Let’s face it: managing your business’s contracts can be, and often will be, a tough gig - especially beyond a relatively small number of them. Doing it well is imperative, but it’s not simple to do. It can be hard to predict what might happen but still somehow be ready(ish) for anything that does happen.
Contract management requires an approach that’s continually followed, continuously relevant and consistently robust. That takes commitment and effort, resilience and stamina.
It takes organisation to deliver such an approach, and that comes with a few challenges.
It can be a big ask just to get organised in the first place, and it can be a stretch to stay that way when conditions can change so quickly both inside and outside your business.
Disorganisation happens in contract management just like it does in any other business activity, and for pretty much the same reasons. It is often self-reinforcing. Its effects can quickly escalate from causing disarray to inviting chaos - the ultimate unwelcome and overstaying guest.
There’s a lot at stake if disorganisation gets entrenched in contract management processes. It can impact Contract Managers personally and operationally and financially for their businesses.
Disorganisation in contract management processes is both preventable and remediable, depending mainly on the will and the means to deal with it. Sometimes the latent risk can provide both, but sometimes that risk has to occur to trigger any action, and that’s not a good place to be.
This article discusses an approach to overcoming disorganisation in contract management processes, covering:
- Why being organised benefits contract management
- Drivers of disorganisation in contract management processes
- Consequences of disorganisation in contract management processes
- Recognising disorganisation in contract management processes
- Overcoming disorganisation in contract management processes
Why being organised benefits contract management
Managing contracts is usually achieved using a combination of people, processes and technology. Establishing that combination requires:
- Commitment of senior management
- Effective communication and collaboration
- Experienced people to advise about and/or do the work
- Focus on the tasks and the outcomes
- Performance measurement, monitoring and optimisation
- Relevant and usable technologies
- Risk assessment and mitigation strategies
- Stakeholder alignment and engagement
- Training and skills development programs
Managing contracts is complex work and it’s non-stop. It requires structure to ensure all the moving parts mesh, because it needs to operate in an environment in constant motion, both within your business and outside it.
Organisation provides the structure that allows the right things to be done the right way at the right time. That takes collaborative planning, persistence, continual measurement and review, and coordinated adjustment as necessary.
Relying on half measures, lip service, off-the-cuff and seat-of-the-pants flying are almost guaranteed to bite their proponents in the usual place, often sooner than later. Sometimes you only get one shot, so it has to count.
Organisation is the enabler for contract management. It can never guarantee success though, because there will always be surprises. But it provides a framework that greatly enhances the likelihood of achieving desired outcomes, and that’s critical when it comes to contracts.
It helps to ensure clarity, consistency, and compliance, preventing misunderstandings and disputes. It cultivates reliability, boosting stakeholder trust and reputation. Financially, it optimises contract terms, minimises risks, and fuels profitability. Moreover, strategic decision-making thrives on organised contract insights.
Organisation promotes clear goals, efficient resource allocation, focussed efforts and streamlined processes. It requires dealing with the facts, not ignoring them or indulging in wishful thinking. It’s forward-looking in a place where you really need to know where you’re at and where you’re heading.
Organisation in contract management processes contributes to smoother operations, reduced stress, and improved overall well-being for the individuals involved, the contracts they work on, and the business they work for.
Reduction in uncertainty and anxiety is perceptible because there is clear guidance about what needs to be done when under normal and abnormal situations. That fosters efficiency and timeliness, and also creates confidence in dealing with the unexpected if and when it occurs.
Being organised provides both the sense and the reality of control of contract management processes because it helps to standardise what’s routine and offers guidance for dealing with the unusual.
Drivers of disorganisation in contract management processes
Three key factors make an elemental contribution to disorganisation in contract management processes, each with its own area of influence:
- Entropy: the gradual deterioration of order when change is not met with proactive intervention. The lack of attention and maintenance of the status quo support inertia
- Inertia: resistance to change stemming from comfort with existing practices and no sense of a need for any such change. This deters the adoption of improvements, and enables processes to stagnate and become less and less fit for purpose in a changing environment
- Disregard: inadequate recognition of the importance of contract management as a discipline discourages proactive change. This hampers investment in time and resources required for properly organised processes.
A dynamic operating environment will stress any of your business’s strategies, tactics, standards and guidelines from top to bottom.
That stress comes in varying degrees, from the equivalent of hairline cracks with their invisible but latent threat potential, right up to the massively public failures with their all too obvious consequences.
Disorganisation in Contract Management Processes
Disorganisation in its many guises in contract management processes is typically caused by shortcomings in one or more of the following areas, but there can be many others:
- Accountability: disarray commonly accompanies the use of processes that nobody has responsibility for in terms of correctness, relevance and suitability
- Adoption: particularly in geographically dispersed or decentralised firms, widespread use of a globally standardised approach can be difficult to obtain and maintain
- Alignment: too narrow an applicability given the range of vested interests and participants in contract management processes
- Backing: without visible senior management support, there can be less than complete take-up of, or adherence to, the notion of standardised contract management processes
- Change management: the roll-out of new and changed processes and supporting technologies can fail or falter unless effectively and inclusively planned, scheduled, conducted and supported, and appropriate training provided where needed
- Collaboration: since contract management processes need to cater for both internal and external requirements, in-depth canvassing of all participant groups is required
- Communication: collecting requirements, proposing design options, settling on viable compromises, gathering approvals, and establishing performance are all key to effective contract management processes
- Compliance: policy, contractual and regulatory compliance requirements require deep consideration about how to consistently achieve and maintain required levels
- Culture: the normalising of quick fixes over systemic improvements encourages shortcuts and short-term thinking, entrenching disorganisation
- Data: a mass of operational and process measurement data needs to be collected, stored and made readily accessible to enable and facilitate the operation of contract management processes
- Flexibility: unwillingness to consider or make improvements or corrections to contract management processes, practices and technologies can drastically degrade their correctness, effectiveness and relevance - hindering the achievement of desired outcomes
- Monitoring: not evaluating or acting on contract management process measurements that might take considerable time and effort to capture is a classic symptom of disorganisation
- Ownership: orphan processes typically suffer the unusual fate of being continuously used as-is, effort and relevance notwithstanding, for fear of breaking something, either immediately or somewhere down the line, that nobody knows how to fix
- Structure: while contract management processes are designed to bring structure to the management of contracts, they need to operate within an appropriate structure delivering the level of organisation that flows from planning, preparation, training, reporting and remediation
- Subjectivity: different individuals may have varying opinions on what constitutes disorganisation or the seriousness of its effects, and the need for any remediation
- Visibility: not knowing the current status of something important related to contracts is a sure sign of disorganisation. For any particular process, what needs to be visible are things like what’s waiting to be processed and when is it expected to be done; what’s in progress, what stage is it at, and who is involved; what’s been done and how did it go?
A particularly insidious cause of disorganisation in contract management processes is legacy.
This is the persistent use - in the face of common sense and track record - of error-prone inadequate, inconsistent, irrelevant, non-aligned, non-standard, outdated and unjustifiable practices and technologies.
Its continued existence makes a hard job unnecessarily harder and more risky from just about every conceivable aspect.
Consequences of Disorganisation in Contract Management Processes
The occurrence of disorganisation in your business’s contract management processes can result in outcomes ranging from unwelcome to unrecoverable if it’s not promptly and effectively dealt with.
The severity of those outcomes can vary based on the following factors:
- Contract nature: complex, high-value and/or long-term contracts can sustain more severe consequences compared to simple, short-term contracts
- Financial impacts: missed opportunities, overpayments, financial penalties or early contract termination can occur when things that should be done are not done well or at all
- Operational impact: lack of contract clarity, missed deadlines or misunderstandings can lead to delays, disputes or strained relationships with internal and external stakeholders
- Regulatory and legal environment: failure to comply with specific requirements may result in fines, legal disputes or reputational damage for your business
- Resource allocation: more time might be spent rectifying process issues than other critical activities that could have financial and operational impacts
- Risk exposure: contracts with high financial or legal risk can result in more significant negative outcomes, depending on what goes wrong
- Scalability and growth: not doing things as efficiently and effectively as possible can hinder the pursuit of new opportunities or expansion into new markets
- Stakeholder relations: poorly managed contracts can affect the firm’s reputation and long-term relationships.
These consequences can be incremental, cascading or compounding.
Disorganisation in contract management processes is an unwanted distraction to the efforts required to get the most out of your business’s contracts.
The people involved in the different activities needed can be overlooked in consideration of disorganisation’s impact. Much worse, they can be made the scapegoats for such impact despite being limited to working with what they’ve got.
Public knowledge of your business’s potentially ineffective handling of its contracts due to its disorganised processes can be embarrassing at a minimum, or much worse, lead to a loss of trust.
Your business’s broader external community of clients, partners, regulators, shareholders and other stakeholders can be sensitive to perceptions of disregard for their interests.
It can also be sensitive to incompetence and unprofessionalism in other areas of its operations - eroding its market credibility on the basis of ‘where there’s smoke…’.
Is it all gloom and doom here? Not necessarily, but it does need any signs of disorganisation to be treated as an early warning of potential trouble. Forewarned is forearmed, but somebody has to be willing and able to get the message and run with it.
Recognising Disorganisation in Contract Management Processes
Common indicators of disorganisation in contract management processes are made visible by unexpected or unusual divergence from expectations in terms of:
- Data accuracy: increasing inaccuracy of processed data leading to faulty decisions, potential compliance violations and legal repercussions
- Efficiency: growing error rates and rework time leading to processing bottlenecks and throughput reduction
- Financial hits: unplanned contract renewals and terminations, or unexpected penalties leading to unbudgeted costs and profitability concerns
- Friction levels: inconsistent or incorrect communications with stakeholders and third-parties causing confusion and disputes over roles, responsibilities and objectives
- Information accessibility: misplaced or non-existent documentation hindering quick referencing and decision-making
- Meeting deadlines: missed key dates resulting in breached commitments, damaged relationships and tarnishing of the firm’s reputation
- Non-compliance: sudden or increasing incidence of some aspect of compliance failure delivering unwanted situations and attention
- Productivity: work takes longer than planned or allowed for, threatening compliance performance and legal repercussions
- Scheduling surprises: disruption to planned schedules due to inadequate workload forecasting causing serious knock-on effects on throughput.
Individually, these signs or effects can be subtle to conspicuous. Collectively, they are cumulative. The sum of their consequences taken as a whole has to be considered to derive the size and extent of the problems they are currently causing or could cause.
Overcoming Disorganisation in Contract Management Processes
It’s not a good idea to treat either the notion or the experience of disorganisation in contract management processes lightly or with disdain. That might be a temptation when its effects to date have been minor. But, as investor guidelines always state, past performance is no predictor of future behaviour.
It’s never going to be a case of ‘ignore it and it will go away’, but it certainly could be a case of ‘ignore it at your own peril’.
Disorganisation in any process is a holistic problem, but it is likely to require a myriad of individual solutions for its varying originating causes to overcome it.
An approach for doing so with respect to contract management processes involves the following steps:
Assess current state
Understanding what is actually being done to manage contracts, as distinct from what is expected or thought to be done, is the starting point for pinpointing areas of disorganisation and inefficiency.
Map out and review existing contract workflows to:
- reveal operational strengths and weaknesses
- provide insights into bottlenecks, errors and trouble spots and their root causes
- quantify the impacts of disorganisation on productivity, stakeholder satisfaction and financial performance.
This assessment will provide a target list of areas to be addressed in overcoming disorganisation in contract management processes.
Define clear objectives
Without an agreed set of goals in mind, addressing disorganisation runs the risk of becoming aimless and misdirected. A focussed roadmap helps to ensure that efforts are aligned with desired outcomes.
An appropriate, positive tone-from-the-top is vital here. Objectives will be pointless unless visibly backed by senior management.
Standardise contract management
Doing the same thing the same way everywhere with respect to contract management, to the extent reasonably practical and possible, provides a solid foundation for limiting disorganisation. Structured approaches help provide consistency in practices and outcomes, eliminate ambiguity and confusion, and drive reliability.
Accurate process mapping is crucial for enabling understanding of who needs to do what, when, how and why to drive consistency.
Automating as much of as many processes as possible provides liberation from mundane manual tasks and simplification of complex ones.
It also de-risks the performance of those tasks through freedom from choice, directed tasking, auto-populated details, visible progress indications and hands-free rules-based stage transitions with appropriate notifications to the relevant people.
Contract management software makes it easy to:
- Keep everything in one place
- Make agreements available on a needs basis
- Validate manual inputs to processes
- Deny process progress in the face of missing inputs
- Escalate situations when key dates are approaching or processes have been in-progress beyond expected maximum durations.
Technology purpose-built for managing contracts generally provides less risk of facilitating disorganisation than general-purpose software. But in both cases, it can occur via the mechanism of misplaced ingenuity and where-there’s-a-will-there’s-a-way.
Contract management software that interfaces and integrates with other systems used by your business or its external partners allows a seamless flow of data between those systems. This maximises the total technology impact, increasing alignment and accuracy, efficiency and performance.
Many contract management processes require the participation of internal and external people, either jointly or separately, in real-time or by agreed dates.
Clear communication channels foster collaboration, helping to eliminate misunderstandings, enhance coordination, facilitate rapid problem-solving, and accelerate decision-making. Technology is an enabler for collaboration, but will is the catalyst.
Involving and aligning all contract management stakeholders, with their unique perspectives and expertise, ensures that the right people are engaged at the right time for the right reasons when it comes to addressing disorganisation. This can lead to:
- Strong buy-in and a sense of ownership
- Identification of valid concerns and issues that have been overlooked
- Improved plans to minimise disruptions
- Mitigation of resistance to change.
Contract managers simply can’t do everything by themselves, because disparate and often localised knowledge is needed to create a synchronised effort towards the same end goal of being organised.
Resistance to change is a key enabler of disorganisation and the perpetuation of its effects. Fear of disruption, extra effort, dealing with the unfamiliar, not keeping up, making mistakes, seeing no reason for change. These and many more factors drive both active and passive resistance to change.
Demonstrating the negative consequences of disorganisation in contract management processes for those resisters individually, and for your business overall, can be a surprise.
Understanding the scale of the risk outside of their limited exposure to it can be an eye-opener and counter reluctance to change.
Explaining to resisters the nature of the change required to remove the causes of those consequences is crucial.
Sometimes they will have little say in what changes are required, for instance when regulators mandate what has to happen. There can be times when left-field matters and the bigger picture needs consideration, effectively dictating the nature of changes needed.
Listening to resisters’ concerns about proposed changes and their suggestions that could improve or facilitate desired outcomes of the change is both good manners and good management practice.
Train process users
Tailored training offers a structured pathway for people involved in contract management activities to develop familiarity and competence in new processes, practices, technologies and other areas.
Effective training not only fosters a smooth transition from the old to the new, it promotes confidence that contract management will be done better without the distractions and disturbances of disorganisation.
In a dynamic environment, some processes can’t really remain static and stay 100% relevant. This may only become apparent from an increase in error rates, operational difficulties and so on.
Identifying the root causes of such issues and learning from mistakes made is critical for identifying process gaps or weaknesses and taking steps to prevent their recurrence. This allows contract management processes to evolve over time to be more resilient, agile and relevant.
The need for change may also be advertised in advance in some way. Regulatory changes usually have an anticipated effective date. Increasing software capabilities and technological advancements will be promoted by their developers. Your business needs to adapt to changing market conditions or capitalise on new opportunities.
Flexibility, adaptability and agility are needed to help ensure disorganisation doesn’t creep in unnoticed.
A culture of continuous improvement versus set-and-forget is required.
Objective benchmarks should be established to measure and track the performance of individual contract management processes and the outcomes of the overall contract management function, as well as identify any trends.
Measuring the average cycle time of each process used allows the development of expected duration guidelines, enabling visible indicators of progress through each stage and sending notifications to the next stage owner about upcoming work.
Assessment and reporting of important measurements is useful for identifying areas requiring attention or gaps that should be filled.
Clearly defining roles and responsibilities in contract management is of paramount importance. It establishes a framework for accountability and ensures that everyone involved, whether full-time or when requested, understands their contributions to the process.
Task allocations should be based on expertise and experience, and publicised to allow appropriate escalation of issues when necessary.
Two key responsibilities are speaking up if and when disorganisation becomes apparent, and promptly acting on any warnings received about it, even if that only entails escalating it upwards.
A well-defined accountability structure enables smoother coordination and a tighter response to operational issues of all kinds and acts as a barrier to disorganisation.
Being organised means systems, structures and habits have been established that enable effective management of contract management activities, information and resources. It represents a state of orderliness, efficiency and control in various aspects of life and work.
Being organised is also an ongoing process that involves continuous effort and maintenance. It’s about consistently applying organisational principles, adjusting systems and practices as needed, and adapting to changing circumstances.
Organisation is crucial for making your business’s contract management processes as effective as they can be.
Disorganisation in a firm’s contract management processes is much more than just a lack of organisation. Its effects are generally negative, and that usually demands a lot more time and attention to deal with than when things are going well.
The degree of disorganisation’s effects can range from bearable annoyance to unforgivable chaos. Progression across that range is more likely to be compounding than linear, so time is of the essence in recognising and overcoming disorganisation before it gets entrenched.
Paul Kelly once sang ‘from little things big things grow’. That’s not a good outcome when those little things relate to disorganisation in contract management processes. Don’t let it happen to you.
If you would like more information about how to overcome disorganisation in your contract management processes, or how Gatekeeper can assist with that activity, then contact us today.