As you may remember, we were approached by a General Counsel who wanted to become top tier in Contract Management and wanted to leave the position of contract reviewer, legal guardian, approver (or whatever label you want to put on the traditional role) and take the lead as value creator for his company. He truly wanted to make an impact on the bottom line. This is the story of the General Counsel make-over.
We embarked on the project – the General Counsel make-over starts. The idea was to get an overall corporate contract management process and system covering people, organization & process, content (templates and clauses) and system support in place.
We spent quite some time discussing our approach in detail and how this would match to the General Counsel and his company. Moreover, we spent several hours on discussing how to bring his stakeholders on-board on a journey that needed to take its time.
Our philosophy for Contract Management projects
We were very clear on our philosophy for Contract Management projects:
- Legal is in a unique position to become the center of excellence and owner, but the Legal department must embrace the challenge of being outside of the legal box and thinking about bringing value instead of limiting risk. This requires capabilities that are rarely seen in the legal department. You need to understand value and risk management. You need to understand process and technology/systems.
- We believe there is a necessity of a centralized owned Contract Management system (in larger sense than software) but that the day to day usage of Contract Management process must be decentralized to the front line. Building a central processing unit will decouple contracting from the daily business making (We know that some advisers propose central units doing all contracting – and this could be a valid for some companies and types of organizations. But based on our experience it is not without risk if you take the responsibility for contracting away from the actual business owners and you would need to construct your governance model and processes specifically to fit such approach. This is however our practical experience).
- We believe that there are tough calls on making choices on priorities and simplification as these are tools for success
- We think that companies shall grow Contract Management capabilities as the company matures. We recommend not to start with everything, everywhere and for everyone.
- Getting a Contract Management database with legacy contracts in place is a fantastic starting point as it delivers imminent value out of the project, but it is not the end goal, it is the starting point. Companies deciding that contract repository is good enough misses the point of contract management. Do not misunderstand us – contract repository is a pre-requisite for good contract management but just that, a pre-requisite.
We normally approach a contract management build up reflected in a number of steps as highlighted below. The reason why we have landed on this model is that we have seen several projects fail as non-system requirements and capabilities are not being properly addressed. We tend to go for operational models as soon as practically possible in our work, creating hands-on small “pilot test” projects to showcase the values lying ahead and assist in following thru to a working model.
Preparations of the GC and Legal team
To draw the line, ensuring that you and a close team are aligned on the understanding of and need of Contract Management in the company. You need to become the ambassador – sale/promotion shouldn’t be underestimated. Map out backgrounds, education needs and best practice in order to prioritize the first steps for your organization. Create an internal sounding board in order to manage your internal stakeholder management and simply use it as preparation for corporate sell in and stakeholder on-boarding. Conduct a small pre-study & understanding company’s maturity will enable you to understand the core pillars:
- People: Employees with right skills, in the right place, in the right number. Educated on content, negotiation skills and process & governance.
- Organisation & Process: Process, Governance model, Decision structures, Ownership
- Business & Contract Content: What do we want to agree about, contract strategy, prioritization, new Legal Department strategy, templates, and guidelines – change the perception of legal?
- System to manage above: Core functionality of a Contract Repository and contract Management System, Legacy contracts, existing systems, integration etc.
Measuring corporate contract management maturity
Measuring corporate maturity, reviewing current processes and tools. Making gap analyze. Preparing (if deemed necessary) material for procuring system and other tools. Making first assessment of scoping down functionality together with the actual users. Defining road-map for Contract Management roll-out – both in respect of functionality and in additional internal parties.
Sell-in to key stakeholders
Inspirational / sell-in to key stakeholders. Assuring that the project has the pre-requisites for being successful. An example here could be to create a project structure around the Contract Management initiative, could be a project team consisting of the actual end-users, a steering committee consisting of the selected individuals from senior management where buy-in is important – and depending on the company structure and size of legal environment – potentially an advisory board consisting of Head of Legal from various departments. Maturity studies are an excellent tool to sell in – it actually makes users and stakeholders reveal the position and thus make the mapping towards activities much easier.
The work to General Counsel make-over
We started our journey with a maturity assessment and followed up the web-survey with key stakeholder interviews. Just to be clear, it is not hard for us to spot the deficiencies in an organization. The assessment is simply a valuable tool in showcasing to senior management what is required.
As a result of this survey we could produce a report, well anchored with management and the users too, divided into corporate executive summary and subsidiary / business unit level. As we had also caught areas of responsibility and location, we could also pinpoint differences throughout the company.
In essence, the survey and interviews showed:
- System support: Lack of corporate central repository, several repositories of different quality, several templates but lack of consistency, lack of standards, and lack of legal/contractual policies related to contracts and negotiation.
- Process: no unified process, delegation policy well documented and understood
- Skills: several skilled resources throughout the company, but lack of common ways of working. Skills were much individual and hardly institutionalized. Strategy and negotiation skills failed in many areas.
- Content: the company spent time on developing templates, but the usage is inconsistent and there is very little control over changes to the templates, positions in contracts across the business areas but with the same supplier.
Jointly we worked on building a road map:
- The starting position was to build the repository with the legacy contracts, with a sufficient amount of metadata for most contracts.
- All process and delegation policies were revisited. Step one was to keep them and in a year’s time make corporate processes.
- Contract management process/policies were reviewed and a communication plan produced
- A training plan was made, and a step wise roll out plan based on the two steps below was created:
- Unit by unit engagement (location / unit based)
- Roll out to develop more advanced CM capabilities (functionality)
How will it work out? We are as curious as you are. Implementation is ongoing and we are looking into the first findings. Low hanging fruits have already been tasted – and it tasted all good!
The authors of this article, Magnus Steen CEO of Skye Contracts AB and former deputy General Counsel of Sony Ericsson has worked with transformation of legal departments in several companies, provided advise to several global companies on how to initiate cross discipline Contract Management programs including systems and establishing governance, processes and procedures and Martin Lonstrup, a Danish Lawyer, having worked with contract management and legal for the last 10 years, founded the Danish Contract Management Association (DCMA), former Chairman of DCMA. Martin has worked with operational contract life-cycle management in different companies and industries, implementing legal department governance models, policies, CM processes, CM tools, compliance, legal processes, financial optimization. Most recently Martin has in the role as Senior Legal Counsel and Business Lead on implementing a new contract management tool in the Maersk Group globally across +16 business units, +120 countries and +16 ERP systems before moving to a new position as Senior Legal Advisor & Contract Management within the Maersk Group in Maersk Oil Houston.