Contract as a Steering Instrument in Business and Society

Research Field of Prof. Dr. Ralph Schuhmann, Prof. Dr. Bert Eichhorn and Prof. Dr. Dr. Alexander J. Wulf:

 

The understanding of the contract as a steering instrument has been developed at the CMI over the last ten years. It is based on numerous articles and in the book Contractual Management - Managing through Contracts. The basic ideas behind the thought of contract as a steering instrument can be summarised as follows:

We believe that a paradigm change in contract management is necessary: No longer should the management of a contract be the goal, but instead management through the aid of a contract. This objective can be realized through the Contractual Management Model which was developed by the CMI (see Schuhmann, Ralph; Eichhorn, Bert (2019). Contractual Management: A Holistic Approach to a Diverse Issue. In: Schuhmann, Ralph; Eichhorn, Bert (Editors). Contractual Management -Managing Through Contracts, Springer Verlag, pp. 3-47). The model is based on the integration of processes impacted by the contract and uses them to fully operationalize the managerial potential of the contract. In doing so, the model does not just create a management process, but instead encompasses a full management cycle through knowledge management, management of relationship, corporate management and risk management by accessing relevant functions of these domains.

During a negotiation, the manager independently develops a contract based on the management processes of the company; he/she considers the available experiential knowledge of the various departments, the accepted risk culture of the company, as well as the tasks of the management according to the company’s strategy. The contract thus develops out of the negotiation process under the consideration of all relevant success factors of the company and depicts these in its content. Thus, the contract is a tool for project management both before the completion of its final drafting as well as after its implementation in business practice. The continued development of the contract also has a retroactive effect on the various management processes and the targets and requirements prescribed by management. The contract becomes a mirror or reflection of the company’s strategy while, simultaneously, its empirical values can in turn influence the company’s strategy.

This change of perspective requires a much more interactive method of organizing the negotiation process as it is described by the CM Model. Furthermore, the CM approach may be equally useful in the management of quasi-markets through contracts and thus are applicable on an institutional macro level. Even constellations encountered in political management can be addressed by the contractual management approach and model.

For the new perspective based on this approach see https://en.wikipedia.org/wiki/Contractual_Management.