Contract Management: Prioritize Business Outcomes Over Tech

The statistics speak for themselves – weaknesses in contracting results in five to 15% of annual revenue leakage, and poor contract lifecycle management is costing companies nine percent of their bottom line. It’s no surprise then that according to World Commerce & Contracting, 81% of organisations have plans to implement contract automation, as they look to better manage their contract estate. 

However, organisations find adoption of contract lifecycle management challenging. There are two fundamental reasons for this, and mainly at the conceptual level. Foremost, there is lack of understanding of this function. Contract management is so much more than just automating contracts. Secondly, perceptions of this function vary. Contract management means different things to different people. For example, some corporate departments are actually referring to legal request management when they talk about contract management, whilst others merely mean digital signature automation. Procurement may be referring to a workflow to manage renewals. These issues make technology selection and adoption difficult.

Contract Management Technology selection

So, rather than focus on the technology or solution to deploy, a better approach is to identify the problem that you are looking to solve. This will help to achieve the desired business outcomes without getting mired in the numerous terminologies and nomenclatures surrounding contract management.

There are solutions on the market that claim to deliver “contract lifecycle management” (CLM). Do take note that true end-to-end CLM isn’t achieved simply deploying a solution – it actually involves a thorough process of standardising systems and processes across the organisation, not just a single department.

Software functionality that supports contract management

The question to ask is, do you need an all singing, all dancing CLM capability right from the start? If the answer is no, then the better approach is an incremental approach to CLM adoption – or else, you may end up in a more haste, less speed kind of situation where you have deployed the end-to-end solution, but it ends up creating more problems than it solves. Start with deploying a solution that meets your most immediate and imperative needs, then gradually evolve and expand the system by adding other components that form part of the overall CLM capability.

To illustrate, start out by asking, what are the top three business outcomes you want to achieve in the CLM space – immediately, in three years or in any other timeframe. This will enable you to drill down in to the challenges or obstacles that are currently preventing the realisation of those outcomes.

For argument's sake, the desired business outcome may be that you want a streamlined process with complete visibility of all legal requests that come into the legal department. The challenge is that keeping track of all the requests and their progress is difficult because the volume of net new requests every month is in the thousands. So, you determine that immediately, automating the legal request process is a top priority. Rather than simply buying a solution that automates legal requests, review existing processes to understand exactly how many requests are received in a month, which internal clients do they typically come from, what are the workflows for receiving these instructions, how is the work allocated to in-house lawyers, and so forth.

If at the end of this process, you find that instructions are received through a mix of online and emails, with the latter typically residing in lawyers’ inboxes or SharePoint – instantly you will know that first and foremost, you need a single, centralised system and location for all legal instruction requests.

Similarly, once you have this process in place, your lawyers may want a centralised location where all the up-to-date templates and clauses reside, making it easier and quicker for them to deliver against client requests. Alternatively, you might decide that for certain types of contracts, setting up a self-service capability for internal clients through a portal might be a better solution, so that lawyers can focus their efforts on the more high value legal activity.

You get the gist? A gradual approach to CLM adoption will both ensure that the project addresses the business needs, but also lays a strong technology foundation to build upon. As the function matures, you may find that you need to also start introducing different types of solutions across the various phases of a contract’s journey, based on business requirement to create an end-to-end CLM solution. For example, to onboard requests for business, you may need a legal matter management system, but to then take those requests further, solutions such as document management, document automation and workflow automation may prove helpful. Similarly, towards the latter part of process, records management capability may be needed.

Eat the elephant, one bite at a time, goes the adage. This approach will also enable to you to actively track the return on your investment in a quantifiable manner, which in turn will go a long way in supporting future funding for technology projects too.