Contract lifecycle management sounds about as exciting as ... well, ok, it doesn't sound particularly exciting at all. But excitement or not, as a business leader, you know contracts are the lifeblood of any business. To stay successful, you need to keep a handle on every contract your business enters into at every stage of the contractual lifecycle, from assembly to termination.
So, while contract lifecycle management may not set any hearts aflutter, it is the sort of nuts-and-bolts execution challenge that can bedevil even the most sophisticated enterprises. Here are some keys to implementing a successful contract lifecycle management process.
Begin Before the Beginning
Every lawyer learns in first year contracts class that a contract springs into existence when three elements come together: offer, acceptance, and "consideration." Before that moment in time, no contract exists and no one is bound to an enforceable obligation.
Successful contract lifecycle management starts with answering core questions about the lead up to that moment for every contract your business executes. What form will the contract take? What are its essential terms for your business? Which of those terms is negotiable and which is absolutely, positively, fixed in stone? Who has the authority to execute each kind of contract? Who needs to approve a contract ahead of time?
With apologies to Walt Whitman, a foolish consistency may be the hobgoblin of little minds, but there is nothing foolish about establishing consistency in your body of business contracts. Few things make contract lifecycle management more difficult on an enterprise-wide scale than contending with an inconsistent hodge-podge of contracts governing a single type of business relationship. Of course, not every contract can be a one-size-fits-all proposition, but the vast majority of contracts within an enterprise can, at the very least, use consistent formatting, standard terms and terminology, and authorization for who may execute them.
Simplify and Streamline Execution
A significant portion of contract lifecycle management involves prevent unforced errors from creeping into your contracts. The consistency mentioned above forms half of that equation. The other half involves making the contracting process straightforward for every employee who executes contracts for your business, and for every contracting counterparty with whom you do business. Many contract lifecycle management errors occur simply because people lose track of what contract version they're using, or cut-and-paste old language from a legacy contract into a new one without checking for inconsistencies, or on the spur of the moment use a ballpoint pen to revise a critical term at a customer's request. Having a contract lifecycle management system that implements a standard, efficient, enterprise-wide contracting workflow reduces these risks.
Centralize Your Contract Recordkeeping
Contract lifecycle management suffers when you store your contracts in file drawers and network folders scattered across your enterprise, subject to the organizational and operational whims of your second-tier managers. To achieve consistency and efficiency in your contract lifecycle management, store contracts in a central repository. By centralizing your contracts, you not only gain greater control over the contract lifecycle management priorities discussed above, you give yourself the opportunity use your body of contracts as a source of analytical insight (discussed below).
Monitor Performance (Theirs and Yours)
Every contract has it's own "lifespan," defined by the obligations of each party bound by it. Successful contract lifecycle management means paying close attention to every milestone in that contract's lifespan; which is to say, making sure your business does what it's supposed to do, and so does your counterparty. That might sound obvious, but the truth is that a thriving business executes so many contracts in so many aspects of its operation that it's unsurprising (albeit undesirable) for performance obligations to "fall through the cracks." Some of those obligations may not matter much in the grand scheme of your business. But some undeniably will; and a few will pose significant, costly risks. A core focus of any contract lifecycle management system must involve marking every "lifecycle" milestone of every contract, so that performing your obligations and enforcing a counterparty's represent conscious business decisions, not careless oversights.
Learn From Successes and Failures
Ideally, a contract represents a "win-win" for each party. At the very least, you want contracts to be a "win" for your enterprise. But you've been in business long enough to know that's not always the case. You make the best decisions possible based on the information you have available. Sometimes, the market moves against you, and the question is how best to respond.
From a contract lifecycle management perspective, the important thing is to make sure you absorb the lessons that flow from observing a contract over its lifetime. It is only by learning from your contractual success and failures that you can optimize your next contract, and your next one after that. To achieve this end of contract lifecycle management, it's important to have the tools necessary to draw insight and performance metrics out of every contract. Contract lifecycle management solutions like Contract Room supply those tools.
Rinse and Repeat
The end of one contract's lifecycle represents the beginning of another, often literally and always figuratively. Your business evolves on the back of the terms of contracts you execute day-in, day-out. Ultimately, sophisticated contract lifecycle management consists of making a constant study and analysis of that evolution. Where does your business take unnecessary risk? What lessons can you learn from how counterparties react to the terms you set? Who can you trust to make smart contracting decisions? How can you integrate contracting across your enterprise to optimize operational decision-making?
Contract Room is an industry-leading contract lifecycle management platform that gives business leaders the tools they need to simplify contract execution, eliminate contracting errors, monitor contract performance, and treat contracts as a deep and rich source of insight. Our solutions focus on each of the keys to contract lifecycle management success above. To learn more about how we can help transform your contract lifecycle management process, and to schedule a demo of our essential tools for 21st-century contracting, contact us today.