I speak with clients every day who are thinking about procuring a contract lifecycle management (CLM) platform. We hear about a range of business problems that legal, commercial, and procurement contracting functions are trying to solve:
- “Our contract volumes are mounting, and we are struggling to meet turnaround times.”
- “We have limited visibility into current activity or throughput.”
- “We need tighter controls on what is being signed.”
- “We do not know where our contracts are, nor have line of sight into the contents.”
- “We need to free up capacity across our team.”
The problems vary but the theme is always the same: we need a modern, digitized contract management system that addresses these issues and offers the prospect of longer-term transformation of the transactions support function.
There are those of us—myself included when I was COO of General Electric’s law department—who decided to invest in a CLM platform to meet these needs, then emerged more than a year later on the other side of the project feeling bruised and disappointed by the experience. Why is it that so many CLM procurements end up this way?
We consistently see companies investing significant time and money in a CLM project, only to be frustrated by the poor return on investment. They are still waiting to see all that access to data, process efficiency and accelerated speed of service that was called for by the business case.
Here is our take on why this happens and how to avoid it. It’s important to note that this is not a critique of CLM providers. There are some solid products and great examples of innovation emerging in the CLM space, reflecting the deeper industry drive towards digital transformation in legal and contracting functions. But here is the problem: technology is only one pillar of CLM. Ignoring the others is like trying to build a house without foundations.
Technology does not equal transformation
CLM systems are typically presented as technology solutions, so it is not surprising that companies tend to approach CLM implementation as primarily a system deployment project. The focus narrows to system requirements gathering, selection, design, and configuration planning. But, more than anything, CLM is a complex process involving workflows, resource models, transactional content, risk frameworks, talent allocation and corporate sales and operations culture.
All these elements must be assessed, understood, and factored into the CLM project. When that does not happen, the enabling technology cannot be blamed for failing to transform the contracting process effectively.
Time, resource and investment miscalculations
CLM systems do not come with a team of multi-disciplinary experts, ready to implement the large-scale digital transformation that this technology offers. Businesses routinely underestimate the expense and lift required to build the system themselves, and typically do not have access to internal resources with the experience and know-how required to execute transformation of the contracting function. As the cost, timeline and pain of implementation increase, the return on investment reduces.
Consider the range of skillsets you will need at different times throughout the process (e.g., industry and domain expertise, workflow design, project management, change management, user experience, data architects, operational excellence) to maximize your investment.
CLM utility decreases as complexity increases
Many CLMs work best when a company’s contract portfolio consists of high-volume, light-touch negotiations. But that is not the reality of the spectrum of transactions activity in most major companies. The result is that the CLM results in relatively low system utilization for many agreements, and the agreements that are processed through CLM are often those that represent higher commercial risk to the corporation. Once again, the return on investment comes under strain.
So careful and strategic analysis at the design stage is critical. Not all CLM systems are well adapted to supporting the full range of transactional activity that is associated with the highest risk, highest value contract engagements.
We’ve seen an extraordinarily large number of unsuccessful projects because, for example, Legal decides to adopt a CLM, but Sales Operations, Delivery and Procurement are misaligned with the strategic commitment. Or vice versa. The contracting process usually cuts across many functions in large organizations, which is why it is critical to build consensus among key stakeholders on the ultimate goal, and the journey to get there.
Clearly, internal communication and a change management strategy are key components of a successful CLM deployment. Managing the execution of that strategy requires both time and experience, which may be lacking for stretched legal departments trying to “DIY” the CLM project.
Misconception of one-size-fits-all technology solution
Most CLM tools emphasize pre-execution processes. As a result, they fail to provide insights deriving from the post-execution environment: they do not support meaningful contract obligations tracking, nor do they deliver account health monitoring. Clients are left with disconnected systems and processes supporting the pre-signature and post-execution transaction domains, which increases cost, complexity, process inefficiency a—perhaps most painful of all completely misses the opportunity to implement a true, end-to-end CLM environment.
So before taking the technology leap, we encourage our clients to think about the strategic outcomes they want from CLM and the time, resource and expertise required to ensure success. And above all, we advocate a holistic approach to the project design that combines talent, workflow, culture, data, and technology.