This article was originally published by Legaltech News.
It’s funny how some of the most important aspects of running a business can also be the things that tend to drag businesses down. Contracts are an excellent case in point. While contracts are essential, managing them can be a labor-intensive efficiency killer. Corporate legal departments tasked with watching their organizations’ bottom lines need a better way of managing the process.
Legal professionals have relied on everything from email to spreadsheets to (gasp) paper to track, share, and analyze the status of contractual agreements. There’s little to no visibility into contract terms and conditions and limited ways to determine if partners are abiding by their contractual obligations. Worse, manual, non-standardized methods can greatly increase the risks of errors.
Building an efficient and high-performing legal operations team requires improving how you manage the lifecycle of your contracts. The process must become standardized, streamlined, automated, and measurable.
A CLM Growth Spurt
These needs help explain the rising popularity and evolution of contract lifecycle management (CLM) software. CLM software has been around for at least a decade, but demand has increased. CLM tools made their initial impact with procurement teams to track and manage “buy-side” contracts but have evolved to also focus on the sell-side as legal operations teams’ oversight over contracts has increased. That’s probably why Forrester estimates that the market is experiencing 18% annual growth.
CLM software can provide legal operations professionals with the means to automate, track, and analyze the lifecycle of contracts, from initiation to expiration and renewal. Managing these tasks across potentially hundreds of contracts can eat up an enormous number of personnel hours that could otherwise be spent working on legal matters. With a CLM solution, teams can manage contract assembly and administration from a central dashboard that all stakeholders can easily access. From there, they can manage workflow approval processes, track and monitor obligation fulfillment, search for and retrieve information from the contract repository, be alerted to impending renewals, and more.
CLM can significantly reduce contract cycle times, leading to increased revenue, improved compliance, lower risk, and a boost in employee productivity. Attorneys will spend less time managing agreements and have more time to do value-added work.
But these are all table stakes. Let’s take a look beyond the essentials to see how CLM technology can truly enhance the contract management process.
Not Your Grandfather’s CLM
Corporate legal departments are becoming defined by their ability to set goals and deliver measurable results, and contract management should not be exempt from your teams’ analysis. The best modern CLM solutions have the potential to help your team make better decisions about the way they work with contracts.
Legal operations professionals can configure CLM software to correspond to your organization’s unique business rules and adjust as your corporation’s goals evolve. The system can automatically create and monitor workflow processes to correspond to these rules, helping teams streamline contract management.
Just over the horizon is the ability to integrate innovative technologies like artificial intelligence (AI) and blockchain into the CLM mix. Already, we are seeing firms begin to use AI for contract data analysis with its power to enable faster, more accurate analytics and real-time recommendations. The initial application of blockchain in CLM is likely to be for creating and managing smart contracts. Eventually, we will see CLM solutions with the ability to scan contracts and quickly identify areas of potential risk and recommend changes or adjustments.
Getting Started with CLM
If you do not yet have a CLM solution, there are a few things you’ll want to consider before implementation.
First, evaluate your current processes. Begin by ascertaining who is involved in the management of that contract and how many hours it takes them to manage the lifecycle. Understand the type of data that’s included and how it’s being tracked. You’ll likely find inefficiencies that can be rectified through CLM automation.
Next, you’ll likely need to make the business case for CLM. Socialize the concept to your C-suite and prepare them for the impending change. Clearly articulate the cost and efficiency savings. Talk about the potential for profit optimization derived from better visibility into your contract portfolio and related obligations, which will allow your organization to realize the full value of your contracts. Do not forget to also lay out the productivity benefits, including a happier and more productive workforce.
Finally, gain a baseline understanding of what you want to achieve. What metrics are you trying to hit? What insights do you want to receive? What are your end goals?
In fact, that last question should always be the first one that you ask whenever embarking on any type of project. Corporate legal departments are becoming increasingly responsible for supporting organizational strategies and propelling their businesses forward. CLM is part of that process—a process that can be optimized for greater efficiency and effectiveness.