How to prepare your business for contract lifecycle management (Part 1 of 2)

In our previous blog article Making a Business Case for Contract Management, we outlined how to quantify the benefits of implementing CLM in your business and how to get buy-in from your stakeholders.

In this article we'll take you through the next steps to make it easy to implement once you get the go ahead for your business case.

Refine your resource estimates

Current roles with contract responsibilities

Estimating the volume and value of the current contract inventory gives you that initial view of the business opportunity for digital transformation in the contract management function and allows you make estimates for potential savings.

Alongside this step, it’s also important to discover who is doing what with respect to those contracts, where, and how often. If possible, a rough estimate of the average time per month consumed by these activities would be helpful for sizing the total work effort.

Seeing how much or how little Contract Management activity is currently being performed, can provide a tangible indicator of risk. It may also provide a pool of potential candidates for future Contract Management roles.

The size of your contract universe and the current level of proactive management will give you an indication of how much resource will be required for future CLM.

You can then assess what combination of software and personnel is going to work best for your business.

Organisational design

The structure of the new CLM function may be determined based on:

1. The size of the contract inventory and the estimated proportion of contracts that will need active management
2. Assessment of current roles with contract responsibilities
3. The number of CLM activities described in Your Complete Guide to Contract Lifecycle Management (free ebook) that the function will be tasked to perform
4. Analysis of the size, geographic spread, operating model, and organisational complexity of the business.

There will need to be a clear distinction made between the direct responsibilities to be allocated to the new CLM function and any indirect / supporting responsibilities to be allocated outside the function, such as participation in various reviews.

The key outcomes of the design process for the new CLM function will be to decide:

• Whether the desired CLM activities can be accomplished by a single person, a single team, or multiple teams to cover various time zones
• Whether members of any particular team need to be co-located or can be distributed
• What software requirements they have for a contract management solution and for remote working/conferencing
• If the CLM function should be insourced or outsourced (to an off-shore, near-shore or on-shore service provider)
• How recovery of CLM function costs will be achieved - eg. using a chargeback mechanism or some other method.

CLM Policies & Standardisation

At a high level, you should now have a good idea of what you require in terms of resource. However, there are still several activities that you should be focusing on before pushing ahead with your new function.

You need to put together a framework for your function that will ensure it works efficiently and can be scaled in the future.

The first two areas to focus on for this are Policy Formulation and Standardisation.

Policy formulation

Existing policfies covering procurement and contracts may need to be updated, or new policies may be needed, to:

1. Mandate the use of the CLM framework across the enterprise, and specify the criteria determining if a contract must, may or need not be managed
2. Define the common language to be used in all contracts when the business operates in multiple countries with different spoken languages. This will enable Contract Managers with enterprise-wide responsibilities to use the common language version of any contract documents when conducting reviews or analysis
3. State which aspects of the contract inventory and the CLM process measurements need to be reported by whom, to whom, in what format and how frequently
4. Describe any circumstances where specific contract management personnel need to be involved or certain activities must be performed.

Standardisation

Doing the same thing the same way everywhere in an organisation, where practical, can drive compliance with best practice, facilitate the use of automation, reduce training and development costs, and result in highly trustable data.

Wherever standards are implemented, a method is required for handling requests for variations and extensions, implementing any approved changes and issuing advisory notices.

The following items should be standardised by consensus across relevant stakeholders where practical:

1. Common, simplified and optimised contract management processes, based on the activity groups described in Your Complete Guide to Contract Lifecycle Management (free ebook), and associated KPIs
2. Standardised clauses, country-specific where necessary, for use in all or selected contract types to minimise negotiation time, showing whether or not the clause is negotiable, and who has authority to approve changes under what conditions
3. Standardised contract templates consisting of general and standardised clauses to minimise negotiation time
4. Dual-language format for contracts when local language must by law be used for legal documents
5. Common contract currency for consolidated enterprise-level reporting
6. The method of conversion from local currency to common currency when different
7. Standard choices of data values to ensure data consistency when recording various contract attributes, and to provide confidence in the completeness of data returned to queries against those attributes
8. Common templates for capturing and presenting key contract details in a consistent format (eg. a contract management plan, obligations and rights summary, a risk matrix etc)
9. Practical contract document naming conventions that can sufficiently identify a document to minimise having to open it to check
10. Practical directory structure naming conventions for the centralised contract documents repository that can help locate different document types.

Once you’ve written the policies and standardised your processes, you’ll be ready to start collecting contracts together.

In our next blog, we’ll take you through how to get buy-in from the rest of the business and how to prepare your documents for your contract repository software.