Commercial Management – Defining a Discipline? In: Commercial Management of Projects: Defining the...

Thisistheauthor’sversionofaworkthatwassubmitted/acceptedforpublicationinthefollowingsource:Lowe,DJandLeiringer,R(2006)CommercialManagement–DefiningaDiscipline?In:CommercialManagementofProjects:Definingthediscipline,(edDJLowewithRLeiringer).BlackwellPublishingLtd,Oxford,ISBN1-4051-2450-4,pp,1-17.eScholarID:243534|DOI:10.1002/9780470759509.ch1Thisfilewasdownloadedfrom:https://www.escholar.manchester.ac.uk©Copyright2006Pleaseconsulttheauthor Reproducedinaccordancewiththecopyrightpolicyofthepublisher.Notice:Changesintroducedasaresultofpublishingprocessessuchascopy-editingandformattingmaynotbereflectedinthisdocument.Foradefinitiveversionofthiswork,pleaserefertothepublishedsource.

CommercialManagement–DefiningaDiscipline

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CHAPTER1:COMMERCIALMANAGEMENT–DEFININGADISCIPLINE?

DavidLowe1andRoineLeiringer2

INTRODUCTION

Thetermcommercialmanagementhasbeenusedforsometime,similarlythejobtitlecommercial

manager.However,asofyet,littleemphasishasbeenplacedoneitherdefiningtheroleofcommercial

managersorassessingtheimportanceofcommercialmanagementasadiscipline.Wemaintainthat

therearecompellingargumentsforconsideringcommercialmanagement,notsolelyasatask

undertakenbycommercialmanagers,butasadisciplineinitself.

Inaccordancewiththesubsequentchaptersinthebook,thischapterfocusesoncommercial

managementwithinthecontextofprojectorientedandpredominantlybusiness-tobusiness(b2b)

centricorganisations.Consequently,itisconcernedwiththecommercialmanagementofprojects.

Thischapterseekstoestablishcommercialmanagementasadiscretediscipline.Itdelineatesthe

contextwithinwhichcommercialmanagersoperate;definestheterms‘commercialmanagement’and

‘commercialmanager’;presentsacrossindustrysectoranalysisofthefunctionofcommercial

management,asafirststepinestablishingabodyofknowledgeforcommercialmanagement;and

providesarationaleforthescopeandcontentofthefollowingchapters.

THECONTEXTINBRIEF

Projects

1 School of Mechanical, Aerospace and Civil Engineering, University of Manchester, UK, M60 1QD 2 School of Construction Management and Engineering, University of Reading, Whiteknights, PO BOX 219, Reading RG6 6AW, UK

DavidLoweandRoineLeiringer

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Thelasttwodecadeshaveseenachangeinhowcommercialorganisationsgoabouttheirday-to-day

business.Withinmostareasofcommerce,projectsareincreasinglyusedtoundertakeavarietyoftasks

andworkingassignmentsofmosttypesandsizes.Itiscommontofindsimpledefinitionsofprojectsas

‘one-offactivities’andalltoooftenprojectsarestudiedassingleentities.Thismighthavebeenrelevant

forthelarge-scaleprojectsforwhichtechniquessuchasCriticalPathMethod(CPM)andProgram

EvaluationandReviewTechnique(PERT)weredeveloped,butforthemodernbusinessenvironmentitis

perhapsnolongerquitesovalid.Wedonotwishtoimposeanynewdefinitionofprojectsorproject

management;thisisalongrunningdebatethatisdealtwithatlengthelsewhereanditwouldservelittle

ornopointtorevisittheargumentshere.Instead,theviewtakenisthatprojectsarepredominantly

initiatedand/orexecutedwithinalargerorganisationalsetting,thatis,acommercialenvironment.

Acknowledging,therefore,thedevelopmentofportfolioandprogrammemanagement(see,e.g.Gareis,

2004;ArttoandDietrich,2004,ArcherandGhasemzadeh,2004;Thiry,2004).

Whilesomeindustries,forexample,construction,areinherentlyprojectbased,thistrendisalso

emerginginotherindustrysectors,whichtraditionallyhavebeenlessinclinedtowardprojects.Some

commentatorshaveevengoneasfarasstatingthatprojectsarethefutureforglobalbusiness,dueto

increasingtechnicalandproductcomplexity,shorteningtimetomarketwindowsandtheneedforcross-

functionalintegration,andrespondingtochangesinpurchaser(client)needs(cf.LundinandSöderholm,

1998).Whetherornotthiswillturnouttobethecaseisfortimetodecide.However,incontemporary

organisationalpractice,projectsrepresentagrowingpercentageofanorganisation’sordinary

operations,whiletemporaryorganisationalstructuresarenolongerusedsolelytohandleundertakings

ofextraordinarynature,suchaslarge-scaleengineeringprojects.Moreover,inmanyindustrysectors

thereisalsoacleartrendtowardsaproject-basedapproachtoorganisationaldesign(see,e.g.Mileset

al.1997;Hughes,1998;Whittingtonetal.1999)asmoreandmorecompaniesadoptprojectoriented

workmethodsintheirbusinesses.ThisdevelopmentisacknowledgedinthePMBOKGuide(2000),

whichdefinesthe‘projectizedorganization’asanorganizationwhereindividualsaregroupedtogether

basedonprojectcommitments,notwithstandingtheirfunctionalbackgroundorexpertise.Project

managementhas,therefore,graduallybecomeacorebusinessprocessformostfirmsandprojectsare

increasinglyconsideredaskeyvehiclesforthestrategicmanagementofthecompany(see,e.g.Jamieson

andMorris,2004;Cleland,2004).Thus,commercialorganisationsuseprojectsastoolscontributingto

theexecutionoforganisationalstrategieswiththeaimoffulfillingcorporateobjectives,goalsand

missions.


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Projectbasedorganisations

Inthisevolvingbusinessenvironmentorganisationswill,iftheyhaven’talreadydoneso,havetoadjust

tobeingproject-based.Theproject-basedfirm’sworkconsistsofundertakingcertainactivitieson

projectsor,iftheyaremainlyoperationallyorientedundertakingprojectsasanimportantpartoftheir

overallactivity.Thus,theyareeitherpartofexternalprojects,executeinternalprojects,oractivein

varyingcombinationsofthetwo.Whilesomeorganisationsengageinoneprojectatatime,others

couldwellbepartofnumerousprojects,allinvariousstagesofcompletion.Thisisnot,however,the

sameasstatingthatallproject-basedfirmshaveorganisationalformsthatfallwithinGalbraith’s(1977)

definitionoftheproject-basedorganisation.Indeed,somefirmsmightchoosetohaveamatrix

organisationaldesign,whileothersmightoptforfunctionalorganisationaldesigns.Nonetheless,

whicheverorganisationaldesignstrategyisemployed,theorganisationis,atanypointintime,partof

oneorseveralprojectnetworks,allwithinterfacesofvaryingdegreesofcomplexity.Exactlyhow

organisationschoosetodealwiththeseinterfaces,betheyexternalorinternal,vary.Yet,formostitis

essentialtobeabletoorganizetheiractivitiestowardsfunctioninginthesenetworks.

Commercialmanagementinterfaces

Eventhoughadifferentrhetoricmightbeusedonindividualprojects,thereisnoescapingthefactthat

thevariousorganisationsinvolvedinprojectshavetheirownagendasandvestedinterests.Itfollows

logically,therefore,thatevenifprojectsareconsideredasstandaloneentities,mostdecisionstakenon

anyparticularprojectwillinonewayortheotherhaverepercussionsontheorganisationsinvolved.For

theproject-basedfirmthismeansthatthereisanobviousconnectionbetweenissuesthathavetobe

resolvedatboththeprojectandthecorporatelevel.Hence,itisfundamentaltostrikeabalance

betweentheshort-termgoalsoftheprojectandthelong-termobjectivesofthecompany.Thisincludes

obviousactivitiessuchasbalancingtheallocationofresources(ofvaryingkinds)betweenprojects,as

wellasfindingwaysofdistributingriskand,potentially,profitbetweenprojectsandbusinessunits.

Basedonthefundamentalassumptionthatthekeyobjectiveforanycommercialorganisationisto

generateaprofit(alternatively,aprimeobjectiveofanot-for-profitorganisationistoachievebest

value),commercialissues,andthuscommercialmanagementplaysanintegralpartinhowmostofthe

interfacesreferredtointheprevioussectionaremanaged.Afundamentalchallengetothesuccessful


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managementofprojectsis,therefore,interrelationshipmanagement;forexample,betweenthe

purchaserandtheirprincipalsupplier,andthevariousfirmsinvolvedintheprojectsupplychain.

Wecontendthatwithinacommercialorganisationitisthecommercialmanagementfunctionthatlinks

operationsataprojectlevel,multipleprojects(portfolios/programmes)attheorganisationalleveland

theorganisationalcoreofthecompany.

Thecommercialmanagementfunctionandthecommercialmanager

Theterm‘CommercialManagement’andthetitle‘CommercialManager’arebynomeansnew;indeed

theycanbetracedbackatleasttothemiddleofthetwentiethcentury.Duringthetwodecadesboth

beforeandafterWorldWar2,commercialmanagerscouldbefoundattheverytopofcompanies,and

weretypicallyresponsibleforacquiringnewbusinessanddevelopingcompanystrategies.Thishas

subsequentlychanged.Duringthelasttwodecadestherehasbeenanincreaseinthenumberof

individualsassumingthistitleinorganisations.Thus,whatonceusedtobeaboardlevelactivityhas

becomemoreofamiddle-to-seniormanagementroleincompanies.IntheUKconstructionindustry,for

example,acleartrendcanbeidentified:theroleofthetraditionalcontractor’squantitysurveyor

evolvingintothatofacommercialmanager.Otherindustries,likewise,havegonethroughtheirown

evolution,andthetrendtowardsanincreasingnumberofcommercialmanagers(alsocalledcontractor

commercialcontractmanagers)isequallyunmistakable.Asaresult,commercialmanagerscannowbe

foundacrossaspectrumofindustries,especiallythosethatarepredominantlyprojectbased.

Whiletheterm‘CommercialManagement’andthetitle‘CommercialManager’arebothwidelyused

andaccepted,thereispresentlynocommonlyrecognizeddefinitionofeither.Moreover,itisnot

apparentthattheymeanthesamethingbothbetweenandwithindifferingorganisationsandindustry

sectors.

WHAT’SINANAME?

Itwouldbenaïvetostatethatthespecifictasksundertakenbyindividualcommercialmanagersare

identicalacrossindustrysectors,orevenbetweendivisionsoflargeorganisations.However,agrowing


6

recognitionofcommercialmanagementasadisciplineandanassociatedskillsetcanbedetectedas

evidencedbytheemergenceofvariousprofessionalbodiesintheUKandUSeagertopromote

commercialmanagementaspartoftheirportfolios.

Towardsadefinitionofcommercialmanagement

Aspreviouslymentioned,theterm‘commercialmanagement’hasbeenusedforquitesometime,not

leastinconstruction.Cottrell(1979),forexample,referstothejobtitle‘commercialmanager’in

builder’sorganisations.Yet,researchhasshownthatthereisnoconsensusoverwhatcommercial

managementisor,forthatmatter,whatacommercialmanagerdoes(Loweetal.1998).Intheir

literaturereview,Loweetal.failedtounearthanydefinitivestatementsofwhatwasmeantby

commercialmanagementordescriptionsofthetasksandskillsassociatedwiththeroleofacommercial

manager.Thispaucityofliteraturecategorisedascommercialmanagementwasagainconfirmedby

LoweandLeiringer(2005).Thisisnottosaythatresearchhasnotbeenconductedinthisdomain.On

thecontrary,thereisanabundanceofliteratureaddressingissuesassociatedwithcommercial

management(e.g.Scott,1974;Gilbreath,1983;Turner,1995).

Itisclearthatcommercialmanagementis,initsliteralinterpretation,ambiguous,whileitswide

applicabilityinpracticemakesitdifficulttoprovidearealboundaryforthephenomenon.Twomain

interpretationstendtostandoutintheconstructionrelatedliterature:thefirstseescommercial

managementasasubsetofprojectmanagementonindividualprojects,andaseconduses‘quantity

surveying’and‘commercialmanagement’interchangeably.

ThomasandAdams(1995)considerthecommercialmanagertobesubsumedwithintheprojectteam,

tobesubservienttotheprojectmanagerbutresponsiblefortheplanningengineer,contractmanager

andcostengineer/quantitysurveyor.Moreover,thecurrentAssociationforProjectManagementBody

ofKnowledge(BOK),developedbytheCentreforResearchintheManagementofProjectsatUMIST

(Morrisetal.2000;Morris,2001)containsasectionlabelled‘Commercial’,thusplacingcommercial

managementwithinthecontextofprojectmanagementandattheprojectlevel.Itiscontendedthat

commercialissuesmaydrivetheconductofaproject,whilethe‘Commercial’section,asdefinedby

MorrisandtheAPMteam,involvesthebusinesscase,marketingandsales,financialmanagement,

procurementandalegalawareness.


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Followingthesecondlineofinterpretationofcommercialmanagement,Cottrell(1979)andmore

recentlyWalkerandWilkie(2002)holdthetitle‘commercialmanager’tobesynonymouswiththatof

thebuilder’s/contractor’squantitysurveyor:arolethatisintegratedintothemanagementofaproject

andinvolvesthevaluationofwork,changemanagement,financialaccountingandsub-contractor

administration.Thislineofreasoningisfurthersupportedbythefactthatitisnotuncommonfor

contemporaryprivatequantitysurveyingpracticestoadvertisetheirservicesascommercial

management.Furthermore,othercommentatorshavenotedthatthecontractor’squantitysurveyoris

nowcastintheroleofafinancialmanager,providingfinancialcontrolofprojects(see,e.g.Pearson,

1996).Researchhasbeenconductedintheconstructionsectorintotheroleofthequantitysurveyor

bothinconsultancyandconstructioncompanies(see,e.g.Cottrell,1979;Bennett,1989;Male,1990;

RICS,1984,1991and1992;CornickandOsbon,1994;FortuneandSkitmore,1994).

Lookingmorecloselyatthetwoambiguoustermsthatmakeupcommercialmanagementaliteral

definitioncanbederivedfromthefollowingdefinitionsfoundinTheOxfordModernEnglishDictionary:

Commercial:“…of,engagedin,orconcernedwithcommerce;havingprofitasaprimaryaim

ratherthanartistic,etc.”

Commerce:“financialtransactions”

Manage:“organize;regulate;beinchargeof(abusiness,etc.)”

Management:“…theprocessoraninstanceofmanagingorbeingmanaged.”

Manager:“apersoncontrollingoradministeringabusinessorpartofabusiness.”

Adaptingthesedefinitionscommercialmanagementcanbedefinedasfollows:

“Theprocessofcontrollingoradministeringthefinancialtransactionsofanorganisationwith

theprimaryaimofmakingaprofit.”


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Likewiseacommercialmanagercouldbedefinedasfollows:

“Apersoncontrollingoradministeringthefinancialtransactionsofanorganisationwiththe

primaryaimofgeneratingaprofit.”

Unfortunately,thesedefinitions,intheirsimplicity,leavemuchforinterpretation.Yet,theyreflectthe

findingsfromapriorinvestigationintocommercialmanagementinconstruction.IntheirstudyLoweet

al.(1998)andLoweandFenn(1997)concludedthatthemostcommondescriptionofcommercial

managementintheconstructionindustrywas‘lookingaftertheprofitsofthecompany…bykeeping

coststoaminimumandmaximisingincome’.Furthertheyestablishedtheimportanceofthefollowing

attributestothefunctionofcommercialmanagement:

• Theabilitytotakeabroadperspective

• Theabilitytothinklaterally

• Theabilitytoanalyserisks

• Theabilitytoconvertworkrequiredonaprojectintopackages

• Theabilitytonegotiate

• Theabilitytocommunicate

However,thesetraitsarefarfrombeinguniquetocommercialmanagement.Eraut(1994),forexample,

considersdeliberateprocessessuchasplanning,problemsolving,analysing,evaluatinganddecisionmaking

tobetheessenceofallprofessionalpractice.

Thelackofgenerallyacknowledgeddefinitionsforboththejobtitle‘CommercialManager’andtheterm

‘CommercialManagement’,despitetheirwidespreadusage,promptedaninvestigationintoboththe

roleandfunctionofthecommercialmanagerswithinproject-basedorganisations(LoweandLeiringer,

2005).ThisresearchisseenasafirststepindevelopingaBodyofKnowledgeforCommercial

Management.Thefollowingsectionpresentstheresultsobtainedfromthisstudy.

COMMERCIALMANAGEMENTASADISCIPLINE–ACROSSSECTORANALYSIS


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LoweandLeiringer(2005)investigatedtheroleofcommercialmanagersacrossthreeindustrysectors,

construction,telecommunications/ICTanddefence/aerospaceinordertoestablishwhetherornot

commercialmanagementcouldbeidentifiedasadistinctdiscipline.Theempiricalresearchthat

underpinnedtheirinvestigationwasconductedinfourseparatestages.Thefirststageconsistedofa

literaturereviewandanalysisofover100jobadvertisementsforcommercialmanagers.Stagetwo

comprisedapilotquestionnairesenttocommercialmanagersinalargetelecommunicationscompany,

whichwasfurthercorroboratedthroughin-depthinterviewswithcommercialmanagersfrom

constructioncompanies.Thethirdstageinvolvedalarge-scalequestionnairesurveygenerating106

responsesdistributedbetweenconstruction(42),telecommunications/ICT(33)anddefence/aerospace

(31).Thefourthandfinalstageinvolvedthepresentationandvalidationofthequestionnaireresultsby

meansofafocusgroupcomprising8representativeseniorcommercialmanagers.

Findings

Commercialmanagement

Themajorityoftherespondentsworkedonmultipleprojectsorwerenotallocatedtospecificprojects,

ofthoseallocatedtoonlyoneprojectthemajoritywerefromtheconstructionsector.Theinvolvement

ofcommercialmanagersinprojectsvariedbetweentheindustries.Atendencywasrevealedfor

individualsintheTelecoms/ICTandDefence/Aerospacesectorstobeappointedearlierintheprojectlife

cyclethanthoseintheconstructionsector.Thiswasevidentfromthefactthatcommercialmanagersin

theconstructionsectorweremainlyinvolvedincontractadministrationactivitieswithprojectexecution

dominatingtheirtime,whilstcommercialmanagersintheothersectorswerepredominantlyinvolvedin

pre-contractactivitieswithprojectdevelopmentdominatingtheirtime.Thisdifferencebetweenthe

sectorsisperhapsaresultofthetraditionaldivisionofthecommercialfunctionintheconstruction

industry:theestimatingdepartmentbeingresponsibleforpre-contractactivitieswiththequantity

surveyingsectiontakingresponsibilityforcontractadministrationactivities(Brown,1997).

Functionsofthecommercialmanager

Twenty-eight functionswere initially identifiedaspotentialcomponentsof theroleof thecommercial

manager.Therespondentswereaskedto(1)indicatewhetherthesefunctionsformedpartoftheirjob,


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theyprovidedsupporttothefunction,theyprovidedacounterbalancetothefunction,orhadlittleor

nocontactwith the function;and (2) theywereaskedto indicate the importance, to theirday-to-day

work,ofthosefunctionsdeemedtoformpartoftheirjob.

Table1.1presentsthefunctionsrankedinorderofthemode/medianresponseto1above,andindicates

therankedimportancegiventothem,inaccordancewith2.Overall,theresultsconfirmthecontribution

of:contractnegotiation,contractformulation,riskmanagement,disputeresolutionandbiddingtothe

functionofcommercialmanagement.Theyalsoindicatethatcommercialmanagementcanentail:price

formulation, claim formulation, payments, cash flowmanagement, creationofoutlineproposals, cost

management, cost value reconciliation, value management, sub-contracting administration,

procurement strategy, and acquiring approvals and permits. Further, the results reveal that the

commercialmanagementfunctionprovidessupportto:marketing,supplychainmanagement,business

plan development, sales, estimating, quality assessment, development appraisal, supplier evaluation,

image/reputationmanagement,performancemeasurement,andinnovationmanagement.

Hierarchicalclusteranalysiswasappliedtothe28functions,initiallyheldtocontributetotheroleofthe

commercial manager, to identify relatively homogeneous groups of activities. The resulting clusters

weretheninterpretedandlabelled(seeFigure1.1);thisgraphicalrepresentationwasheldtorepresent

genuine clusters. Figure 1.1 also shows, on an industry sector basis,whether these functions formed

partof their job, theyprovidedsupportor counterbalance to the function,orhad littleornocontact

withthefunction

Thethreeindustriesshowbothsimilarityanddivergence.Contractmanagement,comprising:contract

negotiation,contractformulation,andriskmanagement;andthefunctionsdisputeresolutionand

biddingweregenerallyconsistentlyseenasformingpartoftheroleofthecommercialmanager,

althoughbiddingandcontractformulationwerenotseenasbeingquitesoimportantinthe

constructionsector.Thelattercouldbeexplainedinpartbythegreatertendencytousestandardised

contractsinconstructioncomparedtotheothertwosectors.

Anotherareathatshowedconvergencebetweenthethreeindustrieswasresearchanddevelopment,

whichwasstatedbyvirtuallyalltobeoutsidetheremitofcommercialmanagement.Indeed,thesimilar

areasofopportunitydevelopment(inparticularmarketing,image/reputationmanagementand


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developmentappraisal)andinnovationmanagementwereconsistentlyviewedasareaswhere

commercialmanagersprovidedasupportrole.Thus,whilstalltheseareimportantforthesurvivalof

commercialfirmsincompetitivemarketsand,therefore,justifiablycouldbeclaimedtobeanintegral

partofcommercialmanagement,theyarenotprimarilydealtwithbycommercialmanagers.

Areasofparticularinterestinwhichthethreeindustriesdifferincludebidmanagementandfinancial

management.Bidmanagementwasseenasapartoftheroleofacommercialmanagerinthe

Defence/Aerospacesector,whereastherewasatendencyinConstructionandTelecoms/ICTtoviewbid

managementmoreasasupportfunction.Financialmanagement(comprisingfunctionssuchascost

managementandcostvaluereconciliation),valuemanagementandsuppliermanagement(particularly

sub-contractingadministration)wereseentobeintegralpartsoftheroleofthecommercialmanagerin

theconstructionsector,whileinTelecoms/ICTandDefence/Aerospaceinvolvementintheseareaswas

generallyinasupportcapacity.Again,thiscouldbeexplainedbypeculiaritieswithintheindustry

sectors.

Finally,therewasagenerallackofagreementbetweenthesectorsontherolecommercialmanagers

takeconcerningthetasksofestimatingandacquiringapprovalsandpermits.

Figure1.2illustrateshowthefunctionofcommercialmanagementislinkedtotheoverlappingareasof

‘integratedsystemsandservices’and‘projectprocessmanagement’.Likewise,itindicatesitsassociation

with the areas of ‘commercial solutions’ and ‘opportunity development’. Importantly, it shows the

centralityofriskmanagement,valuemanagementandsupplychainmanagementtothemanagementof

projects.

Interactions

Commercialmanagementisconcernedwithmanaginginterfaces.Overall,themostfrequent

interactionswerefoundtobebetweenthecommercialmanagerandspecialistdivisionsintheir

organisation,theclient’srepresentativeandtheclient.Thoughdifferencesininteractiondidoccur

withintheindustrysectors,forexample,intheTelecoms/ICTsectorinteractionwassignificantlymore

frequentbetweencommercialmanagersandspecialistdivisionsintheirorganisationbutlessfrequent

withtheclient'srepresentative,endusersandtheclient.Further,intheconstructionsector,interaction


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wassignificantlymorefrequentwithsubcontractorscomparedwithboththeTelecoms/ICTand

defence/aerospacesectors.

Workingdefinitionofcommercialmanagement

Keepinginmindthattheabovediscussiondealsexclusivelywithprojectsandtheproject-based

organisation,amodifieddefinitionofcommercialmanagementcanbededuced:

“Themanagementofcontractualandcommercialissuesrelatingtoprojects,fromproject

inceptiontocompletion.”

Thisdefinitionentailsspecificactivitiesandfunctionsaswellaswholeprocesseswithinindividualfirms

additionaltotheprojectorganisationsthattheymightbepartof.Also,implicitinthisdefinitionisan

acceptanceofthecentralityofriskmanagementtocommercialmanagement.

Professionalstandingofcommercialmanagers

Predominantly,inthestudydescribedabove,thecommercialmanagersacrossallthreesectorsheldat

leastafirstdegreewithaproportionholdinghigherdegrees.Intheconstructionsector,thereisa

tendencyforcommercialmanagerstobecorporatemembersoftheRICSand/ortheCharteredInstitute

ofBuilding.Outsideconstruction,however,thereisadistinctlackofprofessionalrepresentationand

recognition.Whilethereareanumberofaspiringinstitutionsandassociationsactiveinthisandin

relateddisciplines,theseapparentlyhavenotappealedtopractisingcommercialmanagerswithinthe

targetedorganisationsofTelecoms/ICTandDefence/Aerospace.Thislackofstatusforcommercial

managementledablue-chiptelecommunicationsorganisationtoapproachaleadingUKuniversityin

2000todevelopanMScprogrammeinCommercialManagementandmorerecentlytoestablishan

MBAforCommercialExecutives.Boththeseprogrammeswerethefirstoftheirkind.

Notwithstanding,itwouldappearthatweareobservingtheembryonicstagesoftheprofessionalizationi

ofthecommercialmanagementfunction,whichparalleltheemergenceofprojectmanagementinthe

laterpartofthe20thcentury.Whilstthereissomedebateoverwhatconstitutesaprofession,the

importanceofaprofession’sknowledgebaseiswidelyacknowledged(Eraut,1994).Moreover,asEraut


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(1994)states,thepowerandstatusofprofessionalpersonnelisconsiderablyinfluencedbythedegree

towhichtheycanlayclaimtouniqueformsofexpertiseandthevalueplacedonthatexpertise.

Frequently,matureprofessions,toprotecttheirposition,seektodefinethemselvesintermsoftheir

coreskills/competenciesand/orknowledgebase(see,e.g.RICS,1992:whichsoughttoestablishthe

coreskillsandknowledgebaseoftheCharteredQuantitySurveyor).Likewise,projectmanagement

associations,forexample,theInternationalProjectManagementAssociation(Caupinetal.1998),the

ProjectManagementInstitute(PMI,2000)andtheAssociationforProjectManagement(Dixon,2000),

havedefinedbodiesofknowledge(BOK),inordertoestablishwhataprojectmanagementpractitioner

shouldbeknowledgeablein(i.e.asetofprofessionalcompetences)tounderpinprofessional

certification.However,thepurposeofBOKsextendsbeyondprovidingabasisforestablishing

competencetopractice.AccordingtoMorris(2001),theyshouldreflectthepurposeandprovideaset

oftopics,relationships,anddefinitionsofaparticulardomain,reflecting,therefore,adistinct

professionaldiscipline.

Anobviousdevelopmentwouldentailthecreationofagenericinstituteorassociationtorepresent

commercialmanagers,disseminategoodpracticeandcertifycompetencytopractice.However,these

formalstructuresmightperhapsrepresent19thcenturyidealsmorethancurrentaspirations.Possiblya

moreprogressiveresponsewouldbetoutilisetheInternettoestablishlooselybased‘communitiesof

practice’(LaveandWenger,1991)asavehicletodisseminategoodpracticeandcuttingedgeresearch

pertinenttocommercialmanagers.Intermsofdevelopingaresearchagendatofurtherunderpinthe

developmentofcommercialmanagementasadistinctdiscipline,thereisaneedtoco-ordinatethe

disparatestrandsofresearchcurrentlybeingundertaken.

AIMSOFTHISBOOK

Projectmanagementliteraturealltoooftenconcentratesonthesingleprojectwithitsestablishedgoals

andtime-line.Thisbookisanattempttoaddressthisimbalancebydrawingattentiontothevastarray

ofcommercialissuesthatcompanieshavetocontendwithbefore,duringandafterbeinginvolvedin

projects.Theseissues,whicharesometimesembedded,havetobeunderstoodandproperlymanaged,

regardlessofwhetherornottheorganisation‘owns’theprojectorismerelycontributingtoitasa


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minorsub-contractor.Thus,thebookaimstocontributetothegrowingliteraturethatacknowledges

thenecessityofwideningprojectmanagementresearchtoalsoincludethemanagementofproject-

basedorganisations,project-basedindustriesandevenproject-basedcareers.

Whilecommercialmanagersandthefunctioncommercialmanagementevidentlyexist,sofar,noattempt

hasbeenmadetodefinethepracticeorestablishanunderlyingtheory(ortheories)ofcommercial

management.Thisbookaimstopresentthecurrentstateofknowledgeconcerningthecommercial

managementofprojects.Toovercomepotentialpersonalitybias,attentionwillbedrawnawayfromthe

individualcommercialmanagertoinsteadfocusoncommercialmanagementasadiscipline.Thisis

basedonthebeliefthatthecommercialmanagementfunctionwillbeundertakenirrespectiveofthe

titlesheldbyindividualsintheprocess.However,itseemsquiteobviousthattheefficiencyandsuccess

withwhichthetasksareundertakenisdependentonthelevelofimportanceaccreditedtothem.Itmay

wellbethatthedesignationofanindividualwiththetitleofcommercialmanagercouldimproveonan

organisation’sperformance,butitwouldbenaïvetoexpectonepersontobeabletomasterall

functionsandtasks.

Eachchapteraddressesaspecificareapertinenttocommercialmanagement.Thepurposeisnotto

providedetaileddescriptionsofhowtogoaboutthesespecifictasksthisisnotaprescriptivetextthat

providesthereaderwithdo’sanddon’tsorlengthyexplanationsoftechniquesandprocedures.Instead

thebookfocusesonclarifyingandreviewingthecurrentunderstandingbaseduponexistingresearchin

awiderangeofcommercialissuesrelevanttotheundertakingofprojects.Togetherthechapters

constituteastepinthedirectionofsystematicknowledgebuilding,thatis,asteptowardsthecreation

ofabodyofknowledgeandaresearchagendaforthedevelopmentofanunderliningtheory(ortheories)

relevanttocommercialmanagementpractice.

SCOPEANDCONTENT

Evidentlyitwouldnotbepossibletodojusticeinonebooktoallcommercialissuesthatanorganisation

faces.Therefore,whileitisacknowledgedthatcommercialmanagerscanbefoundinadiversityof

industries,thebookin-linewiththeresearchinitiativereportedinthischapterislimitedinscopeto

commercialmanagementpracticeinproject-basedindustries.Thus,itdealswithfirmswhosework


15

consistsofundertakingcertainactivitiesonprojectsor,iftheorganisationsaremainlyoperationally

oriented,undertakingprojectsasanimportantpartoftheiroverallactivity.

Asstatedintheintroductiontothischapter,thepositiontakenwithinthebookisthatofthesupplier

withinbusiness-to-business(b2b)relationships.Therefore,involvinginterfacesbothupanddown

streaminthesupplychain.Theseinterfacescanbedividedintofourgeneralcategories,dependingat

whichlevelofabstractiontheyarise:

• Theexternalmilieu

• Thecorporatemilieu

• Theprojectsmilieu

• Theprojectmilieu

Whileitisacknowledgedthatvariousspecialistresearchdisciplinesmayuseotherterms,thestructure

ofthebookisbaseduponthisrudimentarycategorisation.Thechapterpresentedundertheseheadings

representcoreareaswithinwhichcommercialmanagersareactive.Itcanbearguedthatcertaintopics

couldequallybeattributedtoseveral,ifnotallofthelevelsofinteraction,forexample,theareasof

trustanddisputeresolution.However,wehaveattemptedtoplacethediscussionofeachareawithin

thecategorymostapplicabletotheexpositionprovidedbytheauthors.

Externalmilieu

Allcommercialorganisationsaresubjecttoanexternalenvironmentwithinwhichtheyhavetoabide,

themostapparentbeingthelegalandregulatoryframeworkinwhichorganisationsoperates.This

categorydealswiththeinterfacesbetweentheorganisationandtheenvironmentwithinwhichitis

active.Thiswillinclude,forexample,purchasers,directandindirectcompetitors,andsuppliers

(subcontractors).Threespecifictopicshavebeenselectedforfurtherexplanation:

• Competition

• Culture

• Procurementsystems


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Corporatemilieu

Allfirmsexistforareason–commonlytomakeprofit.Thus,theywillhaveagovernancestructureanda

strategy(evenifthisstrategyistohavenostrategyatall)toachievethisgoal.Thiscategorydealswith

theinterfacesbetweentheorganisation(atacorporatelevel)andboththeprojectsmilieu(the

environmentwithinwhichindividualprojectscollectivelyresidewithintheorganisation)inwhichitis

activeandexternalmilieudescribedabove.Fivespecifictopicshavebeenselectedforfurther

explanation:

• Corporategovernance

• Strategy

• Marketing

• Trust

• Outsourcing

Projectsmilieu

Thiscategorydealswiththeenvironmentwithinwhichindividualprojectscollectivelyresideandthe

interfacesbetweenthecorporatelevelmilieuofanorganisationandtheindividualprojectsinwhichitis

active.Fourspecifictopicshavebeenselectedforfurtherexplanation:

• Managementofuncertainty

• Conflictmanagementanddisputeresolution

• Performancemeasurement

• Valuemanagement

Projectmilieu

Thislastcategorydealswiththeinterfacesatthespecificprojectlevel.Thefollowing5specifictopics

havebeenselectedforfurtherexplanation:

• Projectgovernance


17

• Contractmanagement

• Bidding

• Purchasing,logisticsandsupply

• Costvaluereconciliation

Whilstwearguethatallthechaptersseektopresenttopicsandgenericissues,relevanttocommercial

managementacrossallproject-basedorganisationsandindustrysectors,mostofthechaptersare

orientedtowardsconstructionandusethisindustrytoillustratespecificpoints.Wemakenoexcusesfor

thisasconstructioncouldlayclaimtobetheoldestproject-basedindustry.Indeed,projectmanagement

literatureingeneralisheavilyinfluencedbystudiesundertakeninthisindustry.

CONCLUSION

Thisintroductorychapterhasendeavouredtovalidatecommercialmanagementasadiscretediscipline

withinproject-basedorganisations.Ithasoutlinedthecontextwithinwhichcommercialmanagers

operateanddefinedtheterm‘commercialmanagement’andthejobtitle‘commercialmanager’.

Further,ithascomparedandcontrastedtheroleofcommercialmanagersfromarangeoforganisations

andacrossindustrysectorsasafirststepindevelopingaBodyofKnowledgeforCommercial

Management.Whiledifferencesinapproachandapplicationbothbetweenandwithinindustrysectors

havebeenestablished,sufficientsimilarityandsynergyinpracticehasbeenascertainedtoidentifya

specificroleofcommercialmanagementinproject-basedorganisations.Finally,ithassoughttopresent

arationaleforthescopeandcontentofthefollowingchapters.

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