This is the second in a two-part series outlining pre vs. post-award contract management solutions.
In part one, we covered post-award contract management solutions. They tend to be easier to implement and less complicated than full life cycle solutions, however, they lack the pre-award features that a full life cycle solution will have. So when does it makes sense to adopt a full-blown contract life cycle solution vs. a post-award only solution?
More Approvers, More Reviewers, More Time Cost
The more $100/hr approvers and reviewers needed to sign-off on and manage a contract, the more likely it is that the benefit of a complex contract life cycle management solution outweighs the cost and implementation time required for success on these systems. Generally, companies looking for full CLM solutions are looking for:
-Contract authoring and editing
-Workflow approval management
-Financial system integration
Most of the above features and benefits are self explanatory and don't require much description. But we will look at two items in particular, as they often form the most important and potentially vexing components of a full-blown system.
Workflow Approval Benefits and Pitfalls
The number of people involved with a contract implies high contract value and potential risk if things go wrong. These underlying drivers lead to multiple stakeholders in finance, services, business development, support, etc. needing to sign-off on changes as well as the final contract. There are benefits around limiting potential risks and liabilities, but as the number of stakeholders needed to approve a contract grows, the main benefit is actually getting contracts done quicker, and most importantly, just getting them done.
The benefits are clear, but implementation is typically not. Mapping out the approval flow and identifying corner cases or exceptions of what redline items require everyone’s approval versus a few, or which types of contracts require approval from which department head, etc., can get complicated quickly. The symptom of this issue may be “the software doesn’t do what we want it to do,” but the cause may just as likely be internal organizational processes that are difficult to codify into an elegant and time-efficient approval process.
Why Lawyers Won't Switch from Word
The attraction of an integrated contract authoring tool with libraries of approved language and alternatives seems obvious. What’s not obvious is how challenging it can be to get lawyers to switch from Word, or any application for that matter, that they have grown accustomed to and comfortable with.
In the interviews we conducted, we did not find one lawyer who was using anything other than Word for constructing and redlining contracts. In addition, we heard lots of paralegals and others talk about the challenges associated with getting lawyers to use other software tools. Simple collaboration tools could take a year to get most on board with, and these tools were much simpler than asking lawyers to switch to a new contract authoring tool.
$50 for 5 Minutes
Everyone may roll their eyes knowingly about lawyers and their lack of adaptability to new technology, but in some sense they are operating completely logically. In most legal practices, lawyers bill $50 for 5 minutes of their time. Even when they’ve moved into a general counsel role, taking 5 minutes to mention the idea of using another contract creation tool just cost you and them $50. Now go add up all the meetings and training time to get them to switch, and you get a sense of how what at first seemed obvious now seems increasingly impossible.
The good news for contract managers is that they have the attention of software providers and have over 100 options to choose from. The bad news is that they have over 100 options to choose from and no time to evaluate them all.
As mentioned in the previous post, the key is to identify where the highest revenue, cost, or risk lies in your current contract process: Is it before the signature or after the signature?
If your primary cost is in the time value of all the people involved in approving, reviewing/redlining, re-approving, and signing-off on a contract, coupled with the possibility of not getting the contract done at all, then a full CLM solution is probably worth the cost, complexity, and time to implement.
You can download the complete white paper, 100+ Contract Management Solutions: Do You Have to Try Them All? here.