On today's episode of The Contract Lens Podcast we have an excerpt from our Legalweek 2022 discussion with Ronak Ray, General Council at Pantheon, and Malbek Customer, as he explores how to use metrics in an actionable and impactful way. Ronak begins by sharing how his organization uses a CLM to align contract management practices to business targets, and what Legal does to support this role. Then, he discusses how to conduct a holistic needs assessment to identify CLM goals. Ronak dives deeper with metrics and KPIs by sharing which ones to track to help define your success. Finally, Ronak shares his experience as a Malbek customer and how having the right CLM solution in place can unite the enterprise and improve business outcomes. So, grab a glass of wine, and let's talk contracts!
Welcome to the Contract Lens Podcast, brought to you by Malbek. In this podcast, we have conversations with contract management thought leaders and practitioners about everything contracts and its ecosystem. In today's episode, you will be hearing an excerpt from our legal week session, Unlocking the Power of Contract Data to Improve Business Outcomes. For our guest, we have Ronak Ray, general council of Pantheon and Malbek customer. He is an attorney and change agent focused on building enterprise value through strong practices, culture and compliance. Now it's time to relax, grab a glass of wine and let's talk contracts.
Taeler:
I would love to talk to Ronak about really how he's united this company around contract management. He's one of the best people at this. He really has brought people together and created a very positive culture of contract management beyond just being a great user of the tools, right? So what led you to choose a modern contract lifecycle solution and what successes have you seen at your organization?
Ronak:
I feel like you've set the stakes really high already.
Taeler:
Should I bring it down?
Ronak:
So I think for me, what was important is to start with the organization. If the legal function is being brought in to solve the problem, it's ultimately a business problem. So if we start with, what is the business really trying to achieve and what are the symptoms of their pain and what are the things that we're doing, ultimately trying to prioritize from the CLM group's solution. We wanted the business to be able to tell us what their goals were and then start designing towards those goals.
Ronak:
So for us, that was really important. It's just really getting, similar to what Colin said, getting a full perspective on what are the challenges, whether they're with sales or with vendor agreements, whatever they might be. And for Pantheon specifically, we have 20,000 agreements that are being executed, renewed, negotiated per year. That's a lot of volume for a company that didn't have a legal function when I got there. So, they needed legal to come in rather quickly, understand the current process, rebuild it for execution, for quality, for speed, for a better way to be transparent with the sales team who could then also land and expand customers, which was our strategy. And so really getting a sense of what were the strengths of the current process, working with sales operations, understanding what are the things that they feel legal can best help with. Those are your allies, right?
Ronak:
And so as I moved in, that was the sense of, how can we do this together? And I'd even say I've implemented probably five different contract or legal tech solutions over the past couple of years. And going through the process each time, if we start with requirements, it's critical to getting the right outcome. So then you move to maybe the Gartner Report or the G2 or something else. And once your requirements are cleared, then you get the market study and you really understand, what is that market offering? Because after that idea to go back to my team and say, "Okay, well, let's bring it back to reality. I understand all of the things that you want. Here are the strengths of the different providers and each..." You're really in the seat at that point, you really have to understand how to best help your organization navigate that decision.
Ronak:
So for us, it is a method. And I feel like, regardless of the legal tech solution, whether it's contracts, it's compliance, it's privacy, it's really important to understand what is the organization trying to achieve. Most times they don't know what they're trying to achieve and your job is to get them to a place where they feel confident in the decisions and the trade offs that they're making, because it is a trade off decision.
Taeler:
Absolutely. Yeah. And Pantheon has grown significantly in the last two years. So when you look at it through that lens and how contracts need to be helping recruiting that growth, it becomes really important, right? And so when you're leading a CLM initiative or introducing any new solution, especially at a high growth startup, there's this pressure to get it right the first time, right? You talked requirements a little bit, how did you accurately assess your organization's needs and build a compelling business case? Can you walk us through your process of that?
Ronak:
Yeah. Let's do it as a checklist almost, right? I think that's really important and it's important to convey that to the rest of the organization. This instills the level of confidence that they understand there is a process to be worked through. You're not just interviewing each person and trying to write things down, that you will come back and maybe we'll participate in all aspects of it. And I think for us, the decision making process starts with the requirements gathering and it has to continue because as we all understand organizations shift and if you're at a company like Pantheon who's unicorn, it's hyper-growth, their business models are being tested on a regular basis in the market and so they're having a shift. And if you build the solution that doesn't shift with it, you're cooked and you need that agility.
Ronak:
You need the ability for the organization to have a pulse on where are we doing things correctly from a business perspective and what is legal enabling for us to get through the door. So for us, it was really important to get those requirements right first. Second, establish very clear success criteria that mapped back to organizational goals, not here's what Legal can turn out in terms of turnaround time and efficiency. Those are important. They're important legal metrics, but they're table stakes for the rest of the company. If you hit 24 hour turnaround times, which is what we do at Pantheon. We've done this consistently over the past two years, thanks to Malbek and thanks to a lot of other superpower help on the team but those are table stakes. The organization at some point cares less about the 'how', they want to know what is it that you're doing to enable the business.
Ronak:
And so the metrics, as a step two, really have to turn back to, what is the organization care about? Initially, it's adoption. Did you install a process with technology or a solution that my sales team is enthusiastic about using? Or it some sort of hindrance? Is slowing things down? Am I not going to be able to keep up with the demand of my organization shifting for the market? Third, being in a position where you can continue to surface that information back to the organization because once they feel like it's a check box done, they're not looking back at Legal or the process or the technology and thinking, "Well, I still have to invest." And similar to what Colin said, it's just a point in time where you install and you implement it, you have to keep that thing going. You have become now the custodian of the organization trying to achieve some business acceptance.
Ronak:
So if you go back to that and continue to instill that confidence, "Here's where we are achieving outcomes. Here's where we have other opportunities which may require additional investment, which may require additional adjustments in the process of workflow." The last thing you want to do is if you map up the process and hopefully you've got that right and that's part of requirements, is go in and say the process is stuck, right? You need to find a way to continue refinement. So I think that's part of the checklist, is at least those three things and as you can tell, there's many steps in between to get to the right place.
Taeler:
Groovy. Yeah. And so the marker that Malbek just completed our first annual benchmark study and we wanted to what organizations... The barriers and benefits they were experiencing using CLM and AI technology specifically, right? And one of the things that surprised me was that the speed and efficiency are really the main drivers. And not only are they the main drivers of technology adoption, but they are the main benefits people are seeing, which as you know in the long term plan, there's so much more to be achieved and gained from an organizational perspective than just moving faster, right? So let's talk about metrics. I know that's a buzz where we all love to hate, but what are the metrics, or contract metrics I should say, everyone should be tracking to really align to business objectives.
Ronak:
Yeah. So I'm going to set the states a little bit for when these things come up. So at Pantheon we do weekly dashboards for the executive team. So Marketing's got theirs, HR's got theirs and Legal's been timid about doing things that are very data related and this gets us in the room, right? This helps us be a peer to our other peers in the executive team and say, "We've got real insights on your business." And the insights start with probably the most important interaction the legal function is having on a regular basis, which is with your customer. And if you can get the intelligence from the legal team about what's happening with those customer conversations, the power that we have is really interesting, right?
Ronak:
And it starts to change that dynamic, people are coming to you a lot more proactively. So I think that's the power of metrics is if you surface the right level of data, you're now the... You're the team that has access to that intelligence. What does the customer want? Where are we becoming market? So we study all of our peers and we look at what are their positions on limitation liability or privacy and compliance and we then go into where contract metrics to understand what are the points that are getting stuck. What we found was the hockey stick, after we adjusted to market on some of those legal terms, we were able to achieve such a radical difference in outcome on the contract lifecycle, the ability to turn things from quickly.
Ronak:
So we're doing a QBR. Legal got pushed last week, but our QBR is going to happen in a couple of weeks and the big metric that I'll be talking to them about is when we started with our Legal 2.0 Solution for Pantheon, to now is 3.76 times faster to get contracts done. And that's powerful. Almost 400%. So you can imagine what was happening before and the pain that was being felt in the room. And so I like surfacing those kinds of metrics because it's already felt. So our CRO when meet with him, said this was within the past year. "I've met with Zack, our CEO, and every time it's something about a contract and some sort of escalation with some sort of approval and in the past few years, I haven't had a single contract conversation with Zack."
Ronak:
So the power of the legal function to draw and enable the rest of the business is really palpable, right? And when they hear in that country of 3.76, they feel it and that's really important because they're nodding heads and we have other people that are really taking to it, right? The second is, so as I talked about, you really want to show the impact to the organization. So for us, it was really important to show, not just we could get stuff done faster, but that the impact to the quality of your revenue, which VCs are very interested in looking at is you're earning, but how good is the earning? You beat your numbers, but what did you sacrifice?
Ronak:
And the legal team is where you about risk, right? This is ultimately what we're there for. We're not there to report on metrics, only. We are trying to show that the quality of earnings in the company is durable. That it's going to last, that it's going to reach a public market and that the floor's not going to fall out underneath. So one of the other data points that we were able to show is some percentage of the ARR, which I'm not authorized to disclosed so I won't do it. But in the QBR, the percentage of ARR that we were at earlier in the year that had uncapped liabilities, uncapped indemnities, data privacy issues, we've reduced that by 5% and I showed a dollar impact to your earnings being much more attractive to the public market, to the next run for VCs. They really understand legal. The more I invest in legal, the stronger the valuation of the company is going to be at exit.
Ronak:
And that's really, really good for us, right? I was the first lawyer in as I said, and the metrics really helped me get to, so we're now 11 people, we're growing to 14 people by the end of the year and that's a lot. But the understanding that there's are aligned, that's coming under the legal function as they invest in... That starts with a real foundational tool like contract lifecycle management. Malbek helps us get there.
Taeler:
Well, now you said and stick with it. No, that's great and you talked a lot about the improvements and successes that you were seeing, but what surprised you the most? If you have pick one thing, even if it's culturally at the company, what surprised you the most when you started actually servicing these metrics?
Ronak:
I think the appetite for the organization for metrics. For one, they were not accustomed to Legal doing, I mean, pretty much anything because the organization didn't have Legal, but the CRO, the CMO, others were really... They had worked in public companies before. Worked with departments like the legal team of Pantheon already so they understood what the legal team can do. But what surprised us was just the amount of positive feedback that we got on the metrics that we gave them, right? Because those were then amplified back into their organization. So when we take on initiatives, also we have an initiative right now on price re-negotiations, termination for convenience, many commercial items that are really focused on, what would Account Management do? What would Sales and Revenue Operations do? Legal is now being brought into those conversations much more proactively and we're helping drive the strategy for it, which is very different than, "Please red line." But be careful, the Stockholm, right?
Ronak:
So we have a seat at the table. We're strategically aligned with them on thinking about the different aspects of the business and the opportunities we can go chase. The piece, that was a surprise that was perhaps more negative is the appearance of this magic lump, right? So have excelled in so many places where we were quite effective and the magic wand around, "Can you just make this compliance problem go away? Or can you make this potential litigation go away?" So be careful over delivering in certain areas because the perception of what Legal can do is colored by it. And I just say on process for contracts, one of the things to always watch for is what are your dependents? Malbek was really good at this. We had a period of time where, because the legal team had built such credibility with the organization, they had asked us to come in and help with the quoting process, which was getting stuck.
Ronak:
And if you can't quote, well, you can't contract. And the perception was, well, maybe is it Malbek? This is getting stuck. We had all these new systems that were being installed and that was what was running in into a halt. So trying to automate over processes that are not well designed is just... It's a terrible idea, right? And we all know this as practitioners. I think we've all suffered as a result of that not being done well, but I think that's a caution.
Taeler:
Yeah. You don't want to automate your mistakes. That's not good. And we use the term magic wand and so that actually is perfect for the closing topic, which I'd actually like you both respond to, but change management and culture play a huge role in this change around contract management. And so what advice would each of you give to leaders such as yourselves who are perhaps in charge of leading a CLM initiative, right? How do you champion change with communication, collaboration and celebration?
Ronak:
I like the three Cs.
Taeler:
Right.
Ronak:
I think really understanding what matters, using the opportunities when you bring benchmark data analytics to spark conversation, not end it. Not to say, "I've reported out and that's it." And you really want the organization coming along from ride. That's collaboration, but that's also an art in communication. You need to understand how you can celebrate the victories with your team, make sure they're not burnt out. They're really in it for the long run, because that's what this is. Every time you hit a benchmark, every time you hit a gate, you have to do it now faster, better, somewhat cheaper if you're thinking about G&A costs, right? Those are things that the organization is now coming to expect. And if you follow some of these principles, I think it really works because the organization is now invested in Legal succeeding, which is somewhat of a magic wand.
Ronak:
If you're careful, you will allow them to understand that there is an investment that's needed for a multiple of an outcome. And if you get that stronger you can draw on that relationship, the better, I think, not just with CLM, but for the alignment of the legal team, to the rest of the organization's objectives, that's going to be really strong.
Taeler:
What about you Colin?
Colin:
Yeah. I mean, I think Ronak's exactly right. There is definitely a need to align the legal function with business objectives and what the business is trying to accomplish and really showing and not just telling that having good, effective legal function is a good thing for the business because it's actually actively contributing to not just growing the business, but making sure that, that growth is sustained and stable. Because I really liked what you said earlier with regards to, there are different types of revenue and you might get a good deal in, but what do you have to give up to get that deal?
Colin:
If you can show that "Well, okay, so we didn't have to give up a lot, for quite a lot in this deal." That's a great way to make sales your number one. But number two, it's a great way to show trust and show the relationship between Legal and the business and why Legal is important to a business because without Legal, you're opening yourself up to all sorts of risk and you may be making money, but who knows what money may be lost in potential litigation or any other type of negative impact from cutting through corners or just saying, "Oh yeah, we can do that." When in reality you know you damn well can't. Sorry. I had to be blunt there.
Colin:
I'm a fairly blunt person. So I think that really understanding the fact that you're all in this together and you all really want to contribute together and making sure that you all understand the same language together, I think is important, which is my last point, which is legal... Contract documents are not exactly thrilling things to read for anyone. They're filled with all these ridiculous and complicated legal terms and language that's in bold caps and just goes on and on and on, by the time you get to the end of it you're like, "What the hell did I just read?"
Colin:
And really the purpose I think for a legal function to (create house 00:20:28) is you want the legal function to not sound like they're reading a contract. You want them to be speaking plain English to your other functions and speaking, not just plain English, but speaking the same language as those functions, meaning you understand numbers, you understand metrics, you can speak to these various objectives your business is trying to achieve and how you're actively contributing to achieving those objectives. So that's really a key aspect of ensuring alignment between the different functions and a CLM tool is a great way to help you become acquainted to give birth to these and insert the language of business in some ways, which is ultimately really important.
Taeler:
Thank you all so much for this conversation and I loved talking to you.