What is the value of a contract manager (CM)? If you are reading this article, you know that they help organizations tremendously. Unbeknownst to most business executives, CMs bring financial value to a company by directly impacting the bottom line, but there are also many contract manager challenges.
Speeding along the contracting process moves the needle for the sales team. Finding contractual options to decrease costs helps procurement, facilities, manufacturing, engineering, and other teams. Discovering and mitigating risks in contract terms also helps keep the organization out of trouble.
So, it was fascinating to read of the challenges facing the contract management team in the IACCM Benchmark Report 2019. In the eyes of the profession, contract manager challenges persist along the lines of proving value to their organizations.
CONTRACT MANAGER CHALLENGES
The IACCM report shows the top six contract manager challenges. This is based on input from over 759 organizations across a broad spectrum of industries (aerospace, automotive, financial, construction, healthcare, manufacturing, oil, public sector, technology, transportation, and others).
From the IACCM research, consider these top 5 challenges of the two categories, as generalized to all contract management teams:
1. GETTING INVOLVED EARLIER
Although primarily noted as a buy-side issue, effective contracts involve the team at an early phase. For example, equipped with the right contract lifecycle management (CLM) technology, the CM offers great value. An easy case is the ability to use a contract template to create an agreement that takes account of all the standard clauses. In fact, this is a great case for using a CLM to focus on digital contracts that do not need intense general counsel attention. It also adapts the contract management process to involve the CM in the business relationship, earlier in the cycle.CM challenges persist along the lines of proving value to their organizations.
2. INTERNAL PROCESSES
It isn’t enough to merely bring in a new contract management system and expect this will be the key that inspired process improvement. One head of contract management told me about how a very large international bank implemented two – million dollar CLM’s, only to end up ripping both out, each after only one year. Digital transformation did not ‘just happen’ because they had new contract management software.
But, if you are in the cycle of bringing in a new management platform, use the opportunity to introduce change management consulting. Ask the system vendor to run consulting sessions on important process changes.
3. CONTRACT ADMINISTRATION WORKLOAD
Once you show your value to the organization, the stream of work simply never ends. Not to be a deterrent, but it is important to find out how to cope with the workload. Simply put, with 20,000 – 40,000 active contracts at a large organization – it’s no wonder contract managers are so busy.
Without an end-to-end contract management solution – it’s insane to even think about how to manage all the obligations and indemnities – with filing cabinets filled to capacity in volumes of agreements. Even digital agreements might be on a shared drive, in the cloud, on thumb drives, SharePoint portals, some distributed on the CRM, and other places. It is simply an untenable task NOT to have them all in a common centralized repository.
Whether merely used for the single repository of contracts feature, or used for its advanced analytics capabilities, AI-equipped CLM technology helps with your workload. Better yet, look for the contract snapshots. These provide quick summaries based on extracts directly from the agreement documents. As a contract manager challenge, good CLM technology makes the workload issue a little less troublesome. This for both the CM and for the legal counselors at your company.
4. ROLE MISUNDERSTOOD AND UNDER-VALUED
Put together, 27% of CM’s perceive their role to be either misunderstood or simply undervalued. Although disconcerting, the opportunity ties in with the next contract manager challenge identified by the IACCM research. This is to establish data to use, which illustrates value.
Here is where a CLM jumps out and offers an immediate answer. Of course, this is not going to be a replacement for good relationship management, nor will it replace effective project management on a significant implementation. But equipped with a solid CLM, agreement managers can offer meaningful insights into an organization’s spectrum of agreements. With a common clause and authoring functions, it means the CM can take on more responsibility for different stages of the contracting cycle. That means faster turnaround of contracts while allowing the General Counsel’s office to focus on higher-end legal issues.
5. EXECUTIVE ATTENTION – UNDERSTANDING VALUE
Our final contract manager challenge of the five is getting the right level of executive attention. Frankly, addressing the other challenges outlined above helps to promote the right attention drawn to the CM’s role and efforts. But, this won’t happen on it’s own. It takes energy, persuasion, and effort to guide the organization to the need for contract management technology. Doing so will drive toward recapturing a portion of that 10% of the bottom line revenue lost due to poor contract management.
FACING THE CHALLENGES WITH LEGAL TECH
Digital transformation is a journey. However, part of the journey is the technology that can bring you to a better state.
The IACCM research on the major contract manager challenges facing today’s companies, is revealing. It shows a profession and subject area starting to gain recognition. Yet, even more companies must realize the profession’s importance to their success. Fortunately, a large part of the answer for many of the concerns and challenges point toward modern, effective contract management. Answer in hand, the next step is to to take charge and start making that change.
TAKING THE FIRST STEP?
The first step is to engage a trusted, and reliable vendor to help along your journey. Please reach out to ContractPodAi for a pressure free discussion about how contract management can help you. Even more importantly, ask about how a full end-to-end CLM solution with a breadth of service offerings can make a difference in your organization.
Author:
Charles Dimov
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