By: Doug Kaminski
Chief Revenue Officer, Cobra Legal Solutions
One of the biggest impediments to progress within organizations is the phrase “that’s the way we’ve always done it”. As we discussed in this post, processes have to evolve to continue to be useful and productive. And they have to leverage technology, as well as expertise in those processes to lead to improvement. And that’s certainly true for the process of managing contracts.
How the “Nuts and Bolts” of Contract Generation Has Evolved
Believe it or not, contracts and contract law have been around since the days of the ancient civilizations of the Greek and Roman empires. Needless to say, they didn’t have a lot of technology to leverage back then! Fast forward a couple of millennia and there may be a few of you who can still remember the days when contracts were typed on typewriters (and liberal use of “white out” was necessary to avoid retyping large sections of those contracts). And contracts were mailed or hand delivered to contracting parties and (of course) hand signed with a pen. Handwritten markups in red pen were performed for changes that were needed, essentially “redlining” the contract. With each contract needing to be typed independently, the only leveraging of technology for contract generation (eventually) was – electronic typewriters for contract creation and fax machines for contract delivery – and the primary way of leveraging expertise was – faster typists.
Introducing computers into the mix made the creation of contracts more digital and enabled technology to be applied to the contract management process in a whole new way. Now, you could create a contract in Word, copy the file and re-use it as a template, then email that to the recipient, who could print it out, sign it, scan it and email it back, within minutes. Or that party could first “redline” suggested contract changes right within the electronic file and the parties could send it back and forth until both sides agreed on terms. What a concept! Imagine back then if an organization insisted that contracts should continue to be typed on a typewriter and mailed, because “that’s the way we’ve always done it”. There were those holdouts, at least for a while.
Eventually, through the technology of electronic signatures, there wasn’t even a need anymore to print, sign and scan contracts anymore. This technology streamlined the contracts process even more, and (especially once the pandemic enforced social distancing), eSignatures have become the standard way to sign contracts for many organizations.
How Contract Management Has Evolved
While leveraging technology and expertise has revolutionized the “nuts and bolts” of contract generation, this created a new challenge: the management of the contract lifecycle itself has lagged as some organizations have as many as 40,000 contracts to manage from the time a contract is generated until it expires. Lack of a centralized approach to contract management has resulted in challenges for organizations ranging from inconsistency of contracts terms, inability to quickly identify which contracts are affected by changing business circumstances and huge fees for outside counsel review of contracts. According to the Harvard Business Review, it’s been estimated that inefficient contract management causes firms to lose between 5% to 40% of value on a given deal, depending on circumstances. Despite those challenges, many organizations have still failed to implement a centralized contract management approach. Why? In many cases, it’s simply because “that’s the way we’ve always done it”.
Just as the “nuts and bolts” of contract generation has evolved, so has the management of contracts throughout the lifecycle itself. The technology for managing and automating the lifecycle of contracts has evolved considerably, leveraging machine learning and artificial intelligence capabilities to help automate the contract management process. Expertise to maximizing the use of that technology has become key to the success of contract management today. Combining technology and expertise has improved and streamlined the contract management process through automation – from creation and tracking of templates (and individual clauses within those templates) to creation of each contract, through contract review, approval, execution, performance tracking, renewal and (eventually) expiration.
Technology + Expertise not only equals Process Improvement; it also equals Process Automation. When it comes to the management of contracts, the excuse “that’s the way we’ve always done it” for not evolving is no longer acceptable. Evolve your contract management process through technology and expertise to be efficient and effective to the point that you can say “that’s not the way we do it anymore.”
For more information about Cobra’s Contract Management services, click here.