CLM Needs Hierarchy – The Different Levels of Contract Management Processes
Contracts are the basis of critical business strategies and relationships, no wonder businesses actively look for smart and digitized Contract Management processes to manage obligations effectively. One of the initial steps in identifying your CLM needs and improving your enterprise Contract Management processes is evaluating what stage you are at in the process. While it varies from organization to organization, there are some common stages businesses go through while managing their contract processes:
- #1 – Scattered and undefined contracts
- #2 – Locally managed with critical contracts accessible to key people only
- #3 – Centralized and well-defined
- #4 – Easily trackable, accessible, and proactive
- #5 – Streamlined processes with continuous improvements
If you are still at stage one or two, you are not only losing productivity and money due to inefficient contract processes, but also failing to unlock the potential benefits you can extract from your precious contracts. To make this easier for you, let’s now look at the different levels of Contract Management in the CLM Needs Hierarchy.
1. Electronic Filing System for Contracts
It’s no secret that a centralized data source is easier to maintain and keep clean, providing you with data that is verified and accurate. However, conventional file storage methods like Spreadsheets, emails, drive folders, etc. lead to human error and increased administrative burden as they fail to provide insights to key contract dates and have no data tracking.
According to a study by The Journal of Contract Management, almost 71% of businesses can’t locate at least 10% of their contracts.
An electronic filing system or contract repository/database is a single, well-organized, central location where all of your contracts and their metadata are stored.
- Avoids data fragmentation by storing your contracts and their relevant documents, such as compliance certificates, in a single location
- Lets you easily find contract records, documents, or counterparties with a quick keyword search providing you with 360-degree insights to all your contractual relationships
2. Comprehensive Legal and Workflow Automation
Contracts creation is an art – it demands attention to their creation as well as the conclusion, but the middle processes require even more time and resources because of the tracking, sharing, reporting, and monitoring involved. When the in-house legal team manually moves contracts through each step of the process, it extends the contract cycle times leading to human error and compliance issues.
That’s where Legal and Workflow automation comes in, which is about using automated software to run your contract workflows instead of your in-house legal team manually moving contracts through each step of the process.
- You can route your review and approval workflows based on criteria like contract value, contract type, data, business area, standard or non-standard agreements, etc.
- You can add multiple stages in the review or approval phase for more structured or hierarchical processes, guided to multiple users sequentially via serial assignment or simultaneously via parallel assignment.
3. Scaling and Self-Service for Efficient Contracts Processes
Contract creation can get complex and tedious at times, especially when one has to do the same thing again and again. When professionals from sales, procurement, or HR teams need to get a contract from the legal or contracts team, it overwhelms them and results in organizational inefficiency as they’re already managing and creating contract requests, active contracts, milestones, and obligations.
This is where self-service contracts come into play. Self-service contracting lets the non-legal teams create contracts without consulting the legal teams.
- You can draft and approve standard language for a variety of contract templates and compose the key questions that guide you to the right contract and language.
- Users who need a contract, access the system, feed in the answers to those questions in an electronic form, and then are presented with a contract using pre-approved language, appropriate to their business needs.
4. Optimized Contract Performance Management
The Legal, Contract, and Procurement teams work hard to negotiate favorable terms for their business, but all that would be in vain if those terms are not being monitored and tracked effectively. It could also lead to revenue leakage, compliance issues, etc. due to the lack of proper contract governance framework and performance tracking. That’s when contract performance management comes into play.
Effective contract performance management helps such businesses optimize the output and accountability of their third-party network while tracking the performance of their partners against the specific terms and line items in their contracts.
- Helps to boost visibility into the contracts data while providing deeper insights
- Lets businesses optimize the output and accountability of their third-party network while tracking the performance of their partners
- Improves governance and helps maintaining healthier contract relationships
5. Intelligent Systems and Self-Learning – AI
Every business strives to stay ahead of its competition, which is why it incorporates cutting-edge technology like AI to stay relevant.
In an experiment, 20 US lawyers with extensive experience in corporate law were put up against an AI to review five non-disclosure agreements. It was found that the lawyers were able to achieve an accuracy rate of 85% and the legal AI achieved an average rate of 95%. (Source: LawGeex)
AI-powered CLM systems help automate and streamline the entire contract lifecycle with flexible features such as contract authoring, workflow, and version tracking.
- Allows you to extract data and clarify the content of contracts while helping in reviewing contracts much faster
- AI helps in deeper insights into contractual terms and similar clauses across the entire enterprise
- It can identify compliance risks, finding rogue clauses and ensure the best overall terms are applied to all contracts
How can eContracts help you?
eContracts is specifically developed to understand the complex contractual and allied business risks faced by Contract and Legal teams across different organizations. It has got you covered with contract creation, negotiation, lifecycle management, governance, security, performance management, and much more.
Users from diverse areas of business can effectively collaborate on contracts, perform duties proactively, prioritize tasks and mitigate risks at every level. Some of its highlights include:
- Contract Repository – Centralized, secure, and reliable repository in the cloud or on-premise for all contract related information
- Contract Lifecycle Management – For fast tracking events in the contract lifecycle and reducing contract cycle times
- Authoring & Reviews – Hassle-free creation of new contracts within minutes and accelerating legal reviews using workflows
- Contract Administration – For standardizing contract governance while reducing any error possibilities, keeping compliance at check
- Team Collaboration & Productivity – For boosting Contract Management processes and meeting key deliverables on time
It’s important to walk through the different levels of Contract Management processes to achieve contract efficiency. For that, determining your specific business needs and where you are on the CLM Needs Hierarchy is the first step. However, whatever level you are at, you still can employ an intelligent and comprehensive Contract Lifecycle Management tool to optimize your Contract Lifecycle.
It’s important to consider the needs of your organization as thoroughly as you would examine the features and benefits of Contract Management tools. It helps you reduce operational costs, increase productivity, and exceed your client’s expectations, and that’s exactly what we help you with.
So, are you ready to take control of your contract processes?