The Case for Control – The Need for a Repository
In the first blog post in this series we made the claim that contract management in many companies can be considered chaotic. In order to not be accused of gratuitous hand-waving, we also defined chaos as “behavior so unpredictable as to appear random; this random behavior happens because of sensitivity to small changes in conditions.”
Most can agree that companies are living, breathing organisms where small changes in conditions are part of daily life. As such, in the world of contract management, it is easy, per the definition above, to view most contract management processes in companies as chaotic. The question being asked and hopefully answered in this blog post is: What, if anything, should companies do about this? In other words, is the chaos worth controlling?
Is shaping a young life – worth it?
As with previous blog posts, I will try and create context to answer this question, using a parenting analogy. As an aside, I don’t invoke parenting analogies because I consider myself a world-class parent. In fact, I’m sure I’m not an exceptional parent (never done this before) and as such, it is the thing that consumes my mind space most of the time. It’s a continuous improvement exercise – frustrating at times yet incredibly fulfilling when progress is made. Yes…very much like contract management.
I have a teenage daughter who to me is fascinating, loquacious, emotional, spirited…but who also utterly befuddles me. My wife, the smartest person I know, has a PhD in Clinical Child Psychology. She tells me that this cocktail of adjectives about my daughter represents standard fare teenage girl stuff. So, needless to say, there are constant, unpredictable changes in conditions with my daughter, which creates untold amounts of familial chaos (her older brothers are equally perplexed by their sister – as well as fascinated by her). Is THIS chaos worth controlling?
Sometimes, The Simpler The Better
Well of course the chaos described above is worth controlling – the stakes are highest when thinking about the implications on the future of a young person. The guidance I have been given to quell the chaos is: Ignore the negative until it goes past a threshold and instead focus on reinforcing positive behavior. Sounds simple? Perhaps. However, it works in impactful ways. It de-escalates when there is an adversarial situation. It allows my daughter to feel validated when doing something positive. It uses the gift of the passage of time as a vehicle to move past unpleasant situations. It opens the door to a continuous improvement conversation, grounded in the positive behaviors. It acknowledges that some behaviors are just part of a developmental stage and will pass – and therefore are not worth addressing with conflict. Plus, it just feels a heck of a lot better than to be that constantly correcting parent. Or maybe I’m just a wimpy parent.
How is a establishing a contract repository like a strategy to parent a teenage girl?
O.k. scintillating, you say, but this is about contract chaos and if/how to control it. Well, here goes. It is my carefully considered point of view that establishing a high integrity repository of existing obligations is the foundation for quelling contract chaos. Sound too simple? Perhaps. However, the guidance from my wife did too until I invoked it and it started showing results. Here are a few key observed results in our years of work in this domain creating high integrity repositories for over 5 million complex contract documents:
- De-escalation: When a business stakeholder needs to know if a contract exists with a counter-party, and if the contract is active or expired, the need is usually urgent. There is an active negotiation, or someone’s manager needs it. It is essential to quickly locate a contract document to answer these questions, and de-escalate situations where anxiety may exist.
- Using knowledge for strategic advantage: Entering a negotiation with a counter-party with full awareness of precedent agreements creates negotiation leverage that is hard to obtain otherwise.
- Proactive management of obligations. Missing renewal and expiration dates of contract obligations is an everyday occurrence. A unified high integrity repository allows proactive notification triggers to be sent so a company can get ahead of these deadlines. Certainly this reduces frenzy and likely even saves money.
- Continuous improvement: One of the root causes of contract chaos is that everyone does their own thing. It works because commerce is conducted daily and the wheels are not falling off the corporate bus. However, if it is known that there are 6 versions of a MSA that are used by 25 different people – something that can be discovered by having a unified repository – the foundation for continuous improvement is established.
- Standardization and reduction of volatility. With a high integrity unified repository, it is easy to identify things such as – the 7 most negotiated provisions in a contract type that constitute 45% of all contracting volume. With this information it is easy to create a negotiation playbook with guardrails for what changes will be accepted or rejected in certain provisions. This reduces volatility and standardizes the response to redlines.
- Blended contracting team with lower cost: Using outsourced, lower cost resources to support contract negotiations is possible with the playbook, once created. The redline review is objective and clinical and service level agreements can be established for response time and review quality. As a result, lawyers can be “enabled to practice more law” and counter-parties can expect to receive swifter response to their desired language, which leads to more efficient business cycles.
- Demonstrating good faith: Every company faces some degree of regulatory oversight. Even if your industry is not heavily regulated, there are audit committee requirements and also things such as the Foreign Corrupt Practices Act (FCPA) that impact how a company enters into obligations. In these situations, there are always mis-steps that occur. The point is to be able to show that even if a company doesn’t always “do things right,” they try and “do the right thing.” It creates a lot of confidence if a company can quickly find obligations and report on same to stakeholders that have questions.
This is certainly not a comprehensive list of the ways a high integrity repository can quell chaos but hopefully shows how something simple like a repository can have broad ranging impact.
For now, I will take my wife’s parenting advice. It’s simple and I understand it. However, if history is any predictor, my daughter will catch onto my approach, and find a way to out-smart me. Until then, I will smugly walk around and call today a win.
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