Knowing where you are on the CM Maturity Model is great, but it’s about being able to move your organization to the next level and beyond that counts.
Deep down you know you need to improve your contract management (CM). It’s been stuck on your list of things to do for months (years?). Are you going to wait until something forces the issue – a vital missed deadline, or renewal that costs your company thousands, even millions of dollars?
As we’ve all discovered recently, procrastinating over strategic imperatives, such as remote working, and then having the issue forced upon us isn’t just costly, it’s time-consuming and uncomfortable, raising issues we didn’t even know would be issues. Rather, it’s better to proactively get your house in order, without the additional pressure.
Recently we wrote about the Contract Management Maturity Model, and the various stages companies can achieve with their CM strategy to reach the utopia of Level 5 – continuous improvement, continuous benefits.
Without knowing where you are, it’s impossible to know in what direction you are heading and should be aspiring to achieve. With the CMMM you can benchmark your organization and formulate a strategy to move through the model.
But where to start? Once you know where you are, what actions and steps you can take to help your progression along and upwards within the model and fulfill your CM strategy? Here are six practical steps you can take to help your development:
1. Lobby senior management
Most organizations don’t report on contract lifecycle and the Board is often oblivious to the commercial value a sound contract strategy can deliver. CM is one of the easiest ways to demonstrate value and boost the legal team’s profile. With CM, you have tangible numbers that any Board member can understand and appreciate, showcasing not only your commercial awareness but also the real financial benefits that a well-thought-out CM strategy delivers. For example, Hub International saved 20% on asset utilization, and 10% on property costs by managing and consolidating its contracts and using the data at the board level to make more informed, commercially beneficial decisions.
2. Risk and compliance assessment
Not all risk is created equal, some will have a greater weight within your business than others. Prioritize and segment your contracts based on a thorough risk assessment and analysis of which contracts give you the insight you need. By identifying the highest risk contracts, the size of the task drops drastically to more manageable levels.
3. Opportunity assessment
Like risk, only some of your contracts will likely yield tangible financial opportunities. Using statistical analysis, you can assess how many contracts will give you an informed view of revenue leakage and other cost-cutting, revenue-enhancing opportunities. Using sampling techniques, you can then delve into the portfolio and assess the extent of contract compliance. Extrapolating the results will help quantify the likely benefits at an early stage.
4. Define, monitor, mentor, and train
Once you have defined a process to manage your contracts, make sure you monitor it, and mentor and train teams for best practice. Getting buy-in, not just from stakeholders, but also from the team around you is essential. One idea we wrote about recently stemmed from a McKinsey article which suggested an analytics training academy to assist with the data analysis as a result of a smart CM strategy. However, as we noted, this isn’t always viable for a smaller law firm, so appointing a small team of champions to lead the training and mentoring around your CM program is a good starting point. Read our article for the six steps to helping your CM champions achieve success.
5. Get support
You may not have all the skills to carry out some of these steps now, but you can use external help to bring in that knowledge. An external CM consultant has the experience and knowledge to help you get things started and drive your strategy forward when you don’t have time to focus on it. But, external support still means you need to look at your internal processes and begin a culture change in the organization to sustain it.
6. Reap the Benefits
You may not have all the skills to carry out some of these steps now, but you can use external help to bring in that knowledge. An external CM consultant has the experience and knowledge to help you get things started and drive your strategy forward when you don’t have time to focus on it. But, external support still means you need to look at your internal processes and begin a culture change in the organization to sustain it.
The benefits of better contract management are unquestionable. From organizing and categorizing contracts to reduce revenue leakage, to improving process efficiencies, and streamlining admin and management. And as AI comes into play, the benefits go way beyond these fundamentals into creating data lakes to conduct valuable and commercially-driven data analytics.
The most challenging aspect of progressing your organization along the CMMM is moving from a level 3 maturity to levels 4 and 5. To do this, we believe there are four key levers needed to drive this change:
- Executive management sponsorship. Without this, no real change will be possible.
- A collaborative effort between Legal, Procurement, Sales, and Finance. If these functions don’t work towards common CM objectives, any change may be superficial and ineffectual.
- A defined enterprise-wide contract lifecycle management strategy.
- A clear alignment of the business strategy with internal contracts performance metrics.
CM has moved beyond a centralized repository. It’s now a comprehensive compliance and analytics suite that harnesses the power of data to go well beyond contracts. But if organizations want full value from these systems, they need to ensure that they have a strategy in place first, so the plan determines the systems and tools required, as opposed to allowing the tools to drive the strategy.
By following these strategic steps and moving your organization further along the CM Maturity Model, your organization can start to realize the value of your CM investment and see the business impact throughout the organization.
If you need some support, and tried and tested experience to help move your organization through the CM Maturity Model, contact us to learn how we can help.
