A robust contract management strategy is critical to streamlining processes, minimizing risks, and maximizing opportunities throughout the contract lifecycle management process.
However, a lack of clear goals, limited resources, varying contract complexities, and constantly changing legal requirements, among others, can significantly limit your ability to develop a holistic and optimized strategy for your contract management processes. And if these aren’t addressed, contract management may become inefficient, error-prone, and exposed to unnecessary risks.
In this guide, we go above and beyond to deliver answers to help you build a robust contract management strategy.
What is a contract management strategy?
A contract management strategy refers to a plan or approach developed to effectively manage contracts throughout their lifecycle.
It involves a set of systematic and proactive blueprints designed to ensure that contracts are correctly created, executed, monitored, and enforced in a way that maximizes value, mitigates risks, and drives desired outcomes.
A typical contract lifecycle management process encompasses the following stages
This may seem easy on paper, but in reality, running contracts through these stages can be time-consuming, exhausting, and error-prone, especially when manual processes and high volumes are involved.
Thus, the core objective of a contract management strategy is to optimize manual processes nested within each phase and develop methodologies that enable the team to manage contracts at scale without compromising efficiency and accuracy.
Guide to developing a contract management strategy
According to a study by Aberdeen, best-in-class companies cut down annual contract costs by 12.8%, accelerate contract approval cycle time by 22.5%, and renew 56% of their contracts.
These top companies are able to stay far ahead of the industry average simply because they have invested resources into developing robust contract management strategies and dedicated time to constantly optimize them.
Let’s see the steps you must take to develop a fully-fledged contract management strategy that’ll keep you on track to replicate the successes of your best-in-class counterparts.
#1 Evaluate your organization’s contract management needs
Begin by assessing specific requirements and challenges related to managing contracts within your organization.
Examine your organization’s current and historical contracts—the volume, scope, complexity, and value. You should also take note of pain points and bottlenecks that usually occur at every phase of your organization’s contract lifecycle as well as the resources required to improve processes across these stages.
Furthermore, consider your organization’s overarching objectives and identify how contract management performance can impact its business strategy and contribute to specific goals.
This evaluation provides insights into areas that need improvement, identifies potential risks, and helps you tailor your contract management strategy to meet your organization's unique needs.
#2 Identify key stakeholders to establish clear communication
This involves identifying individuals whose roles and responsibilities tie directly to the success of the contract management process.
This may include internal stakeholders (such as executives, legal teams, procurement teams, finance teams, and project managers) or external stakeholders (like customers, suppliers, partners, regulatory bodies, or auditors).
Determine those responsible for different processes like contract initiation, negotiation, approval, compliance monitoring, renewal, and termination. This helps establish clear lines of communication and accountability within the contract management process.
By identifying stakeholders who are critical to the success of your contract management strategy, you can plan how to engage them to gain their support and buy-in.
#3 Develop standardized processes and workflows for consistent procedures
“First, I worked on setting up contract templates and contracting guidelines that every lawyer in the team dealing with contracts must use and follow. Doing so, we were able to bring in a lot of order to the system.”
~Bhavna Singh, GC & DPO, Subex Limited
Fostering Transparency and Accountability in Large Tech Enterprises
The purpose of workflow standardization is to establish consistent and structured procedures for handling contracts throughout their lifecycle. This minimizes errors, reduces duplication of efforts, and promotes consistent practices across different contracts and contract types.
To achieve this, start by creating a template for your most popular contract types, including all the relevant legal guardrails and fallback provisions. Afterward, establish a straightforward approval workflow and include mechanisms to ensure every participant delivers their tasks on time.
#4 Establish a central repository for contract documents for easy access
Best-in-class companies save 77% of their contracts in a centralized repository. This is because consolidating your contract documents in a central location makes it easier to bring your contract management strategies to life.
When contract documents are centralized, silos are broken down, cross-functional alignment is enhanced, version control is more efficient, and it becomes much easier to dive into data and optimize processes across the board.
That said, you must ensure that your repository has the following characteristics:
- Accessibility—should be easily accessible to authorized personnel from various locations and devices. It can be a cloud-based system or an on-premises infrastructure with remote access capabilities
- Organization and structure—should have a well-organized structure that allows easy categorization and retrieval of contract documents. You should be able to sort contracts by contract type, vendor, project, or other relevant criteria. Using folders, tags, or metadata can further enhance organization and searchability
- Security and access control—should employ robust security measures such as user authentication, access controls, encryption, and role-based permissions.
- Scalability—should be designed to handle a growing volume of contract documents and support concurrent user access without significant performance degradation
#5 Implement automation mechanisms for faster processes
Automation is at the core of modern contract management strategies. If you continue using manual processes, it will be tough to effectively manage contracts at scale, no matter what your strategy is.
Thankfully, the legal industry has, over the years, witnessed a massive influx of digital tools you can leverage to automate most management tasks.
Popular tool categories include:
- Notification apps—for sending reminders.
- Centralized repositories—for storing contracts on the cloud or on-premise.
- E-signature tools—for signing contracts digitally.
- Document processors—for remotely collaborating on contract drafting and redlining.
- Contract Lifecycle Management (CLM) platforms—for streamlining and automating various tasks across the contract lifecycle.
I strongly recommend utilizing an all-in-one CLM because it contains every tool you need to bring your contract management strategy to life. This includes the tools listed above and much more.
SpotDraft, for instance, offers a centralized repository with robust search and filter capabilities that make it easy to house, secure, and access your contract documents without hassles. It also helps you generate contracts in minutes using standardized templates enriched with legal guardrails that ensure you create contracts ten times faster without compromising quality and compliance.
Furthermore, with SpotDraft, you automate critical workflows like approvals, reminders, reports, and much more.
Also Read: How SpotDraft Works
“Although a CLM solution might seem costly in the early stages, companies should have it in place and build workflows within the tool to process contracts better. By doing so, they can keep legal costs low in the growth stages and close deals faster. Moreover, they will have clear visibility into the contract pipeline and use their legal resources to optimise workflows better for yielding maximum results.”
~Igor Poroger, Director of Legal, EMEA, Vectra AI
How CLMs Empower Legal Teams in B2B SaaS Companies
#6 Identify and mitigate risks to avoid hefty costs
This involves proactively identifying risks that the organization typically encounters during the lifecycle of a contract and developing a standard procedure for minimizing or eliminating them.
These risks can vary depending on the content of the contract, the parties involved, and general industry variables. Some common risks you may need to be aware of include:
- Scope creep
- Regulatory breaches
- Intellectual Property theft
After identifying these risks, assess their potential impact and likelihood of occurrence, and develop plans for mitigating them. The mitigation approach may involve adding contractual safeguards (like NDAs, termination, intellectual property, indemnification, and limited liability clauses), establishing performance metrics, implementing monitoring systems, and more.
“Over the past five or so years, one of the key responsibilities businesses are placing on in-house lawyers is spotting and managing risk. The business wants its in-house lawyers to be the ones who sniff through virtually every situation looking for risk (legal or otherwise). What this means is that in-house counsel need to be masters of the company’s business operations and strategy (both short and long term), because you cannot successfully spot and manage risk unless you understand how the company operates and where it wants to go.”
~ Sterling Miller, CEO and Senior Counsel, Hilgers Graben PLLC
Ten Things: Spotting, Analyzing, and Managing “Risk”
#7 Provide access to training resources
To ensure your contract management strategy is implemented correctly, you must ensure everyone involved in the contracting process is armed with the proper knowledge and skills to perform tasks effectively.
Resources may include programs by industry associations, internal workshops, online courses, documentation and guides, webinars, and more.
Remember to track their progress and assess the effectiveness of the training resources, seek feedback, and while monitor how they apply their acquired knowledge and skills.
Also read: 8 Top Contract Management Software Platforms
#8 Ensure continuous evaluation and improvement
“If you think that you're doing everything perfectly, you're not going to grow. There's always an opportunity for self-improvement.”
~Doug Luftman, ex-DGC, DocuSign
The Key to Success as an In-House Legal Counsel & Leader
As the world of business continues to evolve, the contract management process has followed along, becoming more complex as the days go by.
This means that your contract management strategy, no matter how robust it is, will need to be constantly evaluated and optimized to keep up with changing business, industry, and regulatory requirements.
Ensure you do the following:
- Schedule periodic reviews of your contract management strategy to assess its effectiveness.
- Collect feedback from relevant stakeholders across legal, procurement, and finance units.
- Modify processes, templates, or guidelines to address identified shortcomings or improve efficiency.
- Stay informed about changes in laws, regulations, or legal precedents that may impact your contracts.
Staying ahead of the curve
Leading organizations are able to onboard more deals, save costs, and maintain impressive contract renewal rates because their contract management processes are rooted in proactive, technology-driven strategies.
By building and implementing a comprehensive contract management strategy, you will be able to close deals faster, cut down risks at scale, and maximize more revenue opportunities.
That said, SpotDraft is designed to help you bring your contract management strategy to life by leveraging a comprehensive suite of automation functionalities, repository solutions, and streamlined collaboration features, among others.
Want a personalized demo of how SpotDraft can elevate your contract management strategy? Request a demo!