A contract management pain point is typically described as a persistent or recurring annoyance or inconvenience during an agreement’s lifecycle. This pain can be encountered in CLM practices and processes, both manual and automated.
A contract management pain point can be caused when processes are:
- Deficient and not fit for purpose
- Superfluous or irrelevant in some respect
- Overly complicated or difficult to do or use
- Nonsensical but mandatory because that’s the way things are still done around here
- Totally but needlessly manual.
Beyond annoyance and inconvenience, the more significant pain points can often have a strong association with risk. While things may never get that far, it should be recognised that pain points can have this potential.
There could be dozens of pain points in Contract Lifecycle Management (CLM) practices, some affecting everybody involved, others perhaps more limited to specific subsets of CLM activities.
The causes and effects of these pain points will be unique to an organisation, based on its approach to CLM, its level of CLM maturity and the capabilities it has in place, and both its attitude towards and its understanding of the value of CLM.
This article highlights five common, often significant pain points in CLM practises, covering:
1. Invisibility
The state of being unable to be seen pops up in several CLM areas.
Contract invisibility
A contract is invisible if it is active but nobody is responsible for it, uses it or is aware of its existence any more, despite the Accounts team continuing to pay the associated invoices.
It’s also invisible if its documentation can’t be located when somebody needs it. It can take an unpleasant surprise, possibly a costly one, to raise awareness of such invisibility and trigger remedial action.
Practically speaking, a contract can’t be managed or operated effectively without knowing a fair bit about it. The invisibility of a contract results in:
- No awareness of the terms and conditions, obligations and rights, key dates
- No insight to the contract’s risk profile
- No understanding of the current state of compliance with obligations
- No notion of which regulations are applicable
- No sense of the relevance of clause settings for current operating conditions
- No idea of the contract’s importance for setting the level of attention it needs
- No knowledge of the contract’s owner or its key stakeholders.
Gatekeeper resolves contract invisibility through its cloud-based, centralised repository. All contracts are stored securely in a single location and people with the correct permission can access the information they need, whenever they need it.
This visibility reduces contract risks as stakeholders can act ahead of key dates, identify potential issues and escalate them accordingly so they are resolved early on.
With full visibility that’s shared across the organisation, every contract can be managed effectively so all obligations and compliance requirements are fulfilled.
Vendor invisibility
Effective management of a vendor also requires knowing some important things about it. Too often, all that’s known is the bare minimum needed to allow business to be conducted. That makes the organisation susceptible to vendor stumbles and setbacks that it has no awareness of and made no allowance for dealing with.
Vendor invisibility could result in:
- Minimal, if any, knowledge of the vendor’s financial situation
- Little awareness of the vendor's own supply chain and its inherent issues and risks
- No understanding of the vendor’s business continuity planning and testing
- No idea about the vendor’s levels of regulatory compliance
- No insight into the potential for risk to the organisation the vendor represents
- No sense of the vendor’s importance to the organisation.
Using a dedicated Vendor Portal not only helps organisations to better manage their vendors, but it also allows them to visualise all processes related to them.
Onboarding is automated and specific data mandated before the relationship can progress. Not only does this help automate vendor compliance, but also gives businesses the information they need to drive improvements where required.
Process invisibility
Processes are used to standardise activities. They also allow for activities to be rationalised, optimised, and harmonised across different areas.
Many CLM activities are process-driven. Sometimes they’re manual, sometimes automated, sometimes a bit of both.
They can require different people to do different things at different stages, possibly within certain time limits. They can be triggered manually, by date, by occurrence or non-occurrence of an event, by a change in some data, or in some other fashion.
External invisibility of processes occurs through lack of awareness, documentation or its availability, promotion, training or policy mandating their use.
Inconsistency is the least of the pain that follows from people not following processes because they didn’t know they had to.
Internal invisibility in processes is rife, particularly regarding any manual aspects, but also when a manual process is automated as-is without optimisation or capitalising on the range of any automation capabilities available.
Invisibility here affects the ability of people involved in process activities to be aware of imminent or actual demands for their time and to allow workload planning.
It leads to frustration for everybody making and responding to the seemingly endless ‘are we there yet’ queries about process completion.
It reinforces the perception of indifference to people who rely on process outputs to do their jobs and who may be unfairly graded on their performance due to matters outside their control or influence.
The major internal process pain points involve not knowing or being unable to easily find out:
- What stages exist in each process and their conditionality
- The intent of each stage in a process
- Who has responsibility for each stage
- Which stage is currently active and how it is progressing against time expectations
- The process duration to-date by stage
- The total duration of a completed process
- How the total process duration compares to any established standards.
Visibility can be improved by mapping out each process and digitising them. Using the industry-leading Kanban Workflow Engine from Gatekeeper allows organisations to visualise, standardise and automate processes.
Stakeholders can access workflow data and generate reports about how long each process takes including average contracting time. This visibility not only shows who has responsibility for each stage and who is responsible for progressing a contract, but also helps businesses to address and remedy any bottlenecks that cause delays.
Change invisibility
Given that change these days is constant and increasing, it seems odd that change can be invisible. That’s because it’s a numbers game, particularly for externally-generated change.
The applicability to the organisation of any particular external change must be determined by inspection, since it isn’t generally a visible attribute of that change.
It’s akin to a diamond remaining invisible in a hill of gravel until a stone-by-stone inspection reveals the gem.
Automated inspection helps enormously, with diamonds and with change. The lack of any such capability is a reality for most organisations though. This means the invisibility of change can result in:
- No sense that a change which must be understood has happened or soon will
- No understanding of the implications of a change across the board
- No awareness of the relevance of a change to the organisation
- No easy way to determine exactly which contracts might be involved
- No notion of if, how and how quickly a change can be dealt with
- No insight into the potential disruption to other work from dealing with a change
- No knowledge of the knock-on effects of a change on ongoing risk mitigation.
Change generated internally by the organisation can easily be conducted in secrecy or in isolation, announced with little notice in a ‘by the way, we’ve done this so make it work as soon as’ fashion, with no notion of the concept of change management. Change of this nature can be as difficult to cope with as external change.
2. Contract numbers
The total number of active contracts in an organisation could range from hundreds to tens of thousands.
Every active contract will require attention during its operational life, usually in proportion to its importance to the organisation. However, every contract will need some attention as it approaches end-of-term.
This is when decisions are required about whether to renew or terminate. There could be some renegotiation of terms for a renewal, or some extensive work required to shut down a terminating contract. It could also be replaced with a different one from another third-party.
The workload associated with the management of active contracts is a pain point from three angles:
- New contracts arrive more often than active contracts are terminated, meaning an ongoing net increase in the contract inventory. The number of people who need to deal with contracts in some form tends to remain constant despite the increasing numbers and evidence of workload overload
- Low levels of organisational CLM maturity persist, in the form of inadequate technologies and practises being used, with little awareness of the pain being caused to the people responsible for dealing with contracts, or indifference to it
- The occurrence of events without warning that need almost immediate attention to an unknown number of contracts. Such events might include the divestment of a part of the organisation or the applicability of new regulations to certain contracts.
It can often take an avoidable contract-related disaster to better balance resources against requirements with respect to growing contract numbers, for far less than the cost of the disaster.
3. Legal hang time
Non-lawyers will often bump up against the ‘by lawyers, for lawyers’ problem inherent in contracts when trying to read them, where the language used inhibits a self-service approach to locating and thoroughly understanding any data of interest.
This general incomprehensibility of contract language is responsible for the high level of dependence on the Legal team for the provision of accurate information about a contract."
Arguably it can be hard to find busier people than the Legal team in an organisation, and much of their work sits in the urgent-and-important-at-the-organisational-level category. The inevitable outcome is unpredictable response times to questions about a contract, no matter how urgent and important these questions are to the submitter.
The effects of delay on people waiting for answers from the Legal team can be severe, but escalation may be possible. Clearly though, not every request for information can be submitted as AA++ priority, but work that genuinely is urgent for the Legal team will nearly always take precedence.
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Courtesy of Laura Frederick, Contracts Expert
Unlike a kicked football or a leaping basketballer, requests made to the Legal team for advice are not affected by gravity, and can remain hanging for some time.
To reduce the workload on Legal teams and prevent them from being interrupted by multiple, uncoordinated requests, contract management software offers self-serve options to the rest of the organisation.
Gatekeeper’s Employee Portal allows team members to submit complete and accurate requests to a dedicated location. Requests can be routed to the appropriate stakeholder - which may not always be Legal - and the owner of the request can check in on its progress without disrupting other teams.
4. Contract data extraction
Contracts are loaded with important data about activities, dates, pricing and so on. To overcome the difficulties of comprehensibility and accessibility of that data, effort is required to extract all such data and summarise it into a simpler, smaller and more readable form that anybody can access and understand.
Some data can also need to be loaded into various computer systems, say to facilitate:
- The generation of automatic reminders to key people
- Various calculations to be made over time
- The creation of reports on a regular basis
- Registration of all important obligations that must be complied with.
The one-time pain associated with this work is essential for reducing or eliminating the otherwise near-constant pain of having to continually refer to the contract itself, directly or via the Legal team, to obtain a new piece of data. It also prevents chasing data that has previously been extracted but not recorded anywhere accessible.
The ongoing pain is the arrival rate of new contracts. This can be compounded by a need to extract relevant data from some subset of existing contracts that have yet to undergo any initial data extraction, or have been modified since the last extraction activity.
Automating the extraction of key metadata is one way to resolve this common contract management pain.
AI Extract from Gatekeeper allows businesses to extract key information efficiently, accurately and automatically. Eliminating the manual nature of data extraction gives teams back time and allows them to store information in a centralised, accessible location, while triggering new workflows from key dates.
5. Obligations compliance
Some of the most important information found in contracts concerns the obligations that one or more of the parties must comply with. These obligations are usually expressed in the form of what needs to be done and when. Contract language can be a problem here, as well as any expectation that unstated assumptions are valid and well understood.
The pain point here for CLM has a few angles to it:
- The detail of each obligation has to be fully understood. That might require help from somebody who has been there, done that. That could be the Legal team, someone with expertise in the operational aspects of the contract’s subject matter, and so on. Hang time can be a big problem here
- The fully-understood obligation must be turned into the series of actions needed to achieve compliance. This could entail the capture of certain information from various sources and manipulating it in some fashion, using manual or automated methods that may or may not currently exist. That might also require help from somebody who can advise, design and/or implement a solution for dealing with the obligation, so possibly more hang time will be incurred
- Compliance with an obligation requires management, and that requires ownership, to ensure that the necessary actions demonstrably get done by the date required. That ownership and responsibility is often a component of CLM, unless a contract stakeholder is better placed to do the necessary work. Work overload and changing priorities are issues
Anything about an obligation can change at any time, visibly or invisibly, and the compliance activities might then need to be changed accordingly no later than a specific date. This could be simple or require starting again from the top. The problem is fitting it into the current work schedule.
Contract numbers can influence the level of pain associated with obligations management when the vast bulk of contracts have different types and purposes, as distinct from a single contract type such as a lease where activities are pretty much standardised.
Assigning contract ownership and monitoring allows businesses to keep on top of obligation compliance and fulfilment. Gatekeeper allows you to assign owners to individual contracts, as well as entire phases of a workflow.
Putting a name to a contract not only makes someone responsible for obligation fulfilment, but it also holds them accountable by the rest of the team.
Each owner can also access customised dashboards and reports so they can easily identify key dates such as certificate expiries, agreed milestones and any overdue events. This visibility allows them to drive corrective action, fill any missing compliance gaps and reach out to vendors if more intervention is required.
Wrap-up
It’s a fact of organisational life that somebody, somewhere will have to put up with some kind of insufficiency in their daily work environment that becomes a pain point and makes life hard for them. The causes and effects of such pain points are too numerous to mention, ranging from the ridiculous to the sublime.
The perception of pain is, like beauty, in the eye of the beholder and very personal. What one person finds annoying, another might find infuriating or not even notice. The key driver of that pain perception is the frequency of exposure to the situation that causes it, amplified by frustration at its persistence.
Because pain is personal, it can be hard to recognise or deal with, particularly if it is never mentioned. Soldiering on with a stiff upper lip or suffering in silence is not really a good long-term strategy. If anything untoward arises from a pain point, there’s no satisfactory answer to the obvious question: why didn’t anybody say anything about this before now?
The sample of CLM pain points discussed is potentially just the tip of the iceberg. It’s worth facing up to that potential, and finding out just how the land lies could deliver a good news, bad news story. Proactivity trumps reactivity just about every time though, and helps to fend off Murphy’s Law.
Some complete or partial solutions to the CLM pain points discussed are available in the marketplace, others could be developed by the organisation using existing or newer technologies, but many might have to be done manually. It doesn’t matter, because every little bit helps.
If CLM pain point elimination isn’t practical or possible, given organisational priorities, operational constraints and other factors, any minimisation is far better than accepting the status quo."
For those stuck with the status quo, keep chipping away at it. If you don’t, nobody else will.
If you would like more information about how to identify and deal with CLM pain points, or how Gatekeeper can assist with that activity, then contact us today.
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