5 Strategies to Bring Procurement and Legal Together
The intricate nature of contracts, regulatory landscapes, and business relationships necessitates a unified and collaborative approach between all corporate functions. Two functions that have particularly similar interests, however, are procurement and legal. Both departments involve themselves in the negotiation of commercial relationships through contract management and often encounter parallel challenges along the way.
In a recent webinar, Prashant Dubey (Chief Strategy Officer at Agiloft) and Pierre Mitchell (Chief Research Officer at Spend Matters) shared 5 essential strategies that drive collaboration between the procurement and legal departments, helping them work as business enablers and showcase the immense value they bring to the table strategically.
Setting the Stage for Procurement and Legal
In the current corporate environment, all functions have become overwhelmed with the sheer complexity of modern contract management, and procurement is no exception. Like many other departments, procurement professionals consistently grapple with the need to achieve more with fewer resources. This reality necessitates a strategic shift in approach, one that embraces an ‘outside-in’ perspective facilitated by category management.
In other words, the focus now lies on creating value for the business. This requires a thorough grasp of supplier dynamics, supply market nuances, and the inherent risks and opportunities therein. Aligning these insights with other internal policies while still delivering on the needs of third-party partnerships becomes a critical balancing act that is difficult to achieve without collaboration between departments.
That’s where the legal team comes in. After all, driving and safeguarding value hinges on adept risk and compliance management. However, a noteworthy challenge resides in the often less-than-collaborative interactions between the procurement and legal functions, hindering the seamless alignment of objectives. These subpar interactions are often a result of lack of understanding, with the two teams failing to communicate their goals to one another and thus being unable to create business processes that enhance both departments.
Strategies for Collaboration Between Legal and Procurement
It’s important to note that both procurement and legal departments have recently started to see their roles converge in the way of driving business value. Each team is expected to become a business enabler rather than a hindrance or a bottleneck in the sales cycle. That expectation is another reason behind the need for collaboration between these two essential departments, and thus, is also a basis for the 5 strategies that Prashant and Pierre shared.
Strategy #1: Procurement Intake Management
Procurement and legal, while functioning in parallel spheres, are often brought into business processes belatedly for support. Recognizing the need for a proactive approach, the best practice involves establishing early and influential engagement with stakeholders on both sides. This sometimes entails a predictive assessment of upcoming demands, enabling procurement and legal teams to collaboratively build contracting processes aligned with business needs.
Preemptive involvement is pivotal in fostering a seamless partnership between procurement, legal, and the business itself. The rest of the business must understand how to synergize with procurement and legal as they also synergize with each other. An essential facet of this approach involves assessing how both procurement and legal individually contribute to business objectives, then finding ways to enhance those contributions.
One notable method is to streamline information exchange between departments through intake portals. These allow procurement to obtain the information they need from the legal team while still being somewhat self-service. To avoid friction or bottlenecks, creating the portal should be a joint effort between both teams.
The key lies in driving simultaneous collaboration during the initial phases of contract management, culminating in a harmonized and efficient operational journey. This proactive, concurrent approach signifies a fundamental shift towards a more synchronized and responsive ecosystem.
Strategy #2: Legal Intake Management
In pursuit of adding substantial value to the organization, a pivotal strategy entails the collaborative establishment of a legal intake portal tailored specifically for procurement requests. Within this proactive framework, both procurement and legal functions converge to create a seamless avenue for optimizing legal support.
Central to this approach is the recognition that legal’s involvement must be synchronized with the exact information they need. By co-creating the legal intake process, both functions can ensure that legal teams receive pertinent and comprehensive data from the outset, streamlining subsequent processes.
The incorporation of self-service capabilities bolstered by guided workflows empowers stakeholders to navigate the legal intake process independently while adhering to predefined protocols. The utilization of standardized clauses also gives stakeholders the tools to generate their own drafts, thereby allowing procurement and legal teams to concentrate on more strategic aspects of their positions.
Overall, this strategy encapsulates an evolved collaborative synergy between procurement and legal functions. By standardized processes and aligned objectives, organizations can substantially enhance their legal intake management, resulting in accelerated decision-making, reduced turnaround times, and a more strategic focus for both procurement and legal teams.
Strategy #3: Generating a Negotiation Playbook
The establishment of a negotiation playbook emerges as another strategic pillar. This playbook serves as a comprehensive guide, empowering procurement teams to undertake negotiations more autonomously, lessening the reliance on legal intervention.
Central to this approach is the identification of common negotiation themes and fallback positions. By collaborating, procurement and legal can devise a range of options that empower procurement to negotiate effectively on their own. Legal’s role transitions into providing various negotiation strategies and equipping procurement with the authority to engage in discussions independently, involving legal expertise only for complex or high-stakes negotiations.
The playbook also addresses the imperative of risk evaluation. By clearly defining standard practices and incorporating risk assessment as an evaluation criterion, the negotiation process becomes inherently robust and informed. This approach safeguards the organization while bolstering procurement’s autonomy.
Strategy #4: Creating a Contract Repository
Establishing a comprehensive contract repository is another key piece in optimizing both procurement and legal operations. A repository serves as the singular source of truth for all contractual agreements among all departments.
Critical to this strategy is the recognition of lawyers’ reliance on precedent agreements to navigate negotiations with counterparties. By centralizing contracts, a contract repository streamlines access to these precedent agreements, enabling legal teams to engage in negotiations more fluidly. This consolidated resource supports informed decision-making and expedites the negotiation process.
Moreover, contracts serve as tangible records of intricate commercial relationships. By aligning procurement and legal within the confines of a contract repository, organizations can harmonize their efforts and strategically plan how to drive value during contract renewals. This collaborative approach ensures that both procurement and legal bring their expertise to the table, maximizing the potential of these relationships.
Strategy #5: Extracting and Analyzing Contract Data
The last strategy Prashant and Pierre mentioned centers on the extraction and analysis of contract data directly from the repository, yielding business insights that can revolutionize the negotiation and drafting process. By harnessing the power of contract analytics, organizations can optimize their contractual landscape with remarkable precision.
This strategy involves identifying the contract provisions that frequently undergo negotiation. Once pinpointed, these clauses can be integrated into a starting point template. This proactive approach significantly mitigates negotiation intensity and expedites cycle times by preemptively addressing provisions that typically require intricate discussions. As a result, revisions become more manageable during the legal review phase, streamlining the entire contract lifecycle.
It’s important to remember that not all clauses have the same purpose. Focusing on commercially oriented provisions allows organizations to elevate contracts beyond mere risk mitigation tools. Instead, they become a dynamic system for managing and enhancing key business relationships. The emphasis shifts from transactional elements to value-driven components, aligning contracts with broader business objectives.
Ultimately, the extraction and analysis of contract data engenders a paradigm shift. The process evolves from reactive negotiations to proactive, strategic collaboration both internally and externally. By leveraging data-driven insights, organizations can optimize contract management, reduce bottlenecks, enhance efficiency, and transform contracts into dynamic instruments for driving value and nurturing robust business partnerships.