10 Ways GCs Can Cut the Cost of Contract Management

From the Experts

, Corporate Counsel

   | 8 Comments

Corporate boards and executive management are increasingly looking to the general counsel to take charge of contract management.

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What's being said

  • Nay Aung

    I do like this article. It gives me too much practical knowledge.

  • Dermot Whittaker

    I‘ll second Unnamed 4/3‘s comment "While automation is part of the answer, it can add little value if you have no idea what you are trying to automate and why" -- but with this proviso: CLM automation systems (or the homegrown spread sheets that are baby steps in the direction of CLM systems) can also make contract analytics easier and more widely available. Contract managers can beat the bad rap of weediness when they can show high-level assessments with dollar or time figures, or quantify risks and opportunities associated with contracts. This can be a powerful tool for waking up others in the organization who are prone to be dismissive about contract management. Admittedly, analytics and reporting like this takes thinking on someone‘s part -- but that someone can be the contract manager herself not a reluctant member of legal or C-suite. The CM professionals with the insight can take the initiative (calibrated to their organization‘s culture, natural), making the case in terms that are persuasive to executives or legal. This in turn can show the value in analysis of contracts and processes, and ultimately in a CLM automation or analytics system.

  • Procurement and Legal need to be a partnership (as does also finance, risk, and etc.). And, my opinion is that one size as to process does not fit all. I have seen some horrid injustices to corporations (time, money, risk, lack of advancement, low motivation of employees, - you name it) by putting IT into the same contracting process as for example "staplers" (and same goes for new product development) - progressive products need progressive practices, plus those who understand the products. Equally, for every attorney that really is in it to "move" a business forward, I know many more who are so risk adverse that the business only does well despite itself. And, in all fairness I have seen plenty of procurement people who "just do not get it" as well.

  • Terri Aprati

    Sounds like a lack of due dili to me. Unfortunately, it happens a lot. Many corporations hire outside law firms to review contracts, real and personal property agreements and ownership, leases, IP, accounts receivables and payables, employee agreements, lawsuits, etc. Then the corporation, after paying the law firm for completion of its due diligence, indemnifies said law firm for such due diligence work. It is crazy. I have been at corporations which have acquired so many companies, at rapid speed, that no one at the acquiring company has reviewed the acquired companies‘ boxes of contracts for years. I believe this review should be a shared effort of several departments prior to acquisition or whatever transaction is occurring.
    The solution? 1) A corporation should put together it‘s own employee due diligence team, including one department member from legal, accounting, audit, tax, sales, marketing, HR and facilities to pore over all of the contracts, agreements, licenses, assets, liabilities, litigation, etc.; and 2) after the company which is being acquired (or whatever) has provided all of the information the acquiring company has requested, each person responsible for providing such requested information should be asked to sign a statement, saying "to the best of my knowledge, I have supplied all materials listed on Schedule (whatever) of the Due Diligence Request for Information." It can be quite simple, but the statement needs to be signed. It is amazing what new information comes forth, once someone commits his/her signature to a statement asserting he has provided all the info he has knowledge of to produce.

  • Fair points all - unnamed April 3rd commenter. The purpose of this article is to try, in a small way, to inspire General Counsel to acknowledge the importance of Contract Management. Let‘s face it - dealing with a large M&A deal or prevailing in a large bet the company litigation matter get‘s more airtime. However, Contracting is how the company functions and without a fluid process to manage same...the company doesn‘t function properly. I further agree that automating a bad process is likely worse than not doing it at all. As such, I hope that your feeling that the article is "relatively useless" is tempered by my acknowledgement of the validity of your points.

  • While some decent points are made, most of this article is relatively useless. First, let‘s recognize that the same managements who didn‘t give a hoot about these issues when they were screaming for layoffs and cost reductions in their law departments five years ago, are now in the position of Claude Rains in "Casablanca" expressing their "shock" at the anecdotal type evidence cited, that there are unknown risks in their corporation. Second, nothing of value will happen in these areas until contracts is given some respect. Contracts management is often the Rodney Dangerfield of legal department practice: it gets no respect, to the point that some GC‘s in the past have proudly stated that their lawyers "don‘t do contracts" as if it were a waste of their time, energy and talent instead of a good way to keep themselves and their clients in sync on what‘s happening in the business. Third, often because it‘s seen as a low priority activity until something hits the fan, very little thought is given by either clients (who are too busy complaining the lawyers are getting in the way of doing business) or the lawyers (who don‘t see getting contracts done right as their express route to the GC‘s seat) to the why and how of contracts. While automation is part of the answer, it can add little value if you have no idea what you are trying to automate and why. The truth in any kind of automation that any manufacturing engineer will tell you is in the planning and scoping of the project. So adding automation without understanding why you are doing it and what it needs to accomplish will frustrate both the vendor and the lawyers and add little to everyone‘s value proposition.

  • Brenda Anne Akello

    this is a great insight. thanks

  • not available

    Excellent points, Prashant! Agree that Contract Lifecycle Management (CLM) is a foundational tool/strategy for enterprises interested in contracting efficiencies, reducing risk, and increasing revenue. Contract management is, perhaps, one of the last core business processes to automate in an increasingly connected world.

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