Ways to manage your Contracts

Contract management is the management of contracts made with customers, vendors, partners, or employees. A contract needs to be managed in order to negotiate the terms and conditions in the contracts and ensuring that those terms and conditions are being complied with. Thus the contracts are documented and agreed on by the people involved in it and any changes or amendments that arise during its implementation or execution can be referred to at any later stage. It can be summarized as the process of systematically and efficiently managing contract creation, execution, and analysis for the purpose of maximizing financial and operational performance and minimizing risk. Contract lifecycle management (CLM) is the proactive, methodical management of a contract from initiation through award, compliance and renewal. There are three components to every effective contract management solution – People, Technology, and Process. People and Technology are as important to the overall success but Process is that pulls everything together.

Unfortunately, most organizations avoid contract management process planning because it is the “heavy-lifting” part of the project. It requires more time, more effort, and more self-examination. However most will encounter elongated implementation cycles, rising costs (more time, more software, more development), and unreliable long term results.

Here are five simple Process development steps management should consider prior to getting started.

1. Why are you looking for change? – Nowadays contract management has started to become of utmost importance for an organization. It has become a need to refocus on asset/contract management, or a merger/acquisition that hasn’t gone well due to lack of insight to what you actually own. What matters is that an organization takes the time to define crystal clear and measurable goals before you start.
2. What would happen if you were successful? – In order to start off with an effective contract management solution should be the primary goal for an organization. However in order to get approval, funding, and commitment to this project, you will need to build a solid business case. Your business case should include the cost effectiveness that it would provide along with the optimum use of resources and smart use of time. It also should specify what individual projects would benefit from the plan and in turn how the company will be benefited from the new allocations.
3. Review the current process – Start by reviewing your current process using the 80/20 rule. Every process has its set of exceptions but 80% of the time it works a certain way.  You will need to document every step in detail and determine what is working and what needs to be changed.
4. Make small changes – You can’t make a change to any system in any organization in one go, if done so it would hamper the system by causing it to lose a lot of data. The same can be said about making changes to your current contract management process. Focusing on small incremental changes should be the correct way to approach it.
5. Build a continuous review plan – Assign someone the responsibility for scheduling monthly, quarterly, or annual process review meetings and it must ideally include the management. This review process should highlight the measurable success and discuss the parts where there have been mistakes and the steps that need to be taken for its improvement, along with all this they also need to discuss the next series of small changes, and set goals for what the desired results should look like.

About Author:

Mihir Sakhle is consultant and part of Systems Plus Pvt. Ltd. He is a part of consulting team that delivers Sourcing and Vendor Managementg Office projects. He can be contacted at: mihir.s@spluspl.com