Blog Post

Think You Are Mature Enough? The CM Maturity Model Might Not Think So

September 18, 2020

The benefits of Contract Lifecycle Management can only be realized if you go beyond just implementing in baby steps. It’s time to find out where you are along the Contract Management Maturity Model.

How mature is your contract management strategy? Is it still in its infancy – you know it’s there, but it doesn’t really do a lot for you? Or more like the adolescent – occasionally helpful, but it takes a lot of effort to get there? Or are you in the throes of glorious maturity where it fits almost seamlessly into your day and certainly makes things easier for you?

Managing your contracts unleashes an array of challenges. It’s not just about the sheer number of them or the fact that there are many types, it’s being able to use those contracts – and the data within them – to extract the most (or even any) value from them at all.

Contract Lifecycle Management is designed to ease some, even all, of these challenges. By providing a centralized repository, you can manage your contracts, regardless of type, in a single place, and start to harness the data within them to mitigate business risk, find revenue leakage and organize and control your obligations.

However, most contract management solutions are similar to smartphones – you know it can perform many life-changing tasks, but the reality is you only use about 10% of the functionality because you’ve either got no idea how the rest of it works or you have little inclination or time to find out.

CLM is about more than just implementing the technology and processes.

It’s about how well you are utilizing it and about how far you are along the Contract Management Maturity Model (CMMM). The CMMM is a journey for understanding what stage your contract management strategy is at, and how you can start to develop your strategy to move further through the model, thereby reaping more rewards, and achieving greater commercial value from your CLM strategy.

Most companies are still in the early stage of the CMMM. Paper is still standard and for those who do have a CLM strategy and accompanying technology, it’s still only the basic repository and obligation management features that are fully utilized.

This was reinforced by a recent ACC report, ‘2020 Legal Operations Maturity Benchmarking, which found that most companies are in the intermediate stage on maturity – but only on the more traditional legal areas such as compliance. Those in innovation, e-discovery, and litigation management are still at the very early stages.

What this means is that most companies are not fully realizing the capabilities and value – and therefore business advantages – that CLM has to offer.

As Gartner recently stated; Implementing CLM can lead to significant improvements in revenue management, cost savings, and efficiency. Understanding and automating CLM can also limit an organization’s liability and increase its compliance with legal requirements.”

And this is reinforced by the IACCM, which found in recent research that poor contract management costs companies 9% straight from their bottom line.

So this leads to the question – where are you in the CMMM model?

Ask yourself these questions:

  • How many contracts does your organization have?
  • How many of them are held with you?
  • Can you locate at least 50% of your contracts right now?
  • Can you answer simple questions about risk exposure?

And then benchmark yourself against these levels:

Level 1 – Undefined and unpredictable
As the name suggests, your contracts, as well as their management, are undefined and left to individuals in the organization to make decisions. There may be agreements which commenced informally and were not immediately put in writing. Such agreements might not be well-formed. At worse, they do not conform to industry standards or have not been reviewed by lawyers.

Level 2 – Locally Managed
Basic processes are in a place where contracts are drafted, reviewed, managed, and stored locally. Individual contract owners manage critical contracts, but this might not always be the case. Once contracts have expired, they are archived locally to be accessible to key local personnel only.

Level 3 – Defined and decisive
There is a specific process that dictates which parts of the contract are extracted and analyzed. Templates, central repository, and review processes are in place. At this level of maturity, the use of an integrated contract management tool is recommended.

Level 4 – Proactive and profitable
Contracts can be tracked centrally, at any point in time, anywhere and from any device – laptop or smartphone. This ensures there is a hierarchy of controls for the contract and reduces the risk of individual errors. True risk management processes can be implemented. Alerts can be built ahead of time with agreed triggers. Similarly, compliance audits, including cross-department plans, can be made.

At this stage, you have access to advance business analytics on your legacy systems. You can start taking familiar contract terms and give them commercial value.

Level 5 – Continuous improvement, continuous benefits

Not many organizations make it to this level; however, it’s one of the easiest to sustain because of all the previous groundwork has been done. Once maintained, the benefits are exponential. Materialized risk analysis remains a necessity to ensure further improvement of the contract management process.

If you are languishing at stage one or two, you are not only likely hemorrhaging money that could be going straight to your bottom line, but you’re wasting admin and lawyer time, and most vitally failing to unlock the potential goldmine of data that lives in your contracts.

In his book Managing in Turbulent Times, Peter Drucker states that in turbulent times, “you manage the fundamentals and you manage them well…” Given the past six months, the business world has been upended like never before. Now is the time to start managing one of the fundamental areas of your organization – your contracts – and managing them well.

To find out more about contract management, and how you can start reaping the rewards by moving your organization along the Contract Management Maturity Model journey, contact us to learn more.