The Basics of Contract Lifecycle Management

In recent years, the legal-tech world has seen an overwhelming boom in the realm of contract lifecycle management (CLM). With tons of investments pouring in, new CLM solutions appear on the market nearly every day. As more and more of these solutions become available, many legal departments are scrambling to implement technology as fast as possible, whether out of fear of falling behind or sheer need for innovation. Either way, CLM is quickly becoming a necessity for both new and existing companies, as it finally offers the ability to organize the contracting process in a way that prioritizes efficiency over clunky historical practices. In this article, we will explore the stages of the contracting process and go over how any legal department can begin structuring their contracts to allow for successful CLM implementation.

Steps in the Contracting Process

As it stands now for many businesses, the legal department is involved in nearly every stage of the contracting process, from start to finish. Involving the legal team to this extent is not only unnecessary, but also a waste of time and resources. Many of the tasks performed by the legal team throughout the contracting process could easily be handed over to other departments, such as sales, procurement, administration, etc. Let’s take a moment to briefly go over each step in the contracting process and assess whether involving the law department is a necessity or if said responsibilities could be better handled elsewhere.

  • Pre-contracting: This is the stage of preliminary research and work that eventually leads to the development of a contract. Sales and procurement teams have to send out RFPs (Request for Proposal) in order to initiate interactions. Oftentimes, the law department is asked to review these documents, but all they really should be doing is providing a template for sales and procurement to follow on their own. 
  • Requests: In this step, the sales or procurement team comes to the law department to ask them to begin preparing a new contract or to review an existing one. Without an organized way to intake these requests, the legal team can quickly become bogged down or overwhelmed, especially when requests come in across various platforms like email, Slack, and even text messages.
  • Generating contracts: Here, the first draft of the contract is created and sent to the other party for examination. Legal teams often need to be involved in the drafting process, at least to some extent.
  • Negotiations: During this stage, the law department may be asked to join in for negotiations about business terms that they likely do not need to be spending time handling. However, in some cases, this is unavoidable, and it does provide an extra opportunity for lawyers to add value to the enterprise.
  • Approvals: The approvals stage is one in which lawyers end up performing tasks far outside their reach, with legal teams reaching out to connect with other departments in the company in order to make sure small tasks are being completed. This is a job that could quite easily be automated or delegated to an administrative position.
  • Execution: Similar to the approvals stage, many legal teams may once again find themselves caught up handling administrative duties like tracking signatures and following up on closings. 
  • Storage: Storing contracts can be a huge problem for some companies who have not yet converted to cloud-based storage. Filing contracts onto C drives limits access to them and risks the loss of tons of data if that particular drive is somehow misplaced or corrupted. CLM solutions that provide storage databases are extremely helpful here.
  • Post-signature management: Small companies and law firms may look to lawyers when it comes to managing the obligations of a contract after signing and ensuring that they are properly met. However, tracking business obligations, renewals, and expiration dates should either be automated or delegated elsewhere in order to free up more time for the legal team to work on new contracts and new problems.

Clearly, the law department does not need to have hands-on interaction with each minor step in the lifecycle of a contract. By laying a structure for the creation and usage of contracts and delegating responsibilities throughout the enterprise, you can both free up more time for the legal team to spend on matters that pertain more to their expertise, thus contributing more value to the business as a whole, and empower other departments to become more involved in the contracting process.

Creating a Contract Structure

Many legal departments are aware of the fact that they do not need to take part in every stage of the contracting process, but they may have been doing it for so long that finding a way to step back has become difficult. Taking a good look at your contract process, trying to understand it, and then renovating it is the best way to start making changes for the better and freeing up more time for the legal team.

CLM solutions are not just made up of technology. They consist of three parts: people, process, and tools. Combining these three components is what makes for a successful CLM implementation. Here is an outline of the structure you can aim to create in your company’s contracting process to generate a better experience for all departments:

    • Design a legal review policy. This policy is the foundation of the contracting structure and must clearly explain what exactly the legal team should and should not be involved in handling so that the rest of the company has a clear idea of when to approach them with problems.
  • Generate opportunities to empower all departments, not just the legal team.
    • Create templates and playbooks that provide guidance to answer commonly occurring questions.
    • Train and educate peers in different departments to allow them to take on more responsibility throughout different stages of the contracting process.
  • Automate what you can. Once all the processes are renovated and the roles and responsibilities have been properly delegated, then the technology can take over certain areas in order to speed up the contracting experience and generate efficiency.

With this structure in place, the in-house counsel can then continue to improve and optimize the contracting process over time, implementing any new changes that become necessary as the company grows and expands. More time on the hands of the lawyers also frees them up to be able to focus on their work that contributes the most value to the business as a whole while other departments receive the power to move the contracting process along at their own pace.