I am a huge advocate of content management systems.  I've been helping corporations implement them since the early 1990's.  I am an avid user of them myself for ensuring content is locatable and collaboration on content is facilitated.

When attempting to address the multi-faceted challenges of contract lifecycle management, however, some corporations spend tons of money and tons of time trying to get their content management systems to meet non-content challenges.  The results are a lot of money and a lot of time spent, with lackluster results.  Many folks responsible for this area from both corporate legal and procurement end up feeling frustrated - wondering why after so much money and effort, they are left with many of the same issues they had before.

Having the Right Capabilities for the Right Challenges Makes All the Difference

As with any job - use of the right tools makes all the difference.  Have you ever had the experience of trying to cook a stir-fry in a saute pan on a regular burner?  Things kind of steam and it takes a lot longer than it should.  Then you go to a friend's house or a restaurant where they have a burner with really high BTU's and a great wok - The difference is unbelievable.  Same ingredients - and you might be a great cook - but if you don't have the right tools for the job, you just can't get that same stir-fry flavor.  Once you see how stir-fry can be done - it becomes clear that you need REALLY HIGH HEAT and a WOK, built for this kind of cooking.

The same holds true for Contract Lifecycle Management.  To determine what capabilities you need, you first have to identify what challenges and pain points you really need to address.  And here's a tip - the content portion is just that - a portion - and  maybe the more straightforward portion at that. 

Contract and Vendor Lifecycle Management is a Web of Business Activities (Processes) 

When we think about management of the entire contract lifecycle, which by the way is naturally connected to the management of the entire vendor lifecycle, we begin to realize the biggest challenges lie in the organization of communications and work (of both people and back-end business systems) cross-functionally.  Why is the contract needed, what vendor is it related to, what are the financial implications of the agreement - how will the financial authority policy be applied, what procurement processes need to be coordinated, etc.

So while everyone has been focused on those documents, the organization has been running around trying to manage them - literally.

To address the challenges, and truly eliminate the pain requires a new 'process-driven' approach.  In the upcoming series of blogs, we will explore how the application of this approach will transform your contract and vendor lifecycle management, providing your organization the agility, efficiency and corporate governance you've been seeking for so long - perhaps just in all the wrong places.

A contract is not a point in time event.  It has a lifecycle --- it must govern a relationship over a period of time despite the fact that it is by definition a static document.  Over time, a lot of things can change.  This change, or variation from an expected outcome, is risk, and is why effective contract risk management becomes so important to corporate counsel, e-procurement and contract management project teams in organizations. 

The usual tendency is to see risk negatively, or as the likelihood that returns will be less than expected.  This in turn leads to an almost automatic desire to minimize or suppress risk rather than manage it.  Exacerbating this is the fact that time does actually increase risk (because the longer your time frame, the more stuff that can happen.)

Avoiding Risk is a Good Thing Right?

What’s wrong with minimizing risk?  Sounds like a good thing, right?  Not necessarily.  Suppressing risk can be very expensive to organizations and produces lower returns.  A simple example would be a biotech procurement manager ensuring supply of a key input by contracting for twice the required quantity.  In this instance, the risk of production line being shut down for supply shortage is minimized, but cost is doubled, and margins are reduced. 

Effective contract management embeds risk assessment so that corporate counsel, procurement and contract administrators can move from just monitoring compliance to protecting the organization from substandard returns.

We Recognize the Usual Suspects but Miss the Real Culprits

Each function in an organization can lay out a litany of risks based on their frame of reference.  Identifying and then assessing the risks outside of one’s department, however, is much more difficult.  In addition, we tend to see the demons we know best more clearly and more frequently.  So while the finance team can provide a complete analysis of the effect of interest rate changes corporate investments during the life of the contract, they might not catch the impact a strike at supplier’s plant might have on production, costs and margins.

Managing Risk Cannot be Done in a Vacuum

Dynamic contract management constantly pushes the firm to recognize a wider range of external factors with blindsiding potential. This cannot be done effectively in a silo or a vacuum.   In our procurement example, while the finance group might be pleased with volume discounts gained from buying larger quantities, the production team might reveal storage and spoilage risks associated with the key input, making the “buy double” risk minimization strategy an even poorer business decision. 

Good business process underlies dynamic contract management by:

-Bridging functional walls within organizations
-Enabling informed collaboration by tearing down information siloes
-Removing blinders to full scope risk analysis

BPM and Supply Chain Risk

The most effective contract management systems ensure that risks are accurately and systematically identified and assessed.  They do this by pulling business intelligence real-time from different systems within the organization for cross-functional, collaborative analysis.  If your contract management system doesn’t do this, the default is probably risk minimization, with all the inherent costs, duplications and inefficiencies that come along with it.  And right around the corner is the event you never saw coming…

Fresh from salvaging a technology project sale bedeviled by a series of document errors, near misses on deadlines and late nights, it’s become apparent that technology, e-procurement expertise, contract management plans, deep pockets, or even possession of all of these things, is not going to save us; not now, probably not ever, from recurring (and expensive) business issues.

So what will? Three of the most basic tenets of effective business process management.  This example highlights them, or more accurately, their omission, in action.

Should Have Been Easy, Right?

This particular sale included pretty standard hardware and services for a long-term client.  We do the professional services part, and resell the equipment from Fortune 500 vendor partners and as in this case, occasionally enlist a top-tier financial services company for lease servicing. Flanked by experienced partners with vast resources, specialized skills in contract management services and enviably advanced technology, this integrated solution sale should have been a breeze.

Instead the entire process was wracked by a bewildering tangle of  incorrect prices, confusion on terms, document rewrites, numerous phone calls, chains of e-mail, the risk of missed deadlines and most importantly, a potential loss of trust and client goodwill.

Lesson One:  “I Found the Quote in My E-mail.” – The Right Information

It’s the last week in the quarter, and we’re energized for our client, having secured for them an exceptionally favorable interest rate for a multi-year lease on the servers and storage equipment for this project. We submit the standard VAR documentation to the equipment vendor who owned the next step in the process; coordinating with the financing company to get lease documents prepared for client signature.

The next morning we receive an e-mail from the client telling us how very pleased they were with the lease price of the equipment, which was several thousand dollars less than what we had actually quoted, and to my horror, far below our cost.  How did this happen?

So begins the cycle of calls and e-mails for damage control and to rectify the error. We discover the finance company received an incorrect price quote from the hardware vendor.  When I ask the vendor’s sales consultant where she got the errant quote, she tells me it was “… in an e-mail I had received in the beginning of the month.” Turns out, this multi-billion dollar equipment manufacturer’s processes over-rely on e-mail correspondence.  Sales coordinators and vendor contract management team members access quotes that reside in their company e-mail, in many cases after subsequent equipment reconfigurations and pricing negotiations have occurred.

Quarter-end bonus quotas put additional stress on this inherently flawed process, as consultants process higher work volumes and step in for other team members to facilitate sales finalization.  Company e-mail has essentially become the system of record for quotes, confirmations, purchase orders and other key documents.  There is no single content repository, no point-in-time view of quote history or modifications and no direct way for anyone outside of the e-mail chain to access critical documents for review or verification (or even understand where the process finds itself). The process ensures that the wrong people, with the wrong information are making key financial decisions for multiple parties (not just themselves, but the reseller, leasing company and the end-customer)!  Talk about liability, not to mention WASTE!

Lesson Two – “I Only Checked The Specs.” Having the Right People Engaged in the Process

Okay, so the lease documents are calculated with incorrect information.  Surely the next-step process owner will catch the mistake. And they would have --- if the right person actually was involved at the next step – but NOPE – doesn’t happen. Unfortunately, rather than getting the lease documents concurrently to finance, VAR purchasing and project management teams to verify them against customer purchase orders, sales requisitions and project plans, the unoptimized workflow causes the documents to advance to systems engineering. The infrastructure team reviews equipment specifications, because after all, that’s their only responsibility, right?  Well, that all looks good, so guess what happens next? THEY FORWARD THE EMAIL CHAIN TO THE END-CUSTOMER WITH ALL OF THE WRONG PRICING INFORMATION! 

Accurate information must be available to all the right people at each process step – and, of course, the right people have to be pulled into the process at the right time!  Workflow routing (or in this case, email forwarding) is NOT business process management.  Effective BPM starts with well-defined, optimized and risk-aware process definition, incorporating automated processes with human interaction junctures.  Intelligent BPM embraces the collaborative and sometimes iterative nature of complex, multi-stakeholders processes, which are facilitated through carefully constructed business rules that require simultaneous review, multiple sign-off and step reversion when necessary.

Lesson Three:  “What Delivery Charges?” – Why Timing Matters

Hours of damage control and several reworks later, including painstaking manual review at each process step to insure accuracy, we finally succeed in assuaging customer doubts and securing a set of corrected, verified and complete documents. As owner of the next process, we initiate purchase order submission to the distribution center, which prompts a call inquiring if we or the customer should be billed for delivery charges.  Wait, what delivery charges?!  These costs were waived as part of the initial price negotiation, but notification of this had not arrived at the distribution center yet, creating a narrowly averted shipping delay which would have had further negative implications for every stakeholder in the process, up to and including our client. 

The right information available to all process owners at the right time in each process step.  It sounds simple. It IS obvious – but amazingly it often doesn’t happen. Technology gives us very powerful tools to leverage and workflow can help automate the process, but effective business process management is the lynchpin; the system transforming all the pieces into a delivered solution that differentiates the vendor and delights the customer.

For most corporate law departments, contract management eats up a staggering amount of time. Why? I suspect it’s because they’re not adequately prepared for everything that contract management entails.

Contract management requires much more than simply creating contracts, of course. It’s a multi-stage process that extends beyond the task of actually assembling a document. Here are the stages I believe every good contract management process should encompass:

1. Request. During the request phase, your end users will submit the details of what they want the contract to include. This phase always results in significant wasted time especially if it is paper-based. End users fill out forms with the details of their desired contracts, and attorneys then have to enter the information manually into a corporate data system. These forms are often riddled with inconsistencies and inaccuracies that take time to correct. 

2. Contract creation. With guidelines in hand from the contract request, attorneys will then draft the actual contract. The real value-added work is in writing the parts of the contract that apply to this particular business relationship. However, there will also be parts of the contract that contain standard clauses. Unfortunately, some corporate law departments don’t maintain a central clause repository, but instead attempt to re-write these clauses each time, or simply pull them from the last contract they can find on the network. Both approaches waste time and increase the risk of inaccuracy.

3. Approval. Once the draft of a contract is complete, the approval process can begin. Here, attorneys will route the contract to different departments such as finance, procurement, manufacturing, and HR. If corporate law departments don’t use a centralized solution to manage this routing, they’ll have little visibility into where a contract is at any given moment. Is the CFO holding onto it? Has the CIO even seen it yet? More emails and more phone calls mean more delays – and possibly a missed opportunity for the business.

4. Amendments and Change Orders. During the life of a contract, business circumstances typically change. The change order process often includes end users who provide incomplete information about what they want to see changed in the original contract, and attorneys must again scramble to fill in the gaps – taking time away from their strategic work.

5. Termination or renewal. When contracts approach expiration, attorneys will have certain tasks to perform. But unless attorneys have constant visibility into expiration dates, and receive reminders that these dates are approaching, the tasks around termination and renewal are often rushed – and rushed work is poor-quality work.

Corporate law departments can enhance all stages of cradle-to-grave contract management by following 10 simple best practices. Find out more in Elegrity’s free white paper, “Ten Best Practices for Efficient Contract Management.”

If you’re trying to improve your contract lifecycle management process, there are a number of ways you can go. Just by examining your current workflow, you can probably find some low-hanging fruit for improvement – a few inefficiencies that you can eliminate simply by having a meeting and improving communication.

But if you’re really serious about revamping your entire contract management process for optimal efficiency (and bottom-line savings), consider engaging a firm that provides contract management services. Your service provider can take an objective look at your current workflows, figure out where the problems lie, and craft a plan.

What should you look for in a contract management services provider? Here are six thoughts:

1. Deep understanding of business process management (BPM). Your partner should be much more than a mere IT consulting firm that can implement software. As you’re interviewing a potential provider, make sure they have experience working closely with companies to understand their business processes and implement technology that enhances those processes.

2. Deep understanding of the contract lifecycle process. Some providers will present themselves as business process experts. Few actually understand the contract lifecycle process that occurs in a corporate legal department. Do you really want to have to educate your partner in the nuances of legal contracts?

3. Attention to how you run your business. Don’t be fooled by the promise that if you implement a certain workflow or BPM tool, it will give you better business processes than the ones you already have. Excuse me, but your processes are your processes, and you shouldn’t have to apologize for them! Your software should conform to you – not the other way around. Only work with providers who understand this.

4. A focus on user adoption. This is sort of a corollary to the previous point. Make sure your partner understands what kind of technology your employees are used to, and how willing they are to change. Evaluate the user-friendliness of what your provider is proposing. Otherwise, you may end up with a theoretically great solution that nobody uses – and what good is that?

5. Willingness to work with your current technology. Over the years, you’ve invested thousands of dollars in your existing IT infrastructure. These systems hold enormous volumes of data. Any BPM systems you add from now on should interface and exchange information with them, eliminating the need for manual data entry during the contract process.

6. Willingness to work alongside your team to transfer knowledge. You want to strike a balance here. On the one hand, you don’t want your implementation to place an undue burden on your company’s IT staff. Your contract management services provider should be capable of doing the bulk of the work. On the other hand, you’ll want your partner to involve your IT staff just enough to pass along knowledge that will help them maintain and support your new BPM system in the future.

In short, there’s so much more to “getting it right” than just implementing software. Want to find out more about the proven process Elegrity uses in providing contract management services to clients? Download a case study on how Elegrity helped a growing biopharmaceutical company streamline contract management.

In a previous post, we discussed the idea of launching a contract management project that trims the fat from your contract lifecycle. The potential time savings there are impressive. We mentioned that it’s best to work with a consulting partner that can apply best practices to help you find the low-hanging fruit for rapid improvements in your contract process.

What are these contract management best practices? We’re about to explain four of them, and tell you how to get another six.

Contract Management Best Practice #1: Standardize your process.

The typical company’s contract “process” is actually an ad hoc affair. Oh, sure, the legal department tries to police contract policies and procedures, but they do it manually. Meanwhile, users contact the legal department frequently for basic information, clarifications, and status updates. All of this adds up to a flurry of time-wasting calls and emails.

As contracts make their way through the organization, operational and legal teams must manually enter the same information multiple times, while also correcting whatever inconsistencies and inaccuracies they’re able to catch. More wasted time.

You can avoid this by codifying all your contract policies and procedures into a self-enforcing system that interfaces with your other business systems.

Contract Management Best Practice #2: Distribute data entry to the most logical person.

Too many attorneys waste too much potentially productive time typing missing information into business systems. This should have been the job of whomever requested the contract in the first place.

By putting clear expectations in place for your requestors, you can ensure they’ll provide certain essential pieces of information before your legal team even sees their contract request. You’ll eliminate the need for your legal team to dig for this information – and you’ll ensure that the contract lifecycle will go smoothly and painlessly for everyone involved.

Contract Management Best Practice #3: Build compliance management into your process.

Most organizations take great pains to document their compliance policies. Most organizations then leave enforcement of these policies up to manual methods. See the disconnect?

Even the most conscientious legal department will eventually let compliance issues slip through the cracks unless they have an automated workflow solution that self-enforces policies. In an automated system, your policy won’t just be documented—it will actually run the process.

Contract Management Best Practice #4: Create an online repository for contracts and frequently used clauses.

Why reinvent the wheel each time you include a liability or termination for cause clause in a contract? Write up these clauses and put them in a central clause library. Then, populate these clauses into your contracts automatically. You’ll save countless man-hours per year and free up much more of your attorneys’ time to focus on the unique portions of each contract.

Get Six More Contract Management Best Practices

Did you find these best practices helpful? If so, we’d like to offer you six more. Just download Elegrity’s free white paper, “Ten Best Practices for Efficient Contract Management,” and learn how easy it can be to transform your contract management process from a time-sink into a highly optimized workflow.

Feeling pressure to deliver greater value to your organization? You could work more hours – and encourage your colleagues in the corporate legal department to do the same. Or, you could let go of staff.

Doesn’t sound appealing? Well, then focus on the low-hanging fruit. Most corporate legal departments have at least a few areas in which they can afford to tighten up their business processes. Make a few simple changes, and you could noticeably boost your company’s bottom line – without burning yourself out or losing headcount.

One such area for improvement is contract management. Launch a contract management project that focuses on optimizing your contract lifecycle, and you’ll be surprised at the results.

The “Before” and “After” of the Contract Lifecycle

If you haven’t optimized your contract management lifecycle, then chances are, it’s needlessly taking up the time and bandwidth of your in-house attorneys. I’m referring to the pointless busywork that often plagues the contract process. End users call or email for status updates. Attorneys spend hours filling in information that the contract requestor should have provided. This tedious manual work distracts attorneys from the high-value work they should be doing.

How can your contract management project make life easier for your attorneys? I like to look at it in terms of “before-and-after”:

Before: Too much manual “grunt work” for attorneys.

After: Fewer phone calls and emails from contract requestors means more time for high-value, high-risk work.

Before: Low attorney morale.

After: Less attorney data entry and less mandatory overtime leads to higher retention rates.

Before: Constant contract backlogs.

After: Shorter turnaround times. Fewer complaints from end users and their managers. An overall higher opinion of the corporate legal department.

Before: Lack of visibility into the contract pipeline.

After: A real-time view of how many contracts are under review, and of how many contain active risks or are coming up for termination.

Before: Difficulty mitigating risk.

After: Legal policies are now embedded in how the request information is gathered and routed. You no longer have to manually “police” your policies – they are self-enforcing. At the same time, Legal gets to use the bandwidth they recovered through your new efficiencies to spend more time scrutinizing contracts for problematic items, averting problems before they happen.

Get Serious About Enhancing Contract Management

If you’re serious about launching a contract management project that trims the fat from your contract request process, it’s best to work with a consulting firm that knows where the low-hanging fruit is – and what the best practices are for earning a quick payback. Elegrity has specialized in this area for 15 years. Learn more about our approach in a free e-book, “Enhancing Contract Management in a Tight Economy.”

Want your next corporate legal technology project to succeed? Here’s a tip: don’t think of it as a technology project. Think of it as a business project that just happens to involve technology.

Oh, your peers may tell you about this or that “must-have” piece of software. They’ll urge you to implement a certain workflow solution, BPM platform, or contract management application. And if you do purchase and implement these technologies, you’ll probably see an initial spike in the productivity of your corporate legal team.

But then things are going to get real.

These new technologies may not support the unique ways you do business. You may find it cumbersome to reengineer business processes within the system. And there will be gaps and glitches that you never quite fix.

There’s a reason for this. Most technology platforms used by corporate legal departments are designed based on legal industry best practices. In some ways this is a good thing, because it means you’ll be able to leverage some of the efficiencies other companies have achieved.

But ask yourself: does your company do business in exactly the same way as anyone else?

Going Beyond Best Practices

Best practices aren’t the ultimate goal – they’re simply a guideline. Your goal with a new legal technology platform will be to tweak built-in best practices to support the way you work.

For example, consider the ways in which your contract management process will differ from that of other companies: 

• Required information. You’ll need your technology platform to collect the exact pieces of information you want end users to provide on contract requests. This information may be highly specialized to your industry and business model.
• Systems of record. Data such as vendor addresses and cost center information is most likely scattered across your enterprise. The standard language you require for contracts may be stored in a content management system. To increase your department’s accuracy and reduce the need for manual data entry, you’ll need your contract management solution to tap into all of these systems at just the right stage of the contract management process.
• Approvals. Your contract approval process will most likely involve approvers from multiple business units, and extensive input from the financial organization. So, you’ll need to route each contract request to a slightly different group of people based on contents and subject matter.
• Compliance policies. Compliance management too often slips through the cracks because legal departments leave enforcement up to manual methods. You need a system for automating enforcement, so that the detailed policies you’ve documented won’t be violated.

More on Enhancing Contract Management

As you can see, simply implementing a content management system or workflow automation system isn’t enough. The ideal solution for your in-house legal department will integrate your workflow with various other business systems across your company. Read more about the challenge of enhancing contract management in our free white paper, titled "Ten Best Practices for Efficient Contract Management" . 

Morale of in-house corporate legal teams seems to be at an all-time low. It’s not hard to imagine why.

Legal teams are constantly being told to “do more with less.” Now, that mandate is hardly limited to the legal sphere. Virtually every job function in every type of organization is under marching orders to cut costs nowadays. But I believe the consequences of this cost pressure are especially demoralizing for corporate legal teams.

Here’s why:

1. Legal teams are bogged down with manually intensive tasks. Imagine spending three years and countless dollars putting yourself through law school. Now imagine spending the bulk of your workday chasing down information that end users didn’t include in their contract requests. There’s a disconnect there. When attorneys spend too much time on low-value tasks, they have limited bandwidth to focus on the high-value, high-risk work they should be doing. This is a lose-lose. The attorneys feel frustrated and under-utilized (and eventually under-valued), and the corporation loses out on getting the real value from their knowledge and skills.
2. Legal teams are facing a backlog of contracts. Today’s increasingly complex business environment is generating a greater volume of work for corporate attorneys – and every team has its capacity limits. When turnaround time in Legal begins to lag, end users and their managers invariably begin to complain to executives. The legal department will then feel intense pressure to produce. It can be exhilarating to work at peak capacity for a week or two; it’s exhausting to do it for months on end.
3. Legal teams don’t have the tools they need to do their jobs effectively. Most corporate legal software doesn’t offer the end-to-end visibility and control that legal departments need to run streamlined, automated contract processes. Attorneys are thus forced to patch together and manage manual processes. They know they’re working inefficiently, but there’s little they can do about it.

I hardly need to mention the retention risk that overworked, under-challenged attorneys present. So how can we turn things around?

Is Outsourcing Still the Answer?

Until recently, many legal departments would have addressed these issues by outsourcing some of their workload. But more and more companies are now asking Legal to take work back in-house as part of corporate cost-cutting initiatives. So, while outsourcing of low-level legal tasks (such as e-discovery) may still be an affordable option for some legal departments, companies are shying away from the typically high hourly fees charged by third-party law firms for more strategic legal work.

Savvy general counsels see the increase of in-house work as an opportunity to not only cut costs, but also improve the quality of legal services. In fact, fully leveraging in-house attorneys can give companies a clear competitive advantage.

But how can you get more strategic value – not to mention productivity – out of an in-house legal team that’s already overworked?

Focus on Contract Management Best Practices

Throw your overworked in-house legal team a lifeline by optimizing your contract management process. By doing so, you can:

• Save time and money.
• Reduce corporate exposure to risk.
• Increase end-user satisfaction.
• Free up attorneys to spend more time on high-value work.

Elegrity has identified 10 best practices that most often lead to greater overall efficiency for legal departments. Read them for yourself in the free white paper “Ten Best Practices for Efficient Contract Management.”