Recently, we have witnessed a renewed interest for the contract management process in corporate legal departments. The benefits of this function to legal departments are inarguable – it delivers time savings and tangible operational efficiency. Given the variety of contracts that businesses enter into with internal and external stakeholders, suppliers, partners, outsourcers and so on; an automated approach helps manage these documents across their lifecycle – from contract assembly through to termination.
Crucially, the contract management process helps with minimising contractual risk. Legal departments actively manage commercial agreements with third parties; and timely renewals are vital to cost-effectively maximising budgets, pre-empting revenue loss and mitigating regulatory non-compliance. Often, due to the volume of such documents combined with an fluid contract management process, without an automated approach, it isn’t unusual for departments to miss critical deadlines for renegotiations – especially as contracts don’t have the same terminology and language, nor are they always stored in a central location.
Additionally – and a capability that is grossly underutilised – adoption of contract management solutions can enable legal departments to create a self-service offering for individuals and other business departments alike, closely controlled by the legal team to ensure compliance and with checks and sign off processes where required. For instance, legal departments can institute simple processes for employees to follow for straight forward contract renewals with suppliers. Similarly, they can create a central location for the various types of non-disclosure documents that employees and other business departments can help themselves to, as and when needed. Also, the legal department can establish a knowledge management system with content on standard legal advice that employees can refer to as part of their routine activities. Recently, a General Counsel mentioned that much to his chagrin, a sales executive signed an agreement and then asked him to “check it was OK” – after the event, when it was obviously too late. Such situations can be safely avoided.
All this can also help in significantly reducing the ‘helpdesk’ type calls and requests that legal departments are regularly inundated with, thereby allowing the lawyers to focus on the more business critical aspects of their job. This capability presents a huge efficiency and productivity enhancing opportunity to in-house departments, who are constantly challenged by budget cuts and expectations to ‘do more with less’.
This said, contract management isn’t just for legal departments. For example, HR departments can use the same technology to manage employee contracts. Recently, we implemented a centralised contract system for a major broadcasting corporation to streamline the production of employment contracts, supported by digital signatures. The corporation is now able to issue up-to date contracts (no more error prone cut and paste situations), and adapt them to different languages where required, in a fraction of the time it took previously. Noteworthy is that with the digital signature solution, there is a highly effective workflow and audit trail. The agreements can even be signed by recipients on their phones, making the process much easier and quicker. Often, recipients return the contract agreement within a few minutes from when they are issued by the broadcaster.
This capability doesn’t stop with contracts – policy statements, performance reviews, feedback forms and such, can also be streamlined. Finance departments can automate the management of insurance policies, service level agreements and policy documents. Similarly, Procurement can manage their supplier contracts and proposals, renewals and negotiations with ease.
So, perhaps this presents a good opportunity for in-house legal departments to drive the use of their legal technology into other business departments too? It’s worth a consideration!
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FAQ
The six contract management processes typically include contract initiation, contract development, contract negotiation, contract execution, contract performance and control, and contract closure. Each of these steps plays a vital role in ensuring that contracts are effectively managed throughout their lifecycle to achieve successful outcomes for all parties involved.
The process flow of contract management typically starts with contract request and initiation, followed by contract drafting and negotiation, then contract approval and execution. This is followed by contract monitoring and performance, and finally contract renewal or termination. Each step in the process flow is crucial for managing contracts effectively and ensuring compliance with terms and conditions.
The key contract management principles include establishing clear objectives and goals, maintaining effective communication with stakeholders, ensuring compliance with legal and regulatory requirements, managing risks and identifying opportunities, establishing a strong governance structure, maintaining accurate and timely documentation, conducting regular performance evaluations, and continually improving processes through feedback and analysis. These principles are essential for effectively managing contracts and ensuring successful outcomes for all parties involved.