How to Create a Contract Management Strategy

Legal departments, nonprofits, and businesses of all verticals have to coordinate a complex array of roles and processes to manage their contracts. How you create your contract management strategy will vary depending on the size of your business and your team’s specific needs. This article provides a general overview of how to create an effective contract management strategy that can be molded to fit your needs. Let’s take a look.

1. Review Existing Contract Processes

If your firm is already managing contracts, we recommend creating a comprehensive outline of what’s involved. Use this information to conduct a needs assessment and gap analysis. In other words, assess what you’re doing with which resources, what needs to change, and what’s missing to make it happen. (Note: If you don’t have a process yet, creating one will help you identify the crucial stakeholders and roles in step 2.) 

2. Identify Key Stakeholders and Roles in the Contract Management Process

According to the accreditation institute APMG International, this is the first of four crucial areas in a well-designed contract lifecycle management framework. At this stage, leadership needs to take stock of – and determine – what’s needed to run a successful content management process. This includes existing or future team structures, roles, and required resources – which may range from financial and technological to training and personnel. 

3. Create an Inventory of Existing Contracts

This step applies to teams that are already managing contracts. Here, we move from the general to the specific. What contract relationships are already in the works that need to be accounted for in the new system? Take thorough stock of this, ideally as a subtask in your needs and gap assessments.

4. Establish Clear Policies and Procedures for Contract Creation and Execution

Consider your obligations throughout the contractual relationship – from contract negotiation to completion. Ensure your policies and procedures allow your team to fulfill these obligations. Conduct a thorough analysis not only of your obligations to the client, but your legal compliance duties, and align your policies and procedures.

5. Implement Contract Automation Tools to Improve Processes

The resources each organization needs will of course vary, but the right technology can make contract management much more effective. 

Automation is one of the most effective ways to simplify the process, and artificial intelligence takes it to another level. After conducting a needs analysis, research contract automation software that will help meet those needs. Consider implementing a tool that offers benefits like:

• AI-enhanced workflow automation
• Natural language generation (NLG) that can generate custom documents
• Integrated hub for seamless collaboration, contract workflow, and centralized data
• Integrated, compliant e-signatures
• Robust compliance and data security standards
• AI-assisted contract analysis and data synthesis

6. Centralize Contract Management Workflows

Using the right tool, you can centralize your contract lifecycle management workflows. Having the whole team working from one platform allows the contract lifecycle to fly by more swiftly and with less confusion. Imagine the simplicity if your team could automate things like:

• Data collection and contract generation with templates and AI
• Task assignments, deadlines, and reminders
• Time tracking
• Communication with clients
• Assigning the right document to the right part of a given workflow
• Storing contract data in one secure, easily searchable database
• Generating performance reports and audit information

7. Monitor Strategy Performance and Effectiveness

APMG International sees this as the responsibility of two crucial areas of effective contract management: contract administration and performance management. Under these domains, strategies must be continually assessed to make sure they’re working well. This involves monitoring how every component of the contract lifecycle is managed – from payments, disputes, and relationships to market testing and key internal benchmarks.

Where Contract Management Strategies Fail

Given the complexity of all the interconnected functions in a contract management strategy, it’s not hard to see why mismanagement in any area can cause significant troubles. Let’s take a brief look at a few examples of contract management hurdles that can make or break any strategy.

Lack of Clear Objectives

This might seem obvious, but failure to base a strategy on specific and validated objectives is a common reason for inefficiency. Even a thorough needs assessment can go awry if it’s not founded on clear goals. So before redesigning your firm’s strategy, ensure you’re all working from the same set of well-defined, mutually-validated objectives. 

Poor Planning and Resource Allocation

It’s all too common for firms to operate reactively as their needs evolve. Even if their processes were initially planned, this quickly changes. If they aren’t planned to scale, contract management teams and processes can suffer from bloat, inefficiencies, and burnout. This can lead to missed deadlines, overlooked contractual obligations, unnecessary costs, and even noncompliance. 

This is why a thorough assessment of objectives, existing processes and resources, gaps to fill, and outstanding needs are so important. This should form the baseline of any revised plan, and the whole process should take into account the firm’s projected growth to ensure it can keep up.

Ineffective Communication

When teams aren’t structured effectively and lack appropriate tools and processes, communication tends to fall through the cracks. And without communication, the contract management strategy falls apart. In part, firms can address this by creating a culture of communication. However, the bulk of this problem can be solved by creating a framework that implicitly encourages teammates to communicate closely and prevents miscommunications. 

This includes technology that centralizes all contract data in one common location, offering everyone a single source of truth and collaboration. The tool should facilitate and reward collaboration at every stage.

It’s also important to ensure communication forms the foundation of any contract management strategy: even the planning and assessing stage should involve leadership carefully listening to their teams and other key stakeholders. Only this will ensure needs are properly being met.

Insufficient Training and Adoption

A team that doesn’t understand a new strategy or its tools probably won’t use it. So everyone involved needs to be on board with your new contract management strategy from the beginning. Basing the strategy on collaborative input is a great place to start, but firms shouldn’t stop there. 

Be sure to keep everyone involved as you develop your strategy and decide on technology to support it. It should reflect the whole team’s needs. Finally, provide interactive training to everyone to ensure each stakeholder understands how to perform their role – and how to use any new tools.

Poor Automation

Contract management software that’s poorly designed (or ill-suited to a team’s needs) may be worse than none at all. At the very least, it introduces new problems. Be sure to research each tool’s design and quality and compare it to your own needs. Attending live demos is a great way to dig deeper and ensure the solution is right for you.

Legal or Regulatory Compliance Issues

No contract management strategy is complete without incorporating strategies to stay compliant with regulatory requirements. The strategy itself should explicitly address this, and it’s a good idea to have it reviewed by compliance experts in your firm’s field. 

This goes for automation tools too: they should be vetted ahead of time and confirmed to incorporate compliance with regulations like HIPAA, FERPA, and CCPA. The potential risks of overlooking this step are too great to ignore.

Inconsistent Monitoring and Assessment

Without rigorous monitoring and performance assessments, it can be hard to tell if your chosen strategy is performing as it should. It’s important to conduct these continuously. This allows you to ensure your processes are doing what they should, identify any gaps, and adjust to evolving needs as your organization changes.

Improve Your Contract Management Strategy with Docubee

Docubee helps firms get their contract management humming with AI-enhanced workflow and contract automation. Teams rest easy thanks to:

• Centralized, secure & compliant contract data
• Seamless contract collaboration in one platform
• AI-driven contract generation, research, and analysis
• Automated workflows including reminders, e-signatures, report generation, and task assignments

Get your hive humming with digital contract management.