Though they are often overlooked or treated as a passing thought, contracts are the heart of every organization. They facilitate business by allowing parties to come to a mutual agreement over the exchange of goods and services, making them an integral part of your company’s core business values. In fact, the history of an organization and a detailed outline of its standards for business are encased within that company’s contract database, waiting to be unlocked.
How can you begin to take advantage of the wealth of knowledge hidden inside these stacks of documents? Is there a way to combine that data into a serviceable plan that enables employees across all departments to perform their jobs better and more efficiently? Yes! This type of plan is referred to as a contract playbook.
What Is a Contract Playbook?
Contract playbooks often look slightly different from company to company, as each organization has its own unique priorities and standards for how they do business. However, the concept of a contract playbook remains the same for any company that relies on contracts. Essentially, your contract playbook is a set of documents that details your organization’s standards when it comes to contract terms and negotiations and provides potential replacement clauses to be used when an agreement requires deviation from the usual terms. These documents should be created via a collaborative effort among all departments, as contracts are not touched only by legal, but by sales and procurement as well. All forces need to be unified and clear on the standard terms set forth by the organization as a whole.
How to Build Your Contract Playbook
Setting up such a comprehensive document may seem like a daunting task to undertake, but the whole process mainly consists of just a few phases: examining contracts, establishing terms, and generating potential replacements. Let’s take a moment to break down each phase in a little more detail.
Whether your company is brand new or has been around for awhile, you more than likely have at least some history of previously written and negotiated contracts. Some may have been successful while others failed, but each one represents an important piece of your contract puzzle. Sifting through the data locked inside past contracts can illuminate how your company does business. How long do deals typically take to conclude? What are your deal breakers? Do you have any high priority risks? Which areas of contracts are open to negotiation and which ones must remain rigid? Seek out the answers to these and any other questions you want to answer about your organization’s business experience.
It’s worth noting that the examination process can be made much easier via the use of a contract lifecycle management (CLM) solution, which provides a secure online repository to house all past, current, and future contracts as well as AI tools to assist with the search for and extraction of relevant data, all in one groundbreaking piece of legal-tech software.
Backed by the data of your past contracts, you can then begin to establish a framework of standards that each new agreement must meet. This framework should be able to provide the answers to common questions that come up during negotiations. If the other party asks for a certain change to be made, are you willing to accept that change? Or is that area non-negotiable? As we will discuss later, having these standards in place allows decisions to be made more quickly, ramping up the turnover rate while also helping employees from departments outside of legal learn more about the contracts themselves.
Once you have your contract and negotiation standards in place, you are set to start generating replacement or fallback clauses. These clauses are to be used when the usual language in the agreement is contested by the other party. For example, if the sales team frequently meets with a similar question from various customers, they can look to the playbook for a replacement clause themselves rather than having to go through the legal team for approval. All departments should contribute ideas during the creation of replacement clauses in order to ensure that the replacements are also acceptable to the entire company’s standards.
Easier said than done, right? Communication between departments throughout the entirety of this process is key, so be sure to incorporate input outside of legal, branching into sales and procurement as well. The more work you put into creating a thought-out and detailed playbook for your contracts, the more time you will save in the future.
How a Contract Playbook Helps You
But is all that work really worth it? What will having a contract playbook in place do for your company? Let’s explore a few of the major benefits that you can expect when utilizing your contract playbook to the fullest.
Spread Power Throughout Departments
Without a contract playbook, sales and procurement teams are often left running to the legal department for answers during the negotiation process. Unfortunately, the legal department is usually swamped with plenty of other affairs, meaning that it may take them a few days to provide a solution to a rather simple question. The contract playbook lays out a framework that empowers sales and procurement employees to make decisions about agreements during the negotiation process without having to consult the legal team at all. They can simply locate a replacement clause from the playbook, fit it into the contract, and continue negotiations with the peace of mind that this amendment was already pre-approved by the company standards.
Save Time and Resources
With contract responsibilities distributed more evenly throughout different departments thanks to the empowerment of your contract playbook, the legal team can free up time to spend on more pressing matters. Less time spent on small tasks allows employees to focus their attention and work towards bigger picture goals, such as renovating the contract management process even further to increase efficiency. Not to mention, you may notice a decrease in resources spent on hiring outside counsel and training new employees. Your in-house team should be able to handle more tasks that would typically fall to outside counsel, and incoming employees can look to the contract playbook for guidance as they learn to negotiate your company’s unique contract cycle.
Speed Up Your Contract Cycle
Spending less time caught up in negotiations also leads to more efficiency in your overall contract process. Where you used to have sales and procurement employees needing the legal team’s approval for nearly every small negotiation, you now have them making the approvals on revisions themselves, greatly reducing the amount of time the other party is waiting to hear back about their suggestions. This speeds up the negotiation and revision process immensely, enabling sales to make more deals in less time. By processing more agreements at a higher rate, you will generate more revenue for the company and improve your business or customer experience at the same time.