Company leaders often find the contracting aspect of running a business risky and frustrating. Nonetheless, entering into these legally binding agreements is something that businesses have been doing and will be doing for centuries. Despite this reality, it is often surprising how many companies fail to devote sufficient resources to this part of their operations. In many cases, once legal counsel has negotiated and drafted the agreement, the actual administration of the contracts is often neglected in favor of other pressing matters. Of course, this can become a costly oversight given the legal and financial ramifications associated with contract breaches. Here are 4 tips for ensuring better contract management outcomes:
Set the Stage for Success
As with any business partnership, the key to a successful contracting relationship is to take steps at the beginning that will set the stage for long term success. This means finding the right partner, establishing clear goals and expectations, and creating a mutually beneficial contractual agreement. It is far easier to manage a portfolio that contains unambiguous and well-designed contracting arrangements. The more work that is put in at the beginning to ensure that everyone is on the same page will prove crucial over the long haul.
Institute a Results-Oriented Approach
In order to have better outcomes, the management approach must be results-oriented. Unfortunately, the contracting process can be fraught with issues because parties are more focused on risk mitigation and allocation. Granted, it is important for the parties to protect themselves from sticky legal situations. However, instead of fixating on the many what ifs, the focus should primarily be on how best to achieve the desired results and tailoring the contractual obligations to that end.
Be Proactive, Not Reactive
Good management requires organization, diligence, and a commitment to get out in front of any potential problems before they become real issues. Being proactive when it comes to contract management is vital to preventing breaches, as many situations are fixable if simply caught in time. If a team is constantly reacting to problems instead of figuring out how to avoid them altogether, it is far more likely that the other side will take issue with the agreed upon performance, or lack thereof rather. One of the best ways to ensure a proactive approach to contract management is to invest in a practical software solution that will eliminate some of the more mundane tasks inherent in managing contracts.
The importance of communication cannot be overstated, and this is true when it comes to virtually any type of business matter or management process. Of course, communication with respect to contracting matters is of particular importance given that failing to communicate can be the reason that a dispute ends up in front of a judge. For the best results, timely and effective communication must occur horizontally, vertically, and laterally, as well as internally and externally. A good way to ensure that communication is appropriate is by establishing clear guidelines from the outset. For example, if there is to be a delay in a delivery or payment, the method of communication and timing should be decided upon before this actually happens, such as by email at least twenty-four hours in advance. In the end, good communication ensures good relationships and minor problems are unlikely to become major ones.