Accelerating Contract Efficiency with Hal Bretan

Made with speech-to-text software, so a few words may be off.

0:00You're listening to the Contract Heroes Podcast, your one-stop shop for all things contract management. And now here are your hosts, Marc and Pepe. Hello everyone, and welcome to another episode of Contract Heroes. Today, joining us from the World Commerce and Contracting, Hal Breton. Hal, welcome to the show. Hal is the executive in residence of for contract standards over at World CC. So Hal, we're, uh, we're really excited to kind of pick up where we left off our last conversation and, and dive into, to some more in-depth and, and new topics. So thanks for joining us. Hi. Hi Marc. Hi Pepe. It's great to be with you guys once again. We are gonna be speaking today about speed to contract, because that is my focus with all of my work with World CC. And, uh, when we talk about speed to contract, we're talking about the time it takes for businesses, and this is when we have buyers and sellers on a business relationship, the time it takes from the time the business people shake hands on a deal, and they talk about product or service that's going to be, uh, bought and sold.

1:16They're talking about the commercials, how much they pay, when they pay. They're talking about the features and functionality. And once they've reached agreement and shook hands on that transaction, the time it takes then to sign a contract. And all too often that is a very lengthy and painful process. And there, while everyone's involved, there are lots of people on both sides, particularly the business folks, standing in the background saying, "Why is it taking so long? Why are we fighting over things? We, we want to enter into a friendly relationship, and what's going on here? We're battling even before we're married." So what does that portend for the relationship going forward? It just sets relationships off at a bad tone. And so my focus has always been on shortening that time. And the shorter the time is, the less fighting takes place, and the faster each of the parties can get the economic benefits that would flow from that relationship.

2:16The buyers want to buy the products, goods, services so they could compete better in the marketplace. They could get a, a heads-up on their competitors. They want to do that as quickly as possible. The sellers, on the other hand, want the cash in the door. They want to, uh, increase revenues. They wanna increase volumes of sales. They wanna get their role in the marketplace heightened by more deals and transactions with more logos. And yet both of them take the, all this time to complete the transaction. So the question is, if there's so much benefits that flow from speed, why does it take so long? And there are reasons for that. A lot of them are just tradition. I've been a lawyer for, uh, 40 some odd years, and I've been involved in business transactions all that time, and the way I was trained, and I'm not condescending to lawyers, I'm one, is you have to make sure the contract protects my client from every single possible negative event that would ever take place in the world. As far as my imagination could take me, those are the things I need to protect the company against. And so that's how I write my contracts. That's how I negotiate my contracts.

3:33And after a long period of time, I, I was wondering, is that really the right thing to do? Is that really what's in the best interest of my client? And the answer I think is no. I agree. Is not the answer. And, and we're going to get really deep into speed to contract, Hal, and, and one thing that I love to talk with our customers and the people that are, you know, interested in implementing new technologies for their companies, and the thing is like, you can buy the best piece of technology, the best implementers, everything to automate all your processes, but that big bottleneck on the negotiation part of the contract, that's something that not even the best AI CLM tool can help with. Because when, when you have a template or you have a document, when it's only one-sided, you're, you're gonna get a lot of pushback. And like you said, it's, uh, very tiring. It takes a lot of time. You...

4:31It's a rough game on how to get the best deal for your customer i- in case you're the in-house lawyer or the external lawyer, and that should be like one of the main goals to attack before jumping into technology. That's what I say, and we try to advise to all of our customers. So with that intro that you said, like, can you elaborate a little bit more on the, of course, of, on the benefits on the speed to contract approach that can offer either to both, like, you know, for the buyers or the sellers, and, and how this approach differ from this traditional, you know, perspective, like you say, like where we only think about one side. Yeah. I, I agree with everything you've said, Pepe. The benefits are not only in terms of helping the top line and bottom line of a company, in terms of revenue flow.

5:28You're buying it in order to enhance revenues and profitability. That's why people buy stuff for their company. And so no matter which side of the table you're on, it's the top line and bottom line that benefits. There's another benefit that flows in that there's lots of people involved in this process, whether it's legal, it's operations, it's finance, it's commercial, it's sales, it's procurement, it's risk management. Lots of people get involved, and they're tied up with this transaction. And the longer it takes for this transaction to complete, the less time these, all these organizations have to- For doing other business. You need to free up scarce resources as fast as you can. We don't have the luxury anymore of having too many people in roles. The companies are cutting back left and right, and so we have too much on our plate to begin with.

6:21And so the faster you get this transaction done, the more efficient you could be, the faster you get onto n- other business. That's good for, for your company. So the key question is then, how do you accomplish this? And that's a challenge. And so what we've done at WorldCC is create a quite a number of tools that could help you in this regard. One of the major tools is the WorldCC contracting principles, and what these principles are, are for of many of the boilerplate clauses that you have in your agreements, we come up with what's fair and balanced for both sides of a transaction. And why is that important? As we, you said, Pepe, and I discussed already, traditionally, companies put together very one-sided templates, and then they throw it up against the wall and see what sticks. The problem is that many of the things that stick are really not that important to you in the first place. The things that don't stick, then you battle over to get them to stick.

7:23And so what was the purpose of all of that, particularly when you know you're gonna end up somewhere in the middle anyway? And that's the whole crux of policies and the procedures for speed to contract. Start out closer to where you're going to end up. I can't overemphasize this, and I'll say it again. Start with your templates. Start with negotiating strategies to where you know you're going to end up anyway, and th- where you end, fair and balanced terms. And so the contracting principles that I just referenced, and everyone can access them. You don't even have to be a member of WorldCC to access the contracting principles. They're open to the public. For each of the clauses that you recognize in every single contract, whether it's warranties, limitations of liability, force majeure, term and termination, you name it, we've got a principle that shows what's fair and balanced. So if you could redraft your templates to be fair and balanced from the start, you change your negotiation strategies not to fight for where you want to, uh, end up with being one-sided, but what's fair and balanced, the faster you'll get your transactions completed.

8:34And, and how- So that's one tool. Go ahead... you know, so why do you think, right, because I think we see this often, right? I mean, when w- even when we're negotiating contracts and things like that or, or working with customers, but why do you think that some organizations or departments aren't open to trying to make this change? As I said, a lot of it is tradition. A lot of it is doing what companies and individuals have done for decades, and, and it's time to make a change. It's a sea change. I, I totally agree. It's a sea change, and to make it even more difficult, it's a change that has to take place on bo- on both sides. It takes two to tango, and it takes two to recognize the need for change, and that's not easy. I, I readily admit it, but you have to start somewhere. You have to start with small steps, and th- the challenge for everybody is, how do you change the direction of the ship? And I totally see the challenge for people, particularly if you're not attorneys, because traditionally, everyone in companies just think, "Well, the attorneys are in charge. They control it. What, what say do I have?

9:43They're the masters of, of what happens during contract drafting and negotiations. They know what they're doing. I, I'm powerless to make a change in the business because I'm not an attorney for the company." And that is not the case. Everyone can sh- contribute, no matter what their role is, whether you're a procurement officer, a, you're a contract manager, a you're a contract professional, you have some input into how contracts are drafted. You can raise an alarm in your company or raise an effort to relook at how you contract and the processes that take place. So contracting principles is just one way. There are others. For example, you could organize the individuals who are involved in contracts and reach a, uh, change, reach changes on how efficient you operate, how fast decisions are made, how much people lean into the process.

10:42Do they stand back, as I've seen salespeople do quite often, and just complain, "Oh my gosh, I have to get this deal done this quarter. My commission depends on it. Why are you guys taking so long? Why is it so, uh, painful? You're, you're pissing off the other side"? Those are the sorts of things that can be avoided through collaborative efforts in deciding how people lean in, how quickly they respond to issues, how they prioritize issues, and I could spend a whole hour talking about prioritization of, uh, issues because not every issue that comes up during contract negotiations will make or break a company. Exactly. And- The world doesn't depend on some of those issues. Yeah, exactly. Which is interesting. And, and, and I think there's a, an annual report by the WorldCC that I, that I love is the most negotiated terms. Exactly.

11:34Uh, I think the 2024 was just released, and you can see it, there are the same terms as, I don't know how long this report has been released, but let's say for the last 10 years, the most ne- negotiated terms are not the most important ones for a long-term relationship, either if you're on the buy side or on your sell side. It's always limitation of liabilities, you know, governing law, and a lot of other- The same culprits-... complex terms... come up over and over again. You're absolutely right, Pepe. Exactly. Exactly, and I mean, I understand that tradition, right? And I, when I, when I used to work at, uh, the big law, it was like that, right? So you have to find a way because if, if, if your client sends you a contract, he's like, "Hey, can you review this contract and try to make it the best as possible for me?" And you cannot say, "Yes, this is balanced for both side," because if you're a- an associate, the partner will be like, "Hey, what the hell?

12:31Like, we should put, like, only one-sided confidential clause or, you know, like, unlimited liability, so if the, if the, if the counterparty doesn't say anything, then it's a, it's a benefit of our customer." So I think that part of the internal things that you can do in your organization, either if you're an, an external counsel or an in-house counsel inside your company, that's clear. But in your, like, your recommendations how... on how we can, you know, convince our counterparty, you know, either our vendors or the sellers that we are trying to purchase any kind of goods of, or services, like, what can we do or any, you know, small steps that we can try to talk about with our counterparty so they can understand that the best way to have a long-term business relationship is by having a more balanced terms in our contract? Convincing the other side to the dance, to join in the dance, to tango with you is... can be difficult.

13:35Thankfully, there's a growing consensus that there is a need for speed to contract, there is a need for having fair and balanced contracts, and that concept is growing. And so the marketplace is beginning to recognize the importance of this whole issue. However, when you're selling, part of the selling process is to get s- uh, salespeople to understand that they need to sell not only the goods or services that they're selling, but also the process to reach a conclusion to the engagement, to the contract. And so they need to sell the concept of efficiency, of speed to the other side. And interestingly enough, when they're dealing with, on the sell side, when they're dealing with the users of the products, those users want the transaction to be done just as fast as the salespeople do. And so they have allies in that regard to go back to their respective companies, go to the lawyers, go to the contract managers, et cetera, who are involved in the process of negotiations, to put pressure on those individuals as well that speed is important here.

14:47And that's not easy to do sometimes, particularly when your in-house lawyers are overworked, take long lead times, not necessarily understand the priorities, and many do. I don't wanna disparage all lawyers. I have sympathy for the tough jobs they have. I've done it myself. But they need to prioritize the issues. And let me spend a minute on prioritization of issues. If you take a look, for example, at risks, some risks, if, if they actually happen, an event happens, it could really hurt you tremendously. Some risks are not that harmful to companies. You have to prioritize those risks, not only in terms of how much damage they could do, but also, uh, what's the probability of events happening. And you could create a chart, and along the X-axis, the horizontal axis, you put, uh, damages from zero to infinity, and up the Y-axis, the vertical axis, you could put probabilities from zero to 100%.

15:52And when you start to look at what's important to your business, what are the things that could hurt you the most? What do you lose sleep over during the night? You could plot those out vers, uh, damages versus probabilities. And the things that end up in the upper right-hand corner of this chart, which means high probability and high damages, those are the, the most important things to your business. The things that end up near the axis, the middle of the chart, the bottom left-hand side of the chart, which is almost no damages, almost no risk, those are the things that you need not spend time on, 'cause they don't mean much to your business. So this prioritization should set the tone for what you spend time on in negotiations and what you don't. I call it the hold'em, fold'em strategy. Like in poker, what are you gonna hold on to? What are you gonna fold and say, "Okay, it doesn't matter to me, just I, I'll give in. I'll give in." That could speed up your process as well.

16:54And so when you come up with a strategy like that, not everything has equal importance, not everything is worth dying over and spending weeks and weeks drawing a line in the sand and never crossing that line. Those are the ways you can speed up the contracting process as well. And internal negotiations among all stakeholders can really drive that strategy and come up with a common understanding of high risk versus low risk. So that's another way of get- achieving speed to contract, and everyone could participate, everyone could drive those discussions. You don't have to be a lawyer to do that. Yeah. I mean, I think that's important, right? And, and like you said, I mean, some of these things that are consistently negotiated inside of contracts, at the end of the day, you're probably gonna end up meeting somewhere in the middle anyways. So why not try to start there and just speed this process up, you know?

17:49And I think, you know, like we've talked about, right, I, I do think that the lack of folks wanting to move in that direction is probably really based on just history and, and that's how things have been done. But I, I think it's important that we do start to have more conversations like this, so that more organizations do start to think about, uh, how important something like this could be. Because I mean, at the end of the day, you know, if you're not negotiating the same consistent terms over and over again with customers or vendors, I mean, that's only going to allow your team to focus on more important tasks throughout the day. Whenever there's a sea change like this, question always comes up, is this something that could only take place from the top down, or can it be bottom up? Because I'm at the bottom, what influence do I have on these types of changes? And my answer to that, it's both. You can s- start from the bottom just raising issues, philosophy, just getting people one level at a time to recognize the importance of these changes.

18:49And yes, it does take some messages from the top to say, "This is how we can increase the bottom, top line and bottom line of this business. This is how everyone should be contributing toward the quarterly results, the success of the business, the growth of the business." And so it takes a combination of top-down and bottom-up, but it has to start somewhere. And raising these possibilities through team meetings, through sessions among the stakeholders, just to float out ideas about how efficiencies can be increased, that would have a tremendous impact on the business in terms of sending signals up the chain of command that we could do things better. We can contribute to the success of this business even though we're way down in the organization. This is how I could make a name for myself career-wise in terms of important changes. It goes beyond just the day job.

19:48It goes to being a change agent within your company, and that's within everybody's capability and willingness to just do something beyond just the day job. And if that's what you think you'd like to participate in in terms of your career, in terms of advancement, this is a great opportunity to show some creative ideas within your company. Yeah, that's a good piece of advice on how you can incentivize from the, the bottom of, of the or- organization, how, how we can push for this type of cha- of change how. And one thing that I was thinking, you know, during our conversation, and something that I would like to close with, is that I think everybody can understand that long negotiation processes can be painful, right? It, it will take a lot of time.

20:42But thinking about in terms of transactional cost and thinking about this number that is always on the, when, when we talk about the World CC, that companies with bad contract management processes, that can affect up to close to 9% of the annual incomes of that company. There's a lot of leakage there, their contracts. And I think one good way on how we can promote this change is always not just thinking about, like, we can close a deal instead of a month to two weeks, but what kind of metrics can we use to, you know, or insights can you provide on the measurable impact of delayed negotiation? And can you share any specific cost saving figures so that people who wants to promote this change can also use when they are talking to, to their bosses or people in finance, who's usually the ones who approve any kind of budget for any kind of service or technology?

21:46Yeah. So getting data of this sort is hard to come by. We have lots of anecdotal information from companies such as Verizon and others who have used the contracting principles and have gained traction and efficiencies through it. One of the things that we're working with within World CC is to come up with, uh, better sources of information in terms of the time it takes for negotiations, and how even a 10%, a 15 or 20% reduction in time represents that much in time value of money, and that there are formulas that you can use with time value of money to demonstrate economic benefits just from revenue streams coming in that much faster. It's, unfortunately, not many companies do time reporting to the degree you need to figure out the time between, you know, shaking hands and actually ex- you know, signing a contract.

22:46That data is hard to come by, unfortunately, but it's intuitive. We all could recognize that, and each company should take a look at attorneys report their time to clients, or if they could track those dates, they could track how long it takes. Unfortunately, I don't have enough data that I'd like, uh, and it's hard to come by, but we're working on it within World CC. There are a couple of things that we could also help you with, and that is we offer a, a webinar, a workshop, it's, uh, in person right now, a workshop for non-contracting professionals to gain an appreciation of contracts and to collaborate on gaining efficiencies in negotiations. And we offer that to members of World CC. It's a tremendously exciting course. It's interesting, it's funny, it's... You really don't fall asleep even though we're talking about contracts.

23:44It's really a funny course to have. I give it, and it's, it's been very well-received, and it could teach companies, uh, how internally to collaborate and become more efficient, and to understand the issues involved and how you prioritize risks, how you make decisions on hold them versus fold them. It's a great course if you're interested, and it gets people together to talk about these very major issues on speed to contract. Um, it's for salespeople, procurement, finance, commercial people, operations people, all get together and take this course together, and it, it's amazing how much dialogue and improvement comes from this course. It's a half day, and it's really profitable for everybody. Yeah, no, that, uh, Tal, that sounds exciting. I mean, when, when is the, the next, uh, session on that taking place? Well, we, we schedule it on a company-by-company basis- Okay... and it's customized for each company. So we look at what are your important issues, like a chart I, I just, uh, explained. Where are your important risks?

24:48Where are your important issues? What do you hold onto dearly because they're company jewels? And we, we set up lists. You know, you mentioned, Pepe, the most, uh, negotiated terms survey. We actually do that for our company by company basis where everyone looks at terms and collaboratively decides what's important and what's not. So it's, it's a really hands-on experience. Wow. No, that sounds great. And Hal, if, if folks want to sign up for that course or learn more about you or the other items that we've talked about today around speed to contracting, where's the, where's the best place to do that? Reach out to me. I'll give you my email address. It's hbreton, that's H-B as in boy, R-E-T as in Tom, A, N as in Nancy, hbreton@worldcc.com, hbreton@worldcc.com. Reach out to me, and be glad to work with you. Whether you're a, a member or not, I will, I don't discriminate, so I'm happy to work with anybody who's interested in this topic. I'm, I'm doing it to get the marketplace going. That's great. It's my goal in life.

25:56Well, hey, this has been a fantastic conversation, Hal. We really appreciate you joining us. And thanks everybody for listening to another episode of Contract Heroes. This episode of the Contract Heroes is sponsored by Koho Consulting. Koho helps organizations of all shapes and sizes find, implement, and manage their chosen CLM tool. Whether your project is buy or sell side led, Koho can help you navigate the waters of the CLM space to make sure that you're getting a product that's going to fit like a glove years to come. If you'd like to learn more about Koho, visit their website at C-O-H-O consulting dot com.