CONTRACT MANAGEMENT Not performing a metrics-based program in your  legal department?  Not smart!

EDITOR’S NOTE - If you are not using metrics to measure your legal and contracting processes, this article will tell you why this neglect is very shortsighted even though it’s popular with many contract and legal experts.   Amber explains how using metrics can replace risk of failure with measurable value to your clients and legal departments. She also spotlights common misconceptions held by too many professionals…

As an attorney responsible for overseeing people and processes to deliver end-to-end contract management solutions involving high volumes of documents, I live and die by metrics!  Seriously!  And I’m not shy about revealing that the value I bring to my clients and the way in which I effectively oversee a contract management engagement is to systematically track and report on a range of quantitative and qualitative metrics including the following -- just to name a few:

• turnaround time,
• responsiveness,
• touch-time,
• accuracy,
• most frequent clause modification;
• frequency adoption of fallback positions

So, you can imagine my surprise when, during one of my panel discussions on metrics and best practices for corporate legal departments,  I heard the  corporate counsels and contract managers attending admit that their department did not use metrics. In fact many participants said they thought metrics were a big waste of time -- no value in them!

I often hear attendees say that setting up and maintaining metrics is just too much of an administrative burden, and that gathering and analyzing the data requires expensive software. This troubling mindset is why I find it so important to challenge that same attitude of most lawyers and contract managers I have encountered and not only show them the value, but show them how easy it is to collect the required data.

But this attitude prevails and isn’t unique. It takes me back to my pre-metrics days when the department’s thinking was - we’re legal; legal doesn’t use metrics. The most common and flawed misconception is that metrics for legal departments do not tell a meaningful story. Nothing could be farther from the truth.

Capturing the right metrics can significantly inform any legal department as well as its broader organization. In my area of contracts, for example, culling and analyzing data can tell us so much about contract activities and processes including:

• how many different contract types are being handled;
• which department(s) are requesting the most or least contracts;
• where bottlenecks appear in the process;
• how many times a clause was negotiated and other highly useful information.

With these metrics in hand, all the major players in the company from legal to sales to finance can then identify issues and make improvements such as increased efficiency, more informed business planning, and proactive risk management.

During one of my panel discussions about metrics, as I broke down these components and illustrated why they are important and how they can be applied, the participants began to realize that metrics are not just about how many contracts were negotiated, but how effectively legal is running their business.

One of the charts that I regularly use tends to generate significant interest from non-users of analytics.  It is a metric showing how many times each clause in an agreement was changed to a different position over the course of a set time period. At first, most attorneys and contract managers don’t see the value in this type of statistic. However, after I explain how this information highlights inefficiency and provides an opportunity to make an efficiency gain, most get very excited.

To illustrate using Figure 1 below, if the analysis of the past week’s contract negotiations indicates that a specific clause has been changed 80% of the time, that can tell a legal department that perhaps it is time to change the template so that their staff doesn’t continue to waste time negotiating positions that they will ultimately agree to anyway. Efficiency is very important. After all, it brings down the cost per contract.

Figure 1 - Sample Fall-Back Utilization ANALYSIS

Many attorneys and contract managers also showed great interest in hearing about metrics to identify where bottlenecks occur in their contract process. The law department is notorious for being scapegoated as the group responsible for holding up or slowing down a deal.

The reality is that legal is only one component in the overall contract creation process. Although legal is predominantly looking at and responsible for reviewing the legal terms, they are also tasked with engaging other areas of the business such as risk and finance to get their approval.

The process and the people involved are all part of the contracts sausage making process that often gets overlooked or ignored. It can also be the crux of the problem that most companies assume is a head count issue.  That’s where good metrics come in, allowing you to now pinpoint who has the highest touch time and any redundancies.

With this information in hand, you can take steps to make the process more efficient either by implementing internal turnaround times or determining that some of the process steps can be eliminated, automated, or perhaps undertaken in a different way such as parallel versus linear. This small, but impactful efficiency gain will make the business very happy -- deals will get done faster.

Another common misconception of many attorneys and contract managers is that maintaining metrics can be time consuming and requires costly software. Allow me to set the record straight - neither is true. While I do leverage the Contract Lifecycle Management (CLM) platform technology and/or Artificial Intelligence (AI) tools to produce a range of metrics for some clients, such are not essential for everyone. It is possible to create insightful dashboards using the tools available within the Microsoft Office suite such as Excel and PowerPoint.  

As an example, I have been able to produce and deliver 30 different types of metrics every month -- all from one Excel spreadsheet. If the spreadsheet is set up correctly, you can capture a multitude of information that takes less than a minute to track per transaction. That one spreadsheet can also give you all the information needed to create insightful charts, graphs, dashboards and scorecards like Figure 2 below:

Figure 2 - Sample Scorecard for Storage and Negotiation

By the end of one of my panel sessions, participants started to understand the benefits and -- dare I say it -- the necessity of legal department metrics. One skeptic panelist declared he had seen the light and plans to use metrics in the future. Participants agreed, but also expressed some concern about not knowing where to start.

So, where to start?  The best approach for setting up quickly and getting the benefits of metrics that are right for your legal department is to engage with a provider, like Integreon, experienced in delivering results-oriented solutions to improve performance.

To prepare, a suggested first step is to identify what information is important to you and the issues you are trying to resolve. Engaging a service provider may seem like an unforeseen expense, however, the information and knowledge gathered from a metrics-based approach to legal department management can yield unforeseen return in the end.  Even simple metrics can completely transform your law department and organization, by improving efficiency, mitigating risk, and increasing profitability.

About the Author

Amber is a licensed attorney that brings more than 15 years of legal industry experience to Integreon as the Vice President of Compliance, Contracts, and Commercial Business. Amber has experience providing management oversight for all Contract Solutions projects globally and ensuring efficient and accurate delivery. She has designed contractual solutions and implemented technology to support those solutions for many large corporations. Most notably was the complete transformation of the contracts department for a large, global pharmaceutical company; such transformation included software implementation, data migration, and process re-engineering. Amber also acts as the interface to multiple clients and has been responsible for strategy, P&L and client satisfaction. Over the years, Amber has led numerous projects for clients and has negotiated highly complex & high dollar contracts in diverse industries like IT, Pharmaceutical, Finance, Telecom, Defense & Entertainment.

ABOUT INTEGREON

Integreon is a global leader in alternative legal, business, and research support services for law firms, corporations, and financial institutions.  They apply a highly trained, experienced staff of 2,400 associates globally to a wide range of problems that require scale and expertise, enabling clients to become more operationally efficient by streamlining operations, maximizing investment and improving the quality of work they provide their end clients. With delivery centers on four continents, Integreon offers multi-lingual, around-the-clock support, as well as, onshore, offshore and onsite delivery of their award-winning services. For more information about Integreon’s extensive range of services, visit www.Integreon.com and follow Integreon at LinkedIn, Twitter and Facebook.