Best practices in contract management
Every organisation has contracts, but not every organization adequately manages its contracts. And while the nature and complexity of these agreements can vary widely, careful governance enables organizations to maximize their value and limit their exposure. On the other hand, contracts that are administered poorly—or not at all—tend to leak revenue, drive costs upward and become cautionary tales of unfettered legal and compliance risks.
Enter the need for contract lifecycle management (CLM): the proactive, methodical management of contracts from initiation through award, compliance and renewal. Generally, large corporations aspire to have fairly sophisticated CLM programs, but all too often, they fall short of the mark because their contract processes are decentralized and dispersed across multiple departments, including sales, procurement and legal. Meanwhile, law firms—though themselves partnership hubs, given their relationships with clients, managed services providers and other vendors, and despite their expertise in drafting contractual terms—tend to lag even further behind the corporate world in their contract management practices. Perhaps this is because individual lawyers tend to feel protective of their contracting processes and are reluctant to relinquish their power to others; law firms do tend to lack a formal hierarchy, stymieing decision-making.
To the extent contract management practices, or even technology, exists in these organizations and firms, it is often addressed in a siloed way. With different departments tracking different information, buy-side and sell-side contract solutions may seem impossible to merge. But as technology has improved, so has its ability to capture information across departmental lines, unlocking strategic value for all lines of business. And organizations of all sizes, including law firms, that fail to use these tools to corral contracts across their departments are missing out on the benefits of centralized contract management.
HBR Consulting experts have helped clients of all sizes, and on both sides of the negotiating table, create end-to-end CLM processes and protocols to address these seemingly impossible challenges and reap the rewards of contract management. Based on this experience, here are six best practices that can help corporations and law firms alike optimize the contract management lifecycle.