Top Contract Management KPIs to master CLM

“Mastering Contract Lifecycle Management” is a 15 part, bi-weekly series writen by Prashant Dubey, CEO of The Sumati Group, dedicated to expanding your mastery of Contract Lifecycle Management (CLM). The series is divided into 5 parts and encompasses the entire lifecycle of purchasing a CLM solution, including: the research phase, launching your CLM project, implementing the key building blocks, strategies for driving user adoption, and continuing down the road to success. Enjoy!

The word “Integrity” is a strong word. One that represents high moral principles, honest…trustworthiness. More colloquially, it also means that one does as one says – in other words, “walks the talk.”

A breach of integrity usually results in loss of trust. So, that’s a serious thing. As such, the word integrity is also often used too loosely.

I was taking a car from my native place in Northern India to New Delhi. About 300 Km, and with the new highways in place, about 3 ½ hours (yes, predicting travel times in India has gotten easier with the new infrastructure). The driver however chose to take the old highway, stating that it would allow us to get to Gurugram faster then make our way to Noida. I believed him – after all, why would Google Maps know more than Sanjay, the local guy? I took him at his word.

6 1/ 2 hours later, we arrived at our destination. He didn’t deliver as he said. However, as John Malkovich said in Dangerous Liaisons… “there’s nothing more I can do, the situation is beyond my control.”

Crowded street

Was this a breach of integrity? Hardly. If anything, Sanjay could be accused of standard Indian optimism, and reliance on the divine to achieve a stated goal. What then is integrity and what is a breach of integrity?

Integrity = Trust

In the world of contract management, I often talk about the importance of high integrity contract repositories. The word integrity in this context is carefully considered.

Companies build contract repositories because they don’t trust their existing processes to enable proper obligation management. If a company needs to know if they in fact have a contract with a particular counter-party, they need to find the contract first. Then the way the contract is represented in the repository needs to clearly indicate whether the obligation is active or expired. If a stakeholder doesn’t trust the repository to yield clear answers to these questions, then it can be assumed that the repository lacks integrity.

A good number of companies understand this and have made good progress in organizing contract documents, extracting metadata and populating their repositories with contract documents and metadata.

Is that enough? Well maybe not.

Trust but Verify

This phrase has become almost cliché over the years. Used extensively by Ronald Reagan, it quickly took on a political and social policy dimension. However, on its face, it’s a good concept to represent how a company can increase the integrity of their contract repository.

A lot of enhancements have been made recently to technology for automated extraction of metadata. Sexy terms like natural language processing, machine learning and semantic indexing are pervasive in marketing literature. At a fundamental level, these technologies have been around a while and they work…but at a base level. If fed the right inputs/context, they can (sometimes) identify (about) the right text, extract it and provide a window for a human to verify the accuracy. Then presumably, over time, the machine “learns” and the accuracy increases. Cool.

There’s a catch though – the process is never “clean.” This is where trust but verify comes into play. This means that technology as described above is not an elixir but an enabler and needs a process “wrapper” that enables verification and therefore high integrity output. Areas that we have found that benefit from verification include:

 

    – Ensuring that parent/child relationships in a contract family are complete with all relevant documents included.

    – These documents are in the right hierarchy.

    – The metadata is reconciled, considering the entire family relationship – for example if an amendment resets the expiration date of a relationship, it needs to be properly represented at the parent level.

    – Multiple contracting entities within one company often contract with the same counterparty. How is this represented?

    – What about superseded contracts? How is this dimension represented in a contract family and metadata?

    – What if there are missing documents in a family? What assumptions have been made to “plug the gap?”

Increasing the integrity of a contract repository requires a deliberate process with deliberate actions and decisions. Some of these can be executed as a Quality Audit after initial population of a repository. However, we have found it is most productive to organize contract documents and reconcile factors such as the ones outlined above, BEFORE the repository is built and populated.

If Sanjay and I came to terms before the sojourn and I told him that I was ok if the journey took more than 3 1/ 2hours, I may not have been on the brink of losing my paneer at the end of the drive.

Integrity matters.

 

The “Mastering Contract Lifecycle Management” series is written by Prashant Dubey, bestselling author of The Generalist Counsel and CEO of The Sumati Group, which is the Apttus premier contract migration partner.

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