How to design a contract management solution that works for where your company is on the journey towards smart contracts
Search for the latest in contract management and these days it’s all blockchain and smart contracts. It’s an exciting time to be a GC or a Legal Operations Director. All of a sudden legal is at the center of a technology revolution that will place it squarely on the map of business impact and real change. But there’s that little detail about not even having a contract repository yet. How are you supposed to run if you haven’t even learned to walk yet?
That’s the paradox we often face at Exigent, as a company that works with the bleeding edge of technology: there’s hype, and then there’s the reality check. Many of the conversations we have with GCs and Heads of Legal are based on reconciling the current state of their contract portfolio (90 percent of the times in dire straits, scattered all over the company) with the need and desire to fix it once and for all. We’ve been doing this for over 15 years (Exigent was founded in 2003) but we have noticed a shift: from being just a frustrating item on the to-do list, contract management is now finally being understood as the stepping stone to business success. Visionary leaders who want to make a difference are engaging with contract management with excitement for the change and impact it can deliver.
The key question is: how do you channel this enthusiasm to empower legal departments to succeed rather than deflate at the sight of the hurdle? It’s simpler than you think. And it has little to do with technology or budget, and more to do with clarity of vision and courage.
How mature is your company?
You are probably familiar with the Contract Management Maturity Model (CMMM): it’s a great tool to start looking at where your company and legal department sit on the journey towards the holy grail of a fully optimized contract management process. It’s the obvious first step, but it needs to give way to a strategy conversation quickly. Rather than despairing about being at ground zero of CLM, companies should shift from wanting to fix it as painlessly as possible, to seeing it as a strategic opportunity for growth. It’s not a one-time action; it’s a program for change. So maybe the real maturity we should measure is the ability of a company to have vision and to follow through with a meaningful strategy.
Often, you’ll be told the vision is to finally have a contract repository. That’s not what vision means. It’s understandable that in the context of CLM people would think it’s already such a big deal to have it all in one place. But you must be more adventurous. When you don’t know what’s possible outside of sheer compliance, it’s hard to conceive a world where you can generate revenue from your contract portfolio. But it’s possible. In fact, it’s relatively simple, once you have established where you are and where you are going. Knowledge is power, so make sure you stay up-to-date with what is going on in the market, who’s succeeding and how they are doing it. Getting inspiration is key, and so is sitting down to uncover the results you want. What are the outcomes that your organization is trying to achieve? Define them clearly, then design the pathway to get there.
Managing change as the key to success
You’d think technology is the biggest hurdle: it’s a cost, it’s difficult, it needs tending to. But the real blocker in any contract management improvement program is people. Because contract management is change management. It’s a cultural shift that requires careful handling, with listening, communicating and iterating as the key ingredients.
It’s the classic stakeholder buying paradigm. You need to develop internal buy-in, identify advocates and take time to take people on the journey with you. Communicating the why is fundamental to persuading colleagues and other departments to get on board with the program. If they can see what’s possible with their contribution, how they- personally, with their everyday tasks and input- fit in the vision, they will want to be part of the success story. Inspiring them and fueling the excitement for what’s coming is crucial, but it’s also important to acknowledge their concern because there will be plenty. First and foremost, you will want to reassure everyone that there will be training. No-one should be expected to do things differently without support.
Another useful path towards a successful change/contract management program is piloting. Starting small. Begin with isolating one of the outcomes you want for your program and break it down into smaller chunks of mini successes. What do they look like? Can you identify the smallest number of people that need to be involved? Having a small, dedicated team working on this makes it possible to iterate quickly and painlessly. Imagine you’ve implemented a shiny new technology system to the whole company and some of your assumptions turn out to be wrong. It doesn’t work. People are not using it the way they should. Backtracking means admitting defeat but continuing on this path is just not sustainable. It’s a terrible situation to be in, one you will never have to face if you operate on the basis of a Proof Of Concept and keep on experimenting, listening, and adjusting. This approach requires honesty, patience and a laser-like focus on the final goal, but it guarantees success with almost zero chance of failure (provided that you get support from the right experts, not just software-peddlers). Don’t rush it, and you will be rewarded with long term value-add that trickles down to all business units.
Executing a good contract management program takes skill (some will say it’s an art to do it elegantly), but it just cannot happen without the support of senior stakeholders. So, you might have to win them over first, which is very doable. In fairness, our experience shows that it’s not that hard to convince the C-suite to invest in better contract management. Once you show a CEO or COO the numbers, they are pretty much sold immediately. The issue is often that GCs don’t have their ears. Or they don’t have a voice, no seat at the table. Over the years, we’ve found ourselves having these conversations over and over: how can I change the idea that legal is a cost center and show that, as a GC, I can contribute to the business in more than just risk management? We’ve created a number of resources to tackle this: in webinars, white papers and blogs. We show how it’s not just possible to make GCs the rock stars of the legal profession, but imperative.
Legacy and business-as-usual as the vital combo
Practically speaking, aligning your business to contract management best practice means mapping and reengineering processes. Two of the main areas you will focus on are:
1. The company’s legacy contract portfolio
2. The everyday running of CLM
First and foremost, you need to identify what’s important from your legacy portfolio. It’s a one-off exercise that pays off and saves a lot of money (and headaches). You should be able to segment your contract portfolio so that you can choose which contracts to onboard in the new CLM system. Like David Holme likes to say: “All risk is not created equal.” Maybe only 40% of your legacy contracts need to go on to the system. So, run a risk analysis on your contract portfolio (we have a matrix for that) and prioritize your contracts. Remember to bring the desired final outcome to the table: knowing what you want to achieve at the end of the process will help you decide what goes in and what stays out. This initial step usually cuts down by half the number of contracts you need to onboard, but most importantly it ensures the process doesn’t stop before it’s even started. Because that happens a lot, sadly. Many see legacy contracts as a show stopper: they think they have to deal with the whole giant mountain of legacy contracts, so they will give up. But it doesn’t have to be that way. On the contrary: it can be a liberating step towards a smarter, lighter contract portfolio.
The other key piece of the puzzle is the on-going, everyday contract management process. If you have a stake in this change, most likely with a technology spend too, you need to make sure that the process is optimized to leverage the software and people investment. Don’t just be ok with the legacy process. Most of the times old processes are inefficient because there is little to no technology involved. Don’t simply try to fit new technology that is built to carry you into the future into an old process. Fight for a process that is going to give you the optimal result you have identified at the beginning and that has longevity in its flexibility. Be explicit about this.
Of course, this means education comes into the mix. Whoever interacts with the new CLM system needs to understand the vision and how they can get value from it in their daily job. Engagement through a good change management program and training are key for ROI.
Partners, not vendors
There are hundreds of contract management software programs out there. And of course, Exigent’s CLM engine is one of them. It sounds counterintuitive for me to say this, but… Tech alone doesn’t make or break a contract management change program. It’s the tailoring to a company’s needs that does. It’s the support that comes with the planning and implementation, the legal and financial expertise, the understanding of how change is implemented, and the business acumen that make the difference in the equation.
Especially in the planning stages, it’s essential that you get support from people who know the industry and understand where it’s going, the trends and the potential pitfalls of too much or too little tech. You need a partner, not a vendor.
Organizations are incredibly complex, fascinating beasts. They are made of people who operate on the basis of contracts: social contracts and legal contracts. These mini-societies have highs and lows, idiosyncrasies and virtues that are all different, and the result of on-going change, with some tribes more open than others. Some will be Luddites, but ultimately the visionaries will lead the pack towards a better way of working and living together, with more honest communication and better contract management. I’m optimistic. Because I’ve seen it succeed many times over the years.
With ‘anything is a possible’ as a mantra, Exigent’s Global Managing Director, co-founded a global organization that quickly grew from one to over 15 service lines. Nicola’s determination and energy are infectious, making clients excited about the possibilities of change and leaving them empowered to take the first step.