should not be assessed solely on whether the supplier has delivered on time and met its SLAs. It is equally relevant to ask whether the contract, taken as a whole, has delivered the intended financial, operational and strategic value.
What Matters to Senior Management?
Which KPIs matter most also depends on who will be using them.
Procurement will typically focus on areas such as savings, supplier performance, security of supply and total cost. Legal will often place greater emphasis on compliance, contractual rights, claims, disputes and legal risk. Operations and project teams are more likely to focus on delivery, quality, SLAs and changes, while Finance will naturally be concerned with budgets, costs, cash flow and financial performance.
For senior management, the focus will typically be on broader business and strategic outcomes. The number of contract reviews completed or obligations recorded is less important in itself. The more relevant questions are: Are the contracts creating greater value? Are they reducing significant risks? Are they strengthening the organisation’s competitiveness and resilience? And are they contributing to the organisation’s strategic objectives?
This link can be critical to whether Contract Management is perceived primarily as an administrative function or as one with genuine strategic importance. As highlighted through the work of the NSCCM Network, the value of Contract Management becomes far more visible to senior management when it can be linked to areas such as growth, profitability, risk management, competitiveness, quality of decision-making and long-term value.
The Model Can Also Be Viewed as a Maturity Journey
The KPI model can also be understood and used in another way: as a maturity journey for an organisation’s Contract Management capability.
An organisation does not need to start by measuring everything across all five levels.
Instead, the first step may simply be to identify where the organisation is today. Is there a sufficiently robust data foundation? Is basic contract performance measured systematically? Are financial performance and risk integrated into Contract Management? And is the organisation beginning to demonstrate value realisation and strategic impact?
From there, the organisation can gradually progress through the model.
In this way, operational KPIs are not an end in themselves. Rather, they provide the foundation for progressively demonstrating a broader share of the value created through Contract Management.
It is also important to recognise that the right mix of KPIs will vary from one organisation to another. It will depend, among other things, on the organisation’s level of maturity, the type and complexity of its contracts, and the current priorities of both the organisation and its management.
The aim, therefore, is not to replace operational KPIs with strategic ones. It is to build on a solid foundation and gradually become better at demonstrating not only what Contract Management does, but the difference it makes to the organisation.
But how can organisations put this into practice?
From Model to Practice
Moving up through the model requires more than choosing the right KPIs. It also requires the right capabilities, shared methods and a more systematic approach to Contract Management.
An important step is therefore to establish a common professional foundation across the organisation. This includes an understanding of the contract lifecycle, governance, roles and responsibilities, performance, risk, compliance, relationships and value creation. These are precisely some of the areas addressed systematically in NSCCM’s courses and certification programmes, which are designed, among other things, to strengthen organisations’ ability to manage contracts in a more professional and value-focused way.
As this foundation becomes stronger, reporting can also evolve. The focus can gradually shift from activities and individual operational measures towards reporting that demonstrates more clearly how Contract Management contributes to areas such as financial performance, risk, contract performance, value realisation and the organisation’s strategic objectives.
The NSCCM Network also contributes to this development. Here, experienced Contract Managers from different organisations come together to exchange experiences, discuss methods and develop practice. The work on the KPI list and the accompanying model is one example of this type of professional collaboration – with a focus on how Contract Management can become better at both demonstrating the value it creates and communicating that value in a way that is relevant to senior management.
In summary, the KPI model is not intended to provide a definitive answer, but rather to serve as a tool for further organisational development. It can be used to assess where the organisation stands today and what the next steps might be: Which foundations are already in place? Which KPIs are we currently measuring? And what would it take to demonstrate more clearly the business and strategic impact of our contracts? In this way, the model can also support the organisation’s Contract Management maturity journey.
The objective is therefore not simply to become better at managing contracts, but gradually to become better at demonstrating and making visible the value that effective Contract Management creates for the organisation – and communicating that value in a way that is relevant and meaningful to senior management.