Commercial Skills for Leaders

What it was:

A one-day course on commercial skills as part of the Future Leaders Scheme in Pimlico, London on 17 October 2018.

Key outcomes for the course:

  • Build individual confidence in commercial work and decisions
  • To ensure that we are applying good commercial judgement (not falling into just commercial compliance)
  • To assist in “doing the right thing”

What I learned:

The commercial context:

  • General shift away from simple buying of goods as a customer, to more complex supplying of services in a partnership
  • Tempo and change are only increasing

Commercial management is:

  • The alignment of stakeholders to increase the probability of a successful outcome from a trading relationship
  • The business discipline that ensures all relevant stakeholder views are incorporated and evaluated…
  • …So that customer needs and supplier capabilities are aligned, and commercial risks are identified and managed

It’s worth understanding the level of mutual commitment between the supplier and customer. There are some parallels with public relations. Getting alignment is something that senior leaders work on, it is not something that you can delegate to commercial staff.

You need to understand what your desired business outcomes are before you can communicate them.

The contract is at the end of a long process of decision, exploration and alignment.
You should spend most effort before and after going to market, not during the procurement process (the DNA model)

A survey showed around 9% of project value leaks away… Top sources are lack of clear scope and goals; involving legal and contract teams too late; failure to engage stakeholders; adversarial negotiations

Think what will drive supplier behaviours… Can often be better to focus on outcomes not process. Otherwise it may drive perverse behaviours, e.g. an IT helpdesk may be paid by number of calls handled when actually fewer IT problems would be a better metric

Inception, initiation and pre-policy:

Aim to be an ‘intelligent client’ in the inception phase
Aim to achieve an honest appraisal of needs, opportunities and possible approaches

What questions should you ask to enable intelligent business decisions?
* What is the vision for this project / relationship?
* What commercial outcome is being sought?
* What are the major risks and opportunities?


  • What structure of relationship with suppliers do we need?
  • Reflect on the importance of creating a joint team
  • Assess the three Rs:
    • Risk: commercial, financial, business/reputation, market
    • Reward: incentives, payment mechanisms, reputation, contract extensions
    • Remedy: legal measures, liabilities/indemnities, liquidated damages, termination
  • Understand the longer term impacts of decision making in terms of contractual obligations, cost, IPR, legacy and how to manage these to deliver the goal

What type of agreement to use?

  • Ensure advisors provide pros and cons
  • How will the model cope with future changes?
  • Every requirement has a cost, direct or indirect
  • Evaluate the true cost of risk transfer
  • Act as intelligent client with advisors
  • Plan for exit from the very beginning

Case study: delayed development of a new aircraft. What went wrong?

  • Enhanced risk from their extended network
  • Once issues began they compounded themselves
  • Unable to control critical elements of the supply chain
  • Organisation was not ready for the communication levels required
  • Heavy outsourcing but lack of supplier relationship management
  • …Could this happen in Government? What could you do to prevent it?

Different contracting terms are of different importance, depending if time, cost or quality are the most important.

Relationship management

The impact on outcome success in rank order:

  • Communication
  • Risk allocation
  • Problem solving
  • No blame culture
  • Joint working
  • Gain and pain sharing
  • Mutual objectives
  • Performance measurement
  • Continuous improvement

The more people-oriented things are highest on the list. Contracts are ultimately between people. Lawyers may see a contract as a means of limiting risk but most contracts are driven by economics.

What does this mean for the leader?

The agreement type needs to be the right one, so consider:

  • Risk, reward, remedy
  • Long term impacts of decisions e.g cost, obligations, IPR
  • Flexibility to change deliverables following changes in technology, needs or capabilities
  • Focus on the objective and define it clearly
  • Ensure communication is appropriate, timely, efficient, two way and honest

What can go wrong?

Lessons from case study exercise:

  • Don’t forget the broader landscape
  • Get policy right before you start
  • Design your strategy in the context of common causes of failure and identified best practice
  • Poor relationship set-up and management can destroy value
  • Beware of having too many variables outside your direct control
  • The final price is almost always higher than the day one price
  • Understand whether you are a customer or a partner. If the purchase is not simple then likely you are partners!
  • Accountabilities are difficult where contracts are very long and people turn over rapidly
  • Always put the effort in to understand up front.
  • It’s worth revisiting these case studies

Lean sourcing: commercial aspects of sourcing and understanding suppliers

  • Understand what motivates and constrains your suppliers
  • Your goals and your behaviours impact the behaviours of your suppliers
  • Build effective relationships through collaboration

What is true collaboration?

  • Assertiveness is concern for own needs
  • Cooperativeness is concern for others’ needs
  • True collaboration is when assertiveness and cooperativeness are both high.
  • This is the creative, win-win zone with principled negotiation
  • Competing is high assertiveness, low cooperativeness; power relationship, win-lose, at the expense of the other
  • Accommodating is low assertiveness, high cooperativeness, caving in, lose-win
  • Avoidance is low assertiveness, low cooperativeness; nettles not grasped, lose-lose
  • Compromise is in the middle – not getting best value, partially factory to each

Alignment of goals (case study)

  • Contract looked too narrowly at performance KPIs
  • Contract incentivised corner-cutting
  • Relationship performance should be built into contracts and in ways that benefit all parties
  • Suppliers may downplay failure. Conversely, as customers we often struggle to have a honest conversion about performance
  • Open book contracting may have been better… That means being open about costs and collaborating on what costs can be reduced and what can’t


  • Use your leadership capability to maximise the commercial result for the crown
  • Leverage and enhance your team’s capability to deliver
  • Incorporate and engage your suppliers as part of the team
  • What are the measurements and objectives of your staff and the impact these have on their behaviour

Set your objectives wisely:

  • Focus the team on the key outcomes:
  • Do your agreements encourage our discourage innovation or continuous improvement?
  • Is your approach to risk allocation and risk sharing having the desired outcome?

Managing contracts, implementation and post contract change

What reviews do we need? Some ideas:

  • Check understanding of outcomes
  • Check quality of relationship
  • Active risk management
  • Lessons learned and improvements
  • Joint board for project delivery plan
  • Shared risks and mitigation actions

What commercial aspects to monitor as a minimum?

  • Compliance with the conditions and schedules
  • Disputes, claims, escalations
  • Balanced score card
  • Contract calendar
  • Change control
  • Q & A database

Top sources of value leakage identified by the people in the room:

  • Lack of clear scope and goals
  • Contracts lack flexibility and governance
  • Weak post-award processes

Exit planning

  • You need to start planning for exit before you draft the tender
  • Includes: early termination, end of contract, transition, ongoing obligations

Exit questions

  • How can we learn to take to new projects?
  • How do we maintain a competitive option (not create a monopoly)?
  • How do we minimise risk in transition (e.g. licenses, assets, access to facilities)
  • What do we do with the people, the assets and the IP?
  • Do we have to run another tender for a follow on service?
  • What are the obligations on incumbent to support transition?
  • How do we safeguard the service to the end of the contract (e.g. maintain supplier enthusiasm)?

Bringing it all together

The golden rules:

  • Ensure an appropriate stakeholder analysis
  • Test for realism – how do we know this can be done?
  • Ensure common understanding of goals and benefits
  • Validate capabilities, trust but verify
  • Don’t rely upon negative performance incentives
  • Apply rigour, but that does not mean be adversarial

Final thoughts:

  • Behind almost every successful endeavour in Government is a successful contract
  • The three Rs in commercial decision making: risk, reward and remedy
  • Contract terms and commercial vehicles largely drive how people work with us

What I will aim to do differently as a result:

  • Set vision and outcomes for commercial engagements, not just deliverables
  • Ensure my team have the support and advice they need on commercial engagements
  • Get senior buy in to what we are contracting for, i.e. the outcomes
  • Surface and address challenges around all the contacts we operate
  • Make more time for long term planning and thinking… This is a key part of leading.
  • Remember to revisit this learning as there is a lot of content here.
  • Try to ensure that teams are genuinely collaborating, not competing, accommodating or compromising

The modern leader in defence

What it was:

Talk by a senior MOD leader to the ISS leadership cohort in Corsham on 9 October 2018.

What I learned:


  • You are a highly evolved ape!
  • Think about the psychological environment you create for your team
  • Systems of thinking, fast and slow
  • Self awareness is key
  • Create an environment that encourages Reasonable Challenge

A simple framework for leadership:

  • A leader leads three things: issues, people and change.

Leading issues:

  • The product: must be credible, consistent, defensible, logical, viable
  • Stakeholders: use empathy, trust and assertiveness

Leading people:

  • Be effective at what you do. This is fundamental to leadership.
  • Be a time traveller; see five years hence, and reflect on how things have moved.
  • Have a clear view of success and failure, beware the dangers of linear narratives,
  • take a probabilistic view of success and failure
  • Be human: learn about your people, which team they support, their children’s names.

Leading change:

  • Change happens to us. We adapt to change. Therefore leading change is really just leading adaptation.
  • In essence it’s the role of the leader to force the adaptation
  • Evolution is a good analogy – it can be gradual or drama
  • Reputation is the only real currency of leadership: The metric is what will people be saying about you / this in five years time
  • There are many different leadership models, both quiet and loud

In summary:

  • Lead through people
  • Make sure the team is adapting
  • Be conscious of your reputation

What I will aim to do differently as a result:

  • Think about things in terms of issues, people and change – not just issues
  • Use the framework above as a way of organising my planning time
  • Ask my people about themselves more.

Reasonable Challenge

What it was:

Short workshop on ‘Reasonable challenge’ in London on 26 September 2018.

What I learned:

  • The Chilcot report, which examined Government decision-making in the run up to the invasion of Iraq in 2003, warned against the dangers of ‘group-think’.
  • Challenge is a key way of fighting group-think.
  • Challenge is difficult in a hierarchical organisation like defence. We can get swept up in ‘senior narratives’ and find ourselves working within these without necessarily challenging them.
  • Being on the receiving end of challenge is difficult for leaders. The instinct can be fight or flight.
  • The MOD has developed a simple Reasonable Challenge guide that helps people to direct challenge in the right way, and helps leaders to encourage and harness challenge.
  • The language we use to introduce a reasonable challenge is important, make sure to phrase it as a helpful suggestion
  • The role of leaders is to create a context in which everyone can make a reasonable challenge.
  • Reasonable challenge is now being baked into training across government.

What I will aim to do differently as a result:

  • Apply reasonable challenge lessons at work
  • Publicise the reasonable challenge guide in my team
  • Conduct a workshop to explore how we apply challenge in our team
  • Consider recognising or rewarding team members for making good use of challenge

SLS/FLS MOD engagement event

What it was:

Talks and conversations with senior leaders and alumni of development schemes, mainly from within defence, at the Ministry of Defence on 5 March 2018

What I learned:

  • Action Inquiry: Every moment is an opportunity for development, experiment, reflection
  • Exploit your competitive advantage
  • Seek out role models
  • Who you work with is more important than what you work on
  • Need to be sharp and concise on commissioning the right work from the right person
  • You can’t afford to have an off moment, especially when in large groups
  • Have respect for the people in your team; that means preparing properly when speaking to groups
  • As an introvert you need to be an actor, and build in recovery time on your own
  • “Positive deviance” – the ability to challenge and do things in New ways. Leaders need to be able to observe and enable this behaviour
  • In the second year of the schemes there is more onus on self organising networks. There is not an anchor – it becomes a fight to stay in contact with people.
  • Need to challenge the other people in your cohort, if they don’t contribute they are taking a place away from others who wanted to be on the scheme
  • FLS makes you better able to succeed at SCS interviews as it helps you frame your style, think about the emotional impact, talk about your corporate contribution
  • End of scheme reviews are in December January

What I will aim to do differently as a result:

  • Try to pursue partnerships with specific individuals who are likely on a similar development journey as me
  • Look up the “two pies” approach (?) that was mentioned
  • Make a concerted exploration on doing a secondment to industry
  • Practice being more precise in commissioning work from others
  • Take more time to prepare for speaking to the team
  • Gather contact details for others on development schemes and try to maintain the network

Strength Deployment Inventory (SDI)

What it was:

An exercise to measure ourselves against the Strength Deployment Inventory (SDI) model (aka ‘red green blue triangle’) as part of the Future Leaders Scheme at Ashridge in November 2017.

What I learned:

I came out of the SDI exercise as red (“asserting / directing”) but close to red-green (judicious / competing) and the hub (flexible / cohering). Under stress or pressure I move to the hub.

I recognised all three in me, but perhaps the hub most of all

Your self-perception is based on your motivation, which form as intentions, which in turn express as behaviours.

Other people’s perceptions of you are the other way round – they are based on your behaviour, which expresses your intentions, driven by your inner motivation (which other people can’t see!)

What I will aim to do differently as a result:

  • Learn more about what I can do with SDI
  • Recognise when people are moving along their long vectors, it should be obvious they are stressed.
  • Note that for people with short vectors, it may not be obvious they are stressed, I may need to come to them to see if they need support
  • Always maintain healthy scepticism of SDI and similar personality models!