4 Best Practices for Managing an Underperforming Contract

Dealing with contracts is probably a daily occurrence at many companies. Hopefully, there is a coherent contract manaogement strategy in place, as well as a sound software solution that facilitates oversight. Of course, even if there is a good system in effect, there is always the chance that one or more contracts will not perform as expected. It is downright impossible to control the actions of others, and in some cases, there are circumstances beyond anyone’s control that will influence the way in which contractual obligations are met. In the event that a contract management team is faced with one or more underperforming contracts, a proactive approach to managing the situation should help avoid a complete breakdown and subsequent legal battle. Here are some best practices for managing an underperforming contract: 

Look to the Contract for Guidance

To determine the extent of any contractual failings, both parties must first look to the contract for an explanation regarding how things were supposed to be going. Although one side may feel that the other side is not living up to its contractually mandated obligations, the way in which the contract is drafted may prove otherwise. However, if it is abundantly clear that performance is indeed lacking in some regard, a good contract should also provide some guidance as to how the situation should be handled. Unfortunately, some contracts are haphazardly written and thus subject to differing interpretations, which often leads to misunderstanding and subpar performance. Nevertheless, the parties should strive to adhere to the intentions at the time of drafting and may have to make slight accommodations to prevent further erosion of the situation.

Assess Performance More Frequently

Ideally, a potential shortcoming will be identified very early on and action will be taken to mitigate any further issues. The best way to accomplish this is by implementing a contract management strategy that prioritizes meticulous organization and frequent contract assessments. In general, this can be achieved by utilizing purpose-built contract lifecycle management software that offers reporting and other features that help increase contract visibility for the contract management team. If a contract slips through the cracks and is in fact underperforming, it is critical to increase oversight at once, clarifying expectations and any impending deadlines.

Remain Objective

Managing a contract successfully ultimately boils down to managing relationships well. There is always the possibility that people will have different business mindsets or even a clash of personalities. In some instances, these divergent viewpoints are the real source of the issue, causing people to shun their responsibilities or not care if they inconvenience others and therefore they perform in a mediocre manner. This is obviously unacceptable, though sadly it is sometimes unavoidable, in working relationships. As a result, it is vital for leadership to assess these situations with a completely objective lens. It may be hard to overlook a brash colleague, but the focus has to be on the actual results.

Mandate Increased Communication

In far too many cases, the reason a contract underperforms is due to communication lapses. This may be an internal problem with contract management team members failing to keep each other apprised of pressing issues, or it may be an external issue with one side intentionally or inadvertently neglecting to inform the other side when something undesirable occurs. Efficient and timely communication must occur at all levels from the very beginning of a contracting relationship. And, the moment anything seems awry, communication has to increase twofold.