Improving the efficiency and performance of commercial contracting
I listened in on a recent webinar led by one of the leading Contract Management System (CMS) providers. Their value proposition was that a CMS is a requirement in order to streamline and improve the performance of contracting.
As a former head of a two contract management teams I have seen first- hand that we could we improve client satisfaction dramatically and improvement efficiency and client satisfaction by more than 30% through process improvement alone. It is a well known fact that CMS vendors advertise similar performance improvements through automation. The downside of deploying a CMS is that it takes at least 12-18 months to implement, especially work-flow. Time is eaten up by developing a detailed RFP, vendor selection, definition of user requirements, implementation and training of power users, feedback and modifications, and finally training of the rest of the team. Costs are high given the number of stakeholders and system experts involved. Normally, this process is repeated for multiple feature releases. Another well kept secret is that user adoption of work flow automation is fairly low.
There are other alternatives (not listed in order of importance) that should be explored prior to committing to a full-blown and costly CMS. As I mentioned, the first alternative is to clearly define the contracting process. One of the most valuable aspects is defining the interface between the multiple departments that are involved with the negotiation of a contract - legal, business divisions, finance, and executive management, to name a few. Clearly defining repeatable processes and stakeholder roles can have an immediate impact on cost and team performance. This can be done in less than 3 months.
The other approach that can be implemented in parallel with process improvement is the installation of a contract repository. There are many companies today which lack basic repository features such as electronic contract storage, search, alerts, contract folder structure, secured user access, and reporting. The repository function can be implemented in 3 months and is visible to your stakeholders immediately. (Note: a repository is available as part of a CMS but is rarely sold as a stand-alone module.)
With the goal of leveraging your current staff the final alternative is to outsource the lower value/higher volume contracting work to a third party LPO (Legal Process Outsourcing) firm. This approach can be implemented immediately and unburdens contract management and legal so that they can focus on larger transactions and more strategic work related to the business. LPO providers offer highly qualified contract management professionals and lawyers at a fraction of the cost of hiring additional staff or engaging your outside law firm. Examples of the type of work that could be handled by a LPO include contract review/drafting/negotiation, abstraction, document review, RFP/NDA reviews, creation of contract clause libraries/negotiation playbooks, etc. Note that LPO firms, such as Infosys, offer consulting services that are helpful in accelerating process improvement and managing your data base function.
The bottom line is that there are some alternatives to a CMS investment which should be seriously considered when you are developing a strategy for improving the performance of your contracting team. These alternatives can be implemented in unison or independently.
Your internal clients want improvement now and are typically not willing to wait 12-18 months. Of equal importance is that a combination of these alternatives can yield greater cost savings (40%) than CMS and at a lower cost.
