February 16 by Prashant Dubey

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!

I’m a fair weather college basketball fan. Growing up in India and the United States made me a renaissance sports fan – albeit an inch deep and a kilometer wide. As such, I know just enough about college basketball to understand the games when I watch them but not nearly enough to speak cogently in a group of ESPN addicts. This is why I love Nate Silver.

Nate Silver attended my alma mater – The University of Chicago. His sport was data analytics. He is widely regarded as one of the most prescient of predictors. Ardent fans and neophytes alike, as outlined on fivethirtyeight.com follow his March Madness predictions, religiously. So, when trying to articulate Key Performance Indicators (KPI’s) for a Contract Lifecycle Management (CLM) project, it made sense to turn to Mr. Silver for inspiration. By association, I’m now an informed basketball fan.

Leading Metrics beat lagging Metrics

One of the key things that I learned from Mr. Silver is that lagging indicators are nice, by leading indicators are better.

Win records. Of course they matter. Points per game? Number of players in double digits? Blocked shots? Free throw percentages? All important. However in the course of a game, as the game progresses, there are other measures that are statistically sound predictors of successful outcomes:

    – Time remaining in the game
    – Score difference
    – Pre-game win probabilities
    – The team that has possession at the time of prediction
Basketball Statistics relate to Contract Management KPIs

When translating this to CLM measurement, it reminds me that lagging indicators like contracting cycle time or achievement of rollout/implementation deadlines are important but leading indicators are as well. Things such as:

    – Level of Readiness of a business group or contract type to adopt CLM
    – % Of contract documents that can be readily located for purposes of building a high integrity contract repository
    – % Of contracts that go through a legal review workflow (either via standards pushed out to non-lawyers or through actual routing through legal)

Here is one key difference between the basketball leading indicator measures and Contract Management measures. In the case of an active game the leading indicators are hard to control – they exist and they are predictors of outcome. In the case of CLM the leading indicators above, if measured, can be used for adjusting strategic decision-making, sequencing of effort or to proactively cultivate stakeholders.

You get what you measure

The University of Wisconsin Badgers are an accomplished college football team. However, they are often underrated. Case in point. This past year the Badgers finished in the top 10 in the AP polls. However, they were ranked 40th in the ESPN recruiting rankings. This means that if one went just by the ESPN rankings, Wisconsin would be unable to recruit top players.

Wisconsin Football Teaches us About Contract Management KPIs

As a matter of fact, they don’t. Most of their recruits don’t even rate in the top 300 of ESPN recruits. But Wisconsin wins. A lot. Their strategy? Recruit burly linemen from around their home state and make sure they are a cultural fit. Add skill players from the Southern and Eastern parts of the country. The result? They are the highest ranked team in achievement relative to their average recruit rating.

UW recruiters are measuring things like cultural fit and long term likelihood of successful outcomes. This means that local players are likely focusing on these things when positioning themselves to be courted.

In the world of Contract Management, measuring things that are correlated with success can lead to certain desirable outcomes and can influence behavior. For example, successful CLM programs measure things like adherence to process, once established.

    – Are colleagues creating contracts the old way or using the new CLM system?
    – Are all executed contracts coming to the legal department for contract closeout or are they staying local?
    – Are people using the intake forms to communicate requirements or are they lobbing emails over the wall and using executives to push their needs through?

Some of these measures are “control” measures and some are “cultural” measures. However, by tracking and reporting these measures, CLM implementation teams can actually influence behavior.

You can’t manage what you don’t measure

 
Simply stated, without knowing a baseline, a target and progress along the way, a variable cannot be managed. User adoption is a great example. In contract management there is a tendency to inadvertently overpromise. In order to get funding approved, many CLM teams will describe a world where 200 users will contract differently in 12 months. In reality, this may turn out to be 20. Tracking user adoption and setting targets allows CLM implementation teams to adjust and manage the realities of adoption. They can ask why adoption is not as fast as desired and explore root causes.

Sometimes though, even measurement is intractable. In the latter part of 2015, the number of home runs hit in Major League Baseball skyrocketed. Analyses explored the baseball itself, the weather conditions (was it dryer), the number of super powerful rookies… turns out that none of thee things were identified as root causes of the phenomenon. The MLB commissioner had called for more offense the year prior, so perhaps there was something that drove it. In this case, no one could really figure it out (including Nate Silver), so everyone just celebrated it and stopped thinking too hard…

Be sure to check back on February 23th for the next edition of “Mastering Contract Lifecycle Management” to learn how you can increase the integrity of your Contract Repository.

To learn more the keys to successfulling implementing you Contract Management System, visit the previous post – HERE.

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.

Download the Forrester Wave Contract Management Report for Free (a $2495 value) to see a full analysis on the top CLM vendors.

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