Consider your business and the role of the Legal Team when it comes to contracts.
What areas does your Legal Team focus on?
- Reviewing contracts prior to signature for suitability and risk
- Hands-on negotiation of contract terms
- Storing contract documents for audit and enquiry purposes
- Maintaining an overview of key dates such as renewals and compliance deadlines
- Dealing with contract queries from internal and external stakeholders
When it comes to contracts what should be the role of the Legal Team?
The common scenario seems to be that because they’re required to review contracts on behalf of the business, then they should also be responsible for the ongoing storage of the contracts.
And if they’re responsible for storing the contracts, then they should also be responsible for answering questions related to the contract during its period of operation.
And this then extends to being responsible for managing the renewals of contracts and coordinating contract reviews.
But should this be the case?
Many of the activities that the Legal Team are involved in relating to contracts either don’t require specific legal expertise or, more importantly, are simply better carried-out by other stakeholders.
The Legal Team’s primary role is to protect the business’s interests and to provide guidance on what they consider acceptable for any agreement. This is what they’re trained for and specifically what there are paid for.
Other activities can and should be handled by automation and technology. High-volume agreements such as NDAs are an example of tasks that should be automated to save Legal valuable time. This can be achieved through Touchless Contracts technology. Find out more by watching the video below.
And as for monitoring obligations and supplier performance, it’s not legal’s job to make sure that the contract delivers on what’s agreed. That has to be down the key stakeholders and representatives from elsewhere in the business who are carrying out work related to the contract day-to-day.
So what are the right steps to take?
Contract Management & Digital Transformation
Although it’s become an overused term that conjures up images of staid, older businesses trying unsuccessfully to embrace social media, Digital Transformation is still a widely conducted process in businesses of all sizes.
Continuous technological advancement essentially makes the process of Digital Transformation the equivalent of painting the Golden Gate Bridge, so don’t expect it to vanish any time soon.
There are three key areas central to the success of any Digital Transformation Program:
- Identifying a big enough opportunity to warrant the investment of time and resource
- Implementing changes in a timely, efficient and cost-effective manner
- Driving adoption of a new process or solution.
This is how ROI is delivered and success achieved.
Of course, it’s still beneficial to improve the digital capabilities of the Legal Team on its own, but because contracts touch every part of a business, the real opportunity is in looking at the wider business and actually delivering something truly “transformational”.
According to Gartner, “CLM presents a great opportunity for digital transformation, because it’s practical, well-scoped and executable. The technology is proven, as is the ROI, which companies can use to fund other initiatives on their digital business roadmap” - Market Guide for Contract Lifecycle Management.
Contract Management is also typically a process that can be characterised by manual tasks and a lack of consistency across a business.
Often overlooked in a company’s push for growth, the result can be a business exposed to unknown levels of risk, incurring unnecessary costs and wasting its employees’ time with inefficient working practices.
In other words, an ideal target for a digital transformation.
Contract Management and the Wider Business
Any area of the business that signs a contract should have a material interest in effective contract management. Whether it’s the Marketing Team signing with a new advertising agency, Manufacturing sourcing raw materials from a new supplier or Sales signing new deals with customers, all those contracts present an opportunity for effective contract management to make a significant financial difference to the organisation.
On a contract-by-contract basis these groups will have interest in:
- Making sure the agreed deliverables are indeed delivered
- Managing any ongoing relationships effectively
- Monitoring key dates such as for review or renewal
- Maximising the business value delivered
Aside from those interested in individual contracts, consider these other departments with a more macro interest in contracts:
- Finance - looking to manage cash-flow and to understand the business’s risk profile
- Operations - wanting to run the most efficient business possible and often wanting to solve business problems with technology
- Procurement - tasked with reviewing spend and looking for opportunities for cost consolidation
- Sales - making sure that new customers are signed up as quickly as possible and with as little manual intervention as can be achieved.
- IT - maintaining control over business-wide critical infrastructure and contractor workforce
- C-Suite - reviewing high level reports from across the business
In all these cases, having a single, centralised view of contracts, clear reporting and strategically-applied automation will have a material positive impact.
With the right technology in place, uncertainty around contracts can be completely removed.
Agreed, automated processes run 24/7, timely reminders are sent to contract stakeholders when their input is required, documents are accessible remotely by all relevant parties and all activity is tracked against the contract record in an auditable format.
All of the departments listed above, along with individual users can access the information they require securely in just a few clicks.
By looking beyond the Legal Team, the business will also generate a significantly higher ROI due to:
- Time-savings across multiple departments, not just the Legal Team
- Input from key stakeholders who can provide context for the value of the contract
- Proactive and timely reviews of all existing contracts means that renewals can be negotiated appropriately and more value extracted.
- Ongoing obligation management leads to higher benefits-realisation and reduces contract leakage to minimal levels. Typical contract leakage is estimated to be in the region of 9% of contract value.
- Reduced risk profile as all contracts are centrally managed and combined risks can be better identified and mitigated.
This is why it pays to think beyond the Legal Team when considering how a contract management solution will fit into your business.
The potential benefits are magnified and it gives the business a much more stable platform from which to grow in the future.
For more information about how Gatekeeper can help your business thrive and help you to manage contracts across teams and departments, contact us today.