4 Contract Management Misconceptions To Leave In 2020

4 Contract Management Misconceptions To Leave In 2020

4 Contract Management Misconceptions To Leave In 2020

To better understand how contract automation can benefit your businesses in the coming year, it’s important to first break down the different misconceptions about contract automation. 

Misconception 1: Contract automation doesn’t affect all departments

Contract automation benefits many business departments including sales, operations, procurement, finance, and HR. Fortunately, the world has evolved from a time when only lawyers knew how to read and develop contracts. As such, the benefits and uses of contract automation do not exclusively apply to lawyers.

A company may have several hundred contracts happening at a given time before they hire a single lawyer. This means that employees of several different departments are handling contracts. So many elements of business function require an efficient understanding of how contracts work. Professionals from a wide variety of business teams rely on contracts to ensure that the company is proceeding in the right direction as smoothly as possible. 

Other departments that rely on contract:
  • Sales teams use contracts to close deals
  • Hiring teams use contracts to onboard new employees
  • Finance teams keep track of spending and revenue
     

Misconception 2: If it involves a contract a lawyer needs to be involved

In most businesses, having a full-time lawyer working in-house isn’t common, as it can be quite expensive. Additionally, it’s rarely necessary and can lead to employees and teams relying too heavily on the company’s legal team. This includes keeping legal busy with tasks that could easily be handled within a given team ( low-risk documents, updating forms, creating drafts, etc.).
Contract automation makes it easy to divert simple tasks to their proper place and reduces both time and money that would otherwise be wasted on unneeded processes. It’s especially useful in preventing a bottleneck of wasteful tasks when companies grow in the number of employees but stay close to the same in number of lawyers.
Unfortunately, when it comes to embracing contract automation, many smaller teams feel that they aren’t in need until workload issues become too much to solve without significant effort. Automation can help make it to where teams are not overrun with tasks and contracts are still organized and managed accordingly. 

Misconception 3: Contract automation is all about editing and emailing templated Word document

Why shouldn’t contracts stay in Microsoft Word? 
The tech stack on Word and email cause problems to arise quickly and compound over time. Many legal teams have found Word to have a selection of issues. For example:
  • Word is unscalable. While coding a Word template that sent files to mail merge is simple with a few documents, the same cannot be said for hundreds of documents. Files become unstructured and unorganized, making it to where legal teams need to buy contract review software to make sense of their own contracts. Additionally, the way files are organized can lead to awkward file naming and scattered information spread across more than one system.
  • Word lacks data. Creating a database is not easy with Word, nor is it usually very organized. Word databases do not allow individuals to locate files easily, and on top of that, changes made to documents are difficult to track and alternate versions of the same document can lead to key pieces of information becoming lost. 
  • Word does not integrate well. Using Word for contract processes can be a nightmare that leads to valuable time being wasted. Commercial teams can spend entire workdays downloading documents, signing, and uploading them into their current system.  

Misconception 4: Microsoft Word Is ‘Good Enough’ For Contract Management

Word has been around for such a long time that teams and employees alike have grown accustomed to using the system. Despite the functional issues associated with using Word, it can be challenging to break away from a familiar program.
The challenges of moving away from Word may include:
  • Static files– migrating static files to an automated system can seem like a never-ending task with an array of risks thrown in (like formatting issues, for example).
  • Difficulty– developing a contract automation system is not easy and can be time-consuming if a company only has a small legal team. Sometimes, it seems easier to continue processes as they are instead of taking the time to adopt a new system.
  • Hesitance– if a small portion of the team is willing to use a contract automation system, that does not mean the rest of the team will be so willing. It can be a challenge to get an entire team on board.
  • Unfamiliarity– it’s not uncommon for teams to be unaware of what a contract platform does, which may cause them to be unwilling to learn.
While it’s understandable that teams may not feel ready to use a new system, most team members would agree that contracts should be future-proof and contain supportive data. It’s highly desirable to have a system that allows the right information to be accessible whenever needed, without hours of searching.

Plan for Contract Automation in 2021

Now that several CLM misconceptions have been clarified, it’s time to think about a plan of action. If a given business would benefit from automating contracts, presenting an automated system as a solution to common business issues is the key.
Important questions to ask during planning:
  • Do I have a pain? If a company is wasting time and money on repetitive contract tasks, losing the integrity of their data, and feeling more disconnected to legal than supported by it, these are signs that something needs to change.
     
  • Would automation suit my company’s contracts? If a company often deals with low-negotiation and high-volume contracts, automation may be the solution. For example, employment offer letters, partner agreements, NDAs, and MSAs are all high-volume contracts that don’t go through as many changes as high-negotiation contracts.
  • Does the company have enough internal support? If there is budget set aside for automation projects and users feel there is a pain point or bottleneck it may be a good time to propose a contract automation system. 

Successfully Choosing a System

If you and your team have presented a case for contract automation and you gained approval, it’s time to select a system that will fit your company’s needs. Choosing a proper CLM program can be done by following a few helpful tips:
  • Start simple: If it’s too much to migrate and automate every contract in the business, work with easy forms first. Pick NDAs, offer letters, or partner agreements, and make them self-serve first.
  • Choose a user-friendly interface: If a system you’re considering seems complicated to learn, your colleagues are not going to embrace it. Choose a program with nothing less than a streamlined user experience.
  • Plan your success: Define success markers. Success needs to be quantifiable, so it’s important to determine which numbers are supposed to change with the new system. Determine measurable benefits for your teams. It’s best to be clear about what your teams stand to accomplish when automating legal contracts.

If you’d like to find out more about why these myths might be slowing you down, and what you can do about it, click here and we’ll be happy to share what we’ve learned about best practices when it comes to managing contracts.

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