Organizations that implement contract management software evaluate the success of the initiative in several ways:
- reporting on contracts and obligations processed
- elimination of known problems and bottlenecks
- technical roll out of functionality
- adoption of the system by departments and individuals.
Companies may even develop a fine-grained ROI model to show a bottom line where contract management software more than pays for itself in money, time, opportunity costs, and risk avoidance.
Analysts can also ask a simple question: “Who benefits from using contract management software?”
It is valuable to ask this question because it requires analysts to put themselves behind the desks of professionals who play vital roles in how contracts (and through them, the company’s business) are managed. This approach can suggest what processes and work practices to target for improvement through automation in the future. It also reminds analysts of the value that contract professionals can bring to the business once they are freed by software from routine tasks.
So, who benefits? Here’s our take:
- Contract Managers
- General Counsels
Let's have a look at each of these beneficiaries of contract management software.
Contract Managers (and Support Staff)
In many organizations these are one and the same person. The same Contract Manager using a decade of industry experience to frame, modify, and monitor a multi-year construction contract may also be drafting and following physical versions of contract documents. She may be losing part of her work day tracking down which department’s approval the contract is waiting on before it can be sent out. And the printed contract may need to be sent physically via an overnight delivery service, all arranged by the Contract Manager.
Contract management software keeps draft contracts electronically available to all authorized personnel, and through intelligent work flows, alerts legal, finance, and executive departments when it is time to review in-process contracts. Use of e-signature allows contracts to be sent for signature and returned at a fraction of the cost of sending hard copies. And obligation management features can organize and assign responsibility for meeting agreed upon goals to managers of the contract post execution. In short, software consolidates the Contract Manager’s work and makes routine tasks more efficient.
Most important, by making the Contract Manager’s life easier, software has also freed up her time to apply her professional skills to business areas where those skills most matter. As the manager monitors obligations of her company and the counterparty, she knows from experience where a delay in fulfillment can derail a project, or where invoking an contractually agreed upon remediation promptly can serve to keep service providers on their toes.
Here’s an example of efficiency unleashing effectiveness.
The most commonly requested feature of contract management software is expiration and renewal reporting. A simple concept: x number of days before a contract is due to expire or auto renew, the manager receives notice via a dashboard, an assigned task, or an email.
One benefit of such an alert, for sure, is that no Contract Manager has to create, maintain, and remember to check a homemade spreadsheet for expirations. Of more value to the Contract Manager and her company, however, is that the manager’s expertise can now be brought to bear on what the next contract will look like or who it will be with. A manager with awareness of the ever-changing telecom market can ask for revisions to terms of service, flexibility of spend on data, and longer or shorter terms of commitment. With knowledge of plans for growth in her own business, a manager of a purchase agreement can renegotiate quantity discounts she knows her organization can make use of.
In short, the Contract Manager has the time to be more successful in her work, becoming more effective while the software makes contract management more efficient.
In negotiations, the lawyers will always focus on applying precisely the right language to the contract or clause in question. Whether the words on front of them came from a template or via a contract management system may make little difference to them.
But the General Counsel has ultimate responsibility for the language used and its effects on the business. His job is to maintain control of legal language and insure that it serves the best interests of the organization, especially by reducing exposure and managing risk.
Contract management software makes the work of the General Counsel more efficient by bringing together electronically the contracts and approval processes he is responsible for. In an ideal implementation, nothing he needs to answer for should fall outside the system. (Yes, we know we are describing a perfect world where mergers and acquisitions with their highly specialized terms and negotiations won’t cross his desk.)
In particular, routine contracts for licensing, purchasing, sales, non-disclosure, etc., should use contract templates and standard clauses that he has reviewed and approved once, and that the system incorporates into each contract instance. Where the negotiators need fallback clauses or specialized language required only for certain jurisdictions, the General Counsel will have reviewed and approved these as well, and will understand who in the system has permission to apply these clauses. With contract management software that he can trust, the General Counsel is freed from reviewing similar contracts and requests for language changes over and over.
Importantly, with that time liberated, the General Counsel can use the software and his legal acumen to better protect the organization. For instance, legal protections for intellectual property change as domestic law changes and international trade agreements are approved. In a well-designed contract management software, contract metadata and the tagging of specific clauses allows a General Counsel to review all licenses for any IP protection language that is outdated or incomplete , thus creating exposure. Those licensing contracts can be flagged for review before renewal and the counterparties monitored more carefully for compliance. Contract management software also allows the General Counsel to draft, review and approve new language in both contract templates and clauses, insuring that his careful work in this area takes effect for all licensing contracts going forward.
The CEO (or the CFO or CPO) is not usually plagued by inefficiency as she goes about her own work. If a report is needed, the executive assistant will get it done. What worries Executives is the timeliness and reliability of the data.
A Chief Procurement Officer, for example, may want to see spend on a purchasing contract, or a category of such contracts, as well as savings that can be attributed to good management of the contract. If a contract management software allows for reporting on the spend in real time by the contract managers, the Procurement Executive can have accurate real-time data on which to base decisions (to reallocate funding, for example).
In a similar way, a VP of Sales may want to see not only total signed sales contracts (numbers he can usually rely on) but also data on deals in process, that is, contracts that are in negotiation or undergoing review internally. These latter categories can be hard to collect reliable real-time data on, unless his team is using contract management software that reports on contract totals at each stage of their approval process. Certain data on the contracts in the pipeline allow the Sales Executive to speak confidently about hitting his marks for the quarter – or to focus his attention to the departments, persons, or even contract language that may be causing a bottleneck.
Executives have to make decisions. Having contract data to inform their decisions is a matter of efficiency. Having contract data they can trust makes Executives more effective. Contract management software with modern reporting, configurable by the business users and IT, can help them reach decisions with more confidence. Executives can then take risks where they are sure the data supports them, and hold back when they are confident another week will provide more certainty.
Contract Managers, General Counsels, and Executives – in our experience these three groups benefit the most from well implemented contract management software. In a future blog, we will look at the other beneficiaries of this software, including:
- Sales Professionals – who can send reliable contracts and terms to prospects faster and with more confidence in the support of legal and financial departments at the company
- IT Professionals – who, with the right software, can minimize the time they spend configuring and managing a system and more time helping business users create the tools they need to do their jobs even better
- Procurement and Purchasing Professionals – who can promptly access and use the best terms negotiated by the organization for purchasing goods and services
Dermot Whittaker works with Corridor's technology and contract management partners to keep the company focused on current business needs.