The Black Hole of Contract Management

Anyone else singing, “black hole sun, won’t you come and take away the rain”?  Ok, maybe it is just me!

By now, most of us likely have invested in a contract management system.  And, if we take a critical eye to how it is working, we probably have a really expensive repository of contracts with unreliable data, therefore, reporting that isn’t good.  This results in at least knowing you have the contract, but really nothing else about it.  Does that ring true?  If not, congratulations to you!  You are a rare unicorn for sure.

Then, there are a handful of us, that truly have no idea what contracts we have.  We are told by our stakeholders or suppliers that the contracts are expired.  And, heaven forbid, that there is a merger or divestiture.  That is when the consultants start marching in.

It is truly amazing that most of us are still at this state.  Beyond saving money for our companies, we are accountable for adding value.  We are accountable for driving performance of our suppliers, to manage cash, to drive innovation, to mitigate risk – and we have no idea what we have actually signed up for with our suppliers.  It is like our contracts have been sucked up into a vast black hole.

So, what have we learned for this situation?  We have to think differently about how we manage contracts.

We need to manage the data better.  If fact, I would question why are we managing the data from the contract.  We are in 2016 – there is technology for that!  There are several solutions that are up and coming that take unstructured data and present it in a structured way.  You will still have to review the results and train the technology to learn more about your contracts, but it has the ability to keep your data up to date and reliable.  It will also allow you to find clauses in your contracts, like the infamous assignment clause.  If you are looking to improve your contract management process, you must look at these technologies.

We need to organize around the process.  There are very few sourcing professionals that like spending their time in contract management technologies.  No matter how easy the redlining and clause libraries are, that is not where we spend our time.  Therefore, there might be an opportunity to create a small, but mighty team who are experts in the contract management process.  They can do the processes in the system to gain the full functionality of the system – and much, much faster.

If you do not have the opportunity to organize around the process, then there are several solutions that allow for those processes to actually be managed in word (just like we are comfortable with doing).  Once you perform the redlines, it is magically also managed in the solution.   Your solution should have this functionality.

We should also think end to end.  If your legal team, risk team, insurance team, finance team, your stakeholders are not interested in using the solution, it is almost guaranteed that your contact management solution will mostly be a repository.  If fact, the ROI vastly decreases to the point that you should just buy a repository.  If you want something more than that, those other users need to be part of the business case, part of the process design, part of the change.  They need to be fully bought in.

During this Thanksgiving week, I am truly grateful for all the learnings we have had in the contract management space.  Now, we need to take those learnings and do something better.   Have a great Thanksgiving with friends and family!  Blessings to all of you.

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