Contract Lifecycle Management continues to be a fast-growing legal industry sector, but do you know what it is?
This post is intended to provide a brief overview of what this sector is about. In this post, I will:
- State a few underlying principles of CLM.
- Answer some frequently asked questions about what CLM is.
- Provide some additional resources for further review.
Contracts are legal documents and, appropriately, are the domain of the legal function.
Managing contracts, however, is a cross-functional exercise involving several functions including finance, legal, sales, and in larger companies, procurement.
Jason Smith puts it this way:
“There's a difference between managing the contract lifecycle (the process) and the contract (the document). The contract document is a legal artifact... the process is a business lifecycle. Once you understand this, the cross-functional concept becomes easier to address.”
Realizing the benefits from contract lifecycle management takes preparation, time, and effort.
You can help get started on your CLM journey by understanding some key principles that underly effective contract lifecycle management:
- You need to understand your existing business processes.
- You need to understand your users and how they work.
- You need to understand your current process pain points. This comes from speaking with those involved in the contract process, including sales, finance, legal, and procurement, and how each group interacts with and depends on the others.
- Look at your existing tools. What do you use to manage your contracts and why?
Once you have gathered data and understand your current reality, use that as a foundation to build from.
Your goal might be perhaps to use process improvement principles to improve how things are done. Perhaps your goal is more transformative and depends on finding a tech-based solution so that your contract management function can best meet today’s and tomorrow’s business needs.
Frequently asked questions
These are the three questions I see and get asked the most being a legal tech evangelist.
1. What exactly is contract lifecycle management?
The answer is the tracking and managing of a contract from drafting to negotiating to signing to implementation to maintaining to termination and everything in between those steps.
2. What are some costs of not managing contracts properly?
Manually doing this has been done for many years but is time-consuming and prone to different types of failure including failing to enforce contract terms, missed deadlines, inefficient use of time and resources, and inability to be proactive.
3. What are some benefits of effective contract management?
Staying on top of contractual deadlines, tracking contract cycles, tracking, and gathering data on contracts including commonly negotiated terms, frequently used fallback provisions, contract statuses, maintaining control over contract versions, and reducing the potential for human error are but a few of the benefits of effectively managing your contracts.
Helpful Reading and Resources
The following links are to some helpful reading and resources about contract management that I believe will help you understand the contracts space and how to begin your journey.
- CLM Simplified: Efficient Contracting for Law Departments
- Create Contracts Clients Love: Design readable contracts your clients will love with fast and (fun!) workflows
- Contract Nerds
- Making Contracts Easier to Sign