Part 1: The Research Phase
“Mastering Contract Lifecycle Management” is a 15 part, bi-weekly series 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!
Everything is context. Context is formed via experience. Experience leads to certain inherent bias, and bias is often presented as a point of view. As such, this post – on the 10 must haves in a Contract Lifecycle Management (CLM) tool – is my point of view.
Hopefully my point of view is rooted not in vapid hand-waving, but in empiricism. Over the past two decades, I have spent a lot of time with General Counsel, and have really toiled to understand what drives them and how their role has evolved – in fact I was even honored to be able to chronicle my thoughts in a book called The Generalist Counsel. Much of my point of view on CLM is borne from my knowledge about how General Counsels view the world of contract management.
Contract Management = Obligation Management
Fundamentally, contract management for General Counsel is about obligation management- which is akin to risk management. General Counsels are at the headwaters of organizational risk management. There is a lot of sexy talk about the features and functions in technology that allow fluid contract creation, approval, clause library usage – all great things. However, the irony of contract management is that many organizations spend a lot of emotional energy on negotiating a complex contract (let’s say 3 months), then live with the obligations for 3 years – but end up, post execution, just saving the executed contract in a passive location, like a legal department shared drive. This behavior creates risk – which makes General Counsel nervous.
A Contract Repository is the Foundation
So in my view, shaped by our experience establishing contract repositories for over 5 million contract documents across all contract types and industries, most organizations have a “maslow-esque” need for basic search and retrieval of executed contracts, and a need for knowing, in a split second, if an obligation with a counter-party exists or not. This means that the features and functions of a CLM repository are at the top of the list of must-haves.
See what Forrester Research ranks as the essential 5 functions of the leading Contract Management systems, along with the top vendors in the CLM space.
In fact, my view on the best way to think about Contract Management must-haves is “back to front.” In other words – post execution obligation management back to contract intake/creation. This also has the added benefit of mirroring the reality of CLM implementation. As incendiary as it may sound, the vast majority of implementations are overly idealized and end up stepping back in scope to first tackle the challenge of creating a single source of truth for material obligations, then use that success to automate the front end of the contracting lifecycle, one contract type at a time. So, using this lens, here’s the list, presented David Letterman-style.
The Essentials of Contract Management: Back to Front
10. Contract Clause Library with the ability to organize clauses in ascending/descending order of risk.
9. Contract Creation workflow with different swim lanes triggered by requirements gathered in an intake form.
8. Ability to create hierarchical approval workflows based on quantitative thresholds such as contract value, or qualitative thresholds such as data privacy addendum requirements triggered by type of relationship with vendor/counter-party.
7. Integration with other “source of truth” systems such as vendor masters, AP systems, configure-price-quote systems.
6. Intake form that can integrate with single sign on (SSO) environments such as company intranets, matter management systems and enterprise content management/knowledge management systems.
5. E-signature integration with the ability to be implemented first on a standalone basis, then afterwards integrated with the contracting workflow.
4. Reporting on things such as contracting cycle time, variance of end contract from starting template (negotiation intensity) and fluid reporting by every metadata field in the database.
3. Ability to define parent-child hierarchies in contracting relationships, with functionality for the entire contract family obligation status to be updated if the metadata for any document (i.e. amendment) is updated.
2. Ability for the CLM system to represent complex counterparty relationships. For example, the ability to represent situations such as multiple contracting entities within one contracting party having relationships with the same counterparty, and the ability to easily identify if there are superseding relationships in other agreement records.
1. The ability to fluidly define metadata by contract type, with flexibility in articulating metadata field definitions and ease of updating fields as empirical knowledge of contracts is gained through review.
Whew – so there’s my Top 10 CLM Must-Haves list. There are, as always, some “sub-must-haves” to each of these must-haves. However, if you use this list as the framework for your CLM RFP, and add detail to it, you should be in pretty good shape to evaluate CLM vendors based on what is actually needed in your organization.
Be sure to check back on December 29th for the next edition of “Mastering Contract Lifecycle Management” series to learn how you can effectively evaluate contract vendor options.
To learn more about Contract Management, visit the previous post of the series – “What is Contract Management” – 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.