At the end of the previous millennium, I worked for an international information technology services company and was introduced to the concept of the people, process, and technology framework when looking at IT-enabled services.
The model was aimed at guiding organizations in prioritizing certain factors in decision making
Later this was further refined and extended with a fourth element, the external stakeholders, traditionally in the following order of priority:
- Organization and people,
- Value streams and processes,
- Information and technology,
- Partners and suppliers.
So, people first, in secondly processes, then IT and in the last place – but of course still important – external stakeholders.
People, Processes, Technology and Partners in Contract Management
I started to apply the same principles to other areas, one of them being contract value lifecycle management. Which also is becoming more and more IT-enabled due to the advent of legal tech and CLM tools.
Contracts are the backbone of every business. From creating business relationships and
defining legal obligations to driving operational processes and financial commitments,
contracts require more than a perfunctory signature and space in the file cabinet.
Business contracts contain key data points that you must identify, track, and manage to control risk and meet your organization’s financial and operational goals.
As your business grows and evolves, contract management becomes more and more complex.
This complexity leads to many challenges in contract management, like central access to documents, visibility into contract terms and conditions, and lengthy review and approval workflows, that will always result in:
- Lost revenue
- Inflated costs,
- Unmanaged risk, and
- Reputation damage.
Taking a helicopter view of the way people, processes, technology, and partners can efficiently work together enables you to redesign your contract lifecycle management processes.
The key to a successful redesign is understanding that contract lifecycle management is a system — a set of interconnected parts working together to accomplish a goal.
The goal is to increase the value contracts provide to you and your organization by empowering your people, enhancing the efficiency of your processes, deploying user-friendly technology, and collaborating with partners and vendors
This post will explain how to look at all four elements when looking at managing your contract value lifecycle or when designing a new contract management organization, introducing a new service, or adapting existing ones.
The 4 Dimensions of the ‘People, Processes, Technology, Partners framework’
1. Organization and People
What are the three most important things in the world for industries that produce complex high-tech products and services?
People, people, and people. And then come process and technology.
Without people and the organizations they create, you have no product, you have no service, you have no customer. This is not different for contract management organizations.
Processes come in second place and exist only to help people deliver the expected value to the customers. Who are also people, having their own processes, tools and supply networks.
Technology and tools comes in third place. you need it to streamline and speeding up processes so people can provide value delivering your business or to the customers served.
It is people who drive the process and use the technology to generate success.
Finally, external parties and vendors exist to enable you to implement the technology to streamline processes for your people to provide your products and services and value to the customers.
That’s why your people must be at the forefront of every decision you make and every service you design or change. If there is no value to your customers, you should ask yourself why you are doing it?
Do you want to know more about how we can help you with your proposals, contracts and processes to optimize sales and profits?
Best practice organization and people
When designing contract (lifecycle) management or introducing new processes, tools (like CLM) or setting up partnerships always think about who will deliver, who will use the service, including where, when, and how they’ll use it.
What value must your service deliver to your customers? How can your people organize themselves in new processes or with new tools and ensure that this is achieved?
Do your people have the right skills for the right jobs? In this case, the skills to manage contracts and improve contract value during the complete contract lifecycle.
Understand Your People
You need to consult your people and understand their needs for them to be bought in and aligned properly to solve your business problems.
People are also the most important part of an effective contract lifecycle management system. You need their commitment and involvement as a team — from senior management to experts working on the daily contract activities.
2. Value Streams and Processes
Processes describe ‘how’ the organization and people, products, and services will be managed. What do you need to do in order to deliver the expected value to our customers? How and in what order? And can we make the contract management processes repeatable so that we will produce the same result every time, regardless of who is carrying them out?
And how are you going to prevent your processes from degrading over time and becoming useless? Make sure that your processes remain ‘ fit for purpose’ and that they have not passed their use-by date.
Best practice value streams and processes
In efficient contract management lifecycle management, process closely follows people in the people, process, technology, partner framework.
If you have the right people but they are not following your processes, you must revisit your processes. And adapt the processes, not your people.
If we again use contract lifecycle management as an example you have to look at the following process components:
- Are all your workflows for the complete contract lifecycle mapped? So starting from initiation, prepare and propose, draft and negotiate to sign-off, contract execution, amendment and renewal to close-out.
- Are the right departments involved, in the right stages, and do they know what actions they need to carry out.
- How do you minimize business risk and contract value leakage at each stage?
- Do you have Key Performance Indicators (KPIs) for each stage and how do you measure?
Contract Lifecycle Management
To maximize financial and operational performance and minimize risk, it is important to
improve the value and efficiency of your contract lifecycle management process in every stage of the lifecycle.
The following elements in the contract lifecycle management process are the main value enhancers:
- Easy Access to Contract Data
I have seen many organizations that had lost sight of the location of their contracts, how to access them, and how to identify and track obligations and time-sensitive provisions contained in them.
This leads to value leakage:
- Time, resources, and money that will be wasted,
- Missed deadlines
- Missed cross- and upsell opportunities
- Increased risks, liabilities, and compliance issues when contracts exist in various places or with limited access across departments.
- And more bad stuff.
- Digitization and Centralization of Contracts
You must automate and and centralize to improve access and visibility into your contracts.
With properly digitized contracts, you can much faster and easier identify and extract data, such as milestones, renewal dates, for tracking and reporting purposes.
Also, this leads to improved efficiency throughout your contract lifecycle management process – saving you a lot of time and money.
Storing those documents in one central repository enables visibility across your enterprise. It allows you and to give your people role-based access to work on proposals and contracts to easily access the latest version of the document.
The above and the fact that monitoring, reporting, and tracking key contractual provisions becomes much more effective, all add significant value to the organization.
- Contract Templates
Another important step in improving your processes is creating digital templates for your proposal and contracts.
Using templates will not only significantly reduce the time you need to move from proposal to contract creation to contract execution, but it also greatly improves compliance with your internal business governance rules and external regulatory and legal requirements.
Rather than searching for a copy or starting from scratch, templates provide a starting point where most of the work is already done:
- Templates include standard, pre-approved contract language and terms (no questions)
- Business rules and requirements are built into the templates (easy compliance)
- Non-negotiable provisions that must be present in every contract are included in templates, ensuring consistency across the entire contract portfolio (minimal involvement legal department.
When you use templates to standardize proposal and contract creation, this will result in faster, more efficient review and approval process and enterprise-wide compliance.
3. Information and Technology
Are you still managing your contract processes manually? And with that, I also mean the good ol’ Excel sheets. Do you already have a technology system in place to support your people and processes?
When you mix an already-complicated business process with manual systems, you open the door to costly errors that most organizations can’t afford, even in the best of times.
Technologies like contract lifecycle management (CLM) solutions can be critical components of your value system.
An organization’s contracts serve as a fundamental source of business intelligence. They drive
the operations, they are used in decision-making, and they safeguard compliance.
In the case of contract management legal tech and contract lifecycle management software are the technology enablers. And more and more companies are now using these technologies.
Best practice information and technology
Also here you have to follow changes and improvements in technology which also forces you to again look at the organization, people and processes.
A fool with a tool, is still a fool…
Again, people are the most important factor. If you give your contract managers obsolete technology, you are impacting value by making them less productive (and unhappy).
Companies using legal tech or CLM software report more complete, effective, and efficient management of proposals and contracts across the company. Management also has a better understanding and control of the risks in their contracts.
Choose legal tech or CLM tools that aligns to process and people
It could be that an Excel spreadsheet could be the appropriate solution for you. If you have a minimal number of simple contracts, you could decide that this is sufficient.
But in high-tech and capital goods industries per definition this is not the case, so the chances are that you need something more robust.
So technology plays a critical role in contract lifecycle management. But it first and foremost needs strong adoption, fully engaged users (people), and efficient processes.
Again: technology is simply a tool.
Deploying a contract lifecycle management system starts with focusing on a positive user experience, which supports a high user adoption rate. And then come the processes. Only in third place, it is technology.
4. Partners and Suppliers
In high-tech industries like aerospace & defence, maritime, IT, oil & gas it is impossible to deliver products and services and create value without partners and suppliers.
So you also have to look at limitations or constraints that partners and suppliers may introduce to your organization and products and services in the design, production, and sustainment phases.
Still, partnerships and supplier relationships are not simply signed, paid for, and delivered. Too often I see product sales and support agreements that cannot be guaranteed because partner agreements have not been appropriately considered.
Coordinating subcontractors and vendors and ensuring that we build mutually beneficial relationships is a new skillset that modern contract management must perfect in order to deliver real value to customers.
Best practice partners and suppliers
Purchasing more and more products and services from a partner, subcontractor, or vendor increases the need for an in-house supply chain management capability. From your customers’ point of view, the partner/subcontractor/vendor relationship should be virtually invisible, with your organization’s supply chain management providing conduit and ensuring value delivery.
In conclusion, despite automation, people will remain essential, then process, technology and partners.
As our world continues on a path towards increased automation, you may assume that the people side of product and service delivery is lessening in importance. This not true. A technology solution will not compensate for lack of effective contract management.
People will never be removed from the equation and should always be our primary consideration.
Designing a framework that maximizes contract value begins with understanding the potential for contract management to contribute to the organization as a whole.
Redesigning and implementing contract lifecycle management in your organization requires a thorough understanding of the organization, roles, people, value streams, processes, information, technology, partners, and suppliers play in the process.
People play the largest role. The core team must come together to define the desired value, craft a plan to achieve it, execute the plan with discipline, and successfully manage change to succeed.
Processes drive results when the series of steps in each stage of the contract lifecycle –
from creation and approval to negotiation and storage – are designed to work together
efficiently. When looking to maximize performance and minimize risk, plan to examine and
enhance the value and efficiency of your process at every step.
Technology enables both your process and your people. Standardizing contract documents
in both digital form and substantive content, and storing them in a central repository, and
providing secure, cloud-based access to that information builds the foundation for
enhanced productivity with minimum wasted effort and expense.
By understanding how empowered people, disciplined processes, user-friendly
technology and collaborative partner networks can work together holistically, your business can proactively manage contracts across the complete lifecycle and dramatically improve efficiency, reduce risk and maximize value.