Recent research by IACCM (The International Association for Contract and Commercial Management), the global professional group for contract management specialists, shows that over 60% of member companies have implemented contract management software – but less than 30% have succeeded in that same software gaining widespread adoption across their organisations.
It’s a depressing and worrying statistic.
So much so, in fact, that in order to get to the bottom of what’s going on here – a clear lack of ‘follow-through’ when it comes to embedding contract management tools into business workflows – we have worked with third party experts to compile a snapshot of what may be going on.
After all, contracts are the language of business, contributing bottom line results through effective management. Rather than a bureaucratic necessity, a well-managed contract drives growth and innovation. Indeed, IACCM has proven that good contract development and management could improve profitability by the equivalent of 9% of annual revenue.
So why aren’t enough of us doing that?
Access and automation
A few clearly important things emerged from the research that we need to start talking about here on thedmcollaborators.
First off, what comes through in our study is the importance of access. Employees throughout your company need to access the contract at different points in the process. That means a true best practice solution puts the contracts not just in the hands of those who create them, but also in the hands of the people who perform them. Everyone who needs to have the necessary visibility into contracts so they can perform their tasks effectively and efficiently, should do so.
To do that and get that 9% back, we argue firms need to do the following:
• Create a template library that streamlines contract creation and facilitates negotiation
• Automate the review and approval process
• Establish a method to handle custom agreements; these often have the highest risk and the best opportunity for reward
• Build in visibility to the contract pipeline.
But of course, what you do with an executed contract and how you integrate it into your business is just as important as developing it. The essential element of a best practices contract management process is therefore a central repository for signed contracts, which is the foundation upon which the other procedures are built.
This is not a new concept, as it used to be the central file room. But the clear message to the DM community today is that this has to be a modern document management system.
That 9% ‘free profit’ is there – so let’s work to get it
We concluded by agreeing that placing a value on simplicity, whether it is documenting and developing a process or choosing and implementing software, is also a sound basis for great contract management work.
That’s down to the fact that simplicity fosters understanding and acceptance and paves the way to success. So you really can’t do this unless you understand your company and its business needs. And as you look at systems, focus on the solutions that will deliver value to you where you are, not one that dictates a ‘one size fits all’ straitjacket you need to contort into.
Plus, importantly, use technology to break down barriers, not create them. Think about what users of a system will experience – and do everything in your power to make that positive. Integrate into other systems as much as possible to drive that positive experience throughout the organisation – and in fact, the greatest value is achieved you’re your contract management package integrates with your ERP system.
So clearly, leveraging systems, information, and best practices is the best way to position an enterprise you to deliver value from contract management – and if you start doing all these things, that 9% payback is eminently achievable inside your own four corporate walls.
Howard Frear is Sales and Marketing Director at EASY SOFTWARE UK
The guidelines, ‘Contract Lifecycle Management: Implementing Best Practices Into Your Processes’ are available to download here