Table of contents
- What is contract lifecycle management?
- What’s wrong with managing contracts manually?
- Overcoming roadblocks to CLM adoption
- Tactics for streamlining adoption of CLM
- Metrics for evaluating the success of CLM adoption
- Conclusion: Don’t just adopt – adapt.
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As your organization scales up, so does the volume of agreements you handle – and adopting contract lifecycle management (CLM) software becomes increasingly critical. Although manual contract management might work fairly well on a small scale, it quickly becomes unsustainable when you’re juggling hundreds of deadlines and deliverables. That’s where CLM tools come into play, enabling your team to multiply their capabilities.
What is contract lifecycle management?
Contract lifecycle management is an organization-wide approach to drafting, reviewing, signing, organizing and tracking agreements. It starts by bringing all your agreements into a single software platform, where they’ll never get lost.
The top contract lifecycle management software solutions also include built-in contract approval workflows and e-signing functionality, which means you can say goodbye to email attachments. And you’ll be able to set deadline reminders, so you’ll never miss a chance to renew or cancel.
What’s wrong with managing contracts manually?
If you’re still managing contracts manually, it’s hurting your bottom line. Research by McKinsey shows that poor contract management costs businesses an average of 9 percent of their revenues every year.
In addition, the Harvard Business Review reports that as much as 40 percent of a contract’s value can be lost without careful contract governance. And research by Gartner shows that contract-related tasks consume up to 40 percent of a legal team’s time, leading to $2.7 million in lost productivity annually.
While a contract management strategy has been shown to reverse many of these cons, CLM’s effectiveness depends on how widely it’s adopted in your organization. Company culture, technology, cost and operational issues can all pose challenges when it comes to adopting and onboarding a CLM system.
The good news is that contract management mistakes can be turned into positive selling points with the right tactical approach. Here, we’ll show you how.
Overcoming roadblocks to CLM adoption
While each organization presents its own unique challenges to contract lifecycle management adoption, roadblocks on that path generally break out into five key categories.
#1: Organizational resistance
While some opposition to contract lifecycle management arises from practical or financial considerations, the most pervasive source of friction is often change-averse company culture. Teams and individuals are accustomed to following their own workflows, using familiar file management platforms and folder architectures.
To overcome this resistance, you’ll need to demonstrate the value of CLM not only to senior stakeholders, but also to department heads and even individual employees.
#2: Technological constraints
Contract lifecycle management tools may appear to pose technological challenges if your organization still collects signatures on paper forms, or if departments each use their own filing systems. IT decision makers may be reluctant to implement new software, and may raise questions about its compatibility with existing tools.
To get buy-in from the IT side, you’ll need to emphasize the ease of integrating your contract lifecycle management platform with existing software and workflows.
#3: Legal and security concerns
Legal stakeholders may express concerns about a new CLM system’s ability to handle sensitive data securely, since many digital contracts contain proprietary information that must be stored in compliance with privacy laws.
You can alleviate these concerns by providing evidence that a robust CLM strategy will actually enhance security – for example, by discussing the platform’s third-party security certifications and guarantees of regulatory compliance.
#4: Financial considerations
The costs associated with purchasing the system, integrating it into existing workflows, and training employees may raise budgetary worries.
To overcome these objections, you’ll want to highlight the financial benefits of using a contract lifecycle management tool, such as reducing human error, increasing efficiency, and enhancing contract compliance. It’ll also be helpful to point out that contract automation can help identify sources of recurring costs, as well as value opportunities.
#5: Data integration issues
Your organization may already have customer relationship management (CRM), enterprise resource planning (ERP), and/or financial software in place, and stakeholders may be concerned about integrating contract data with these platforms’ workflows.
To tackle this objection, it’ll help to emphasize contract lifecycle management software’s out-of-the-box integrations with many other platforms, as well as custom integrations via application programming interfaces (APIs).
Tactics for streamlining adoption of CLM
Although it’s crucial to tailor your CLM adoption campaign to your organization’s unique culture, priorities, and technology stack, it’ll help to target the following four key tactics.
Tactic #1: Identify and engage key stakeholders
Buy-in from departmental decision makers is essential to rolling out contract management workflows on a company-wide basis. In particular, you’ll need support from leaders in the sales, legal, operations and finance departments.
Here’s how to approach key stakeholders:
- Understand stakeholders’ needs and concerns. Talk with each stakeholder one-on-one to make sure you understand the current pain points and challenges they’re facing. If they offer pushback, seek to understand the reasoning behind it.
- Present tailored value propositions. Personalize your presentations to demonstrate how a contract lifecycle management tool will address the specific issues each stakeholder has discussed with you. Address their concerns head-on, and turn each one into a selling point.
- Connect the dots. Show how a CLM approach can help each department achieve its strategic goals – for example, by reducing risk, or helping finalize contracts faster. Explain how automating or eliminating specific tasks will contribute to those goals.
- Showcase tangible benefits. Cite case studies to show the return on investment (ROI) that other organizations have achieved from adopting contract management tools. Use data from reputable sources to make a strong and objective case.
Close out each discussion by demonstrating how seamlessly contract lifecycle management tools and tactics will fit into the department’s existing workflow. You’ll soon have stakeholders on your side.
Tactic #2: Follow best practices in change management
Once you’ve secured support from leadership, you’ll want to develop a strategy for helping each department manage the transition from legacy contract workflows to modern ones.
Here are four best practices for managing change during the adoption of contract lifecycle management:
- Assign roles and responsibilities. Choose at least one person in each department who’ll take personal ownership of the transition to the new contract management system. Work with each change manager to establish department-specific benchmarks.
- Distribute a CLM implementation playbook. This document should provide a step-by-step outline of the implementation process, including a timeline, goals, metrics for success, and contact info for each department’s change manager.
- Maintain open lines of communication. Keeping everyone informed about the progress of the change helps build trust and reduce uncertainty. Provide regular updates about challenges overcome and milestones reached.
- Encourage feedback and adjust accordingly. Involve team members from each department in the planning and implementation of your CLM solution. Maintain an open-door policy, and look for opportunities to put feedback into practice.
Throughout each phase of the implementation, acknowledge and celebrate the achievements of team members who’ve benefited from contract lifecycle management tools. Word will quickly start to spread.
Tactic #3: Start with a pilot test and build outward
An early success will greatly increase support for wider adoption of contract management tools. So start with one department or workflow where enhanced contract management will deliver a measurable positive impact, and/or where stakeholder support is particularly strong. That’s ground zero for your pilot program.
Here are four steps to get the pilot test up and running:
- Identify metrics you’ll improve. For example, you might aim to shorten contract turnaround times by a certain percentage, or replace all paper signatures with electronic ones. You’ll find more ideas in the list of 10 metrics toward the end of this guide.
- Choose your pilot group. These will be individuals in the department who work with contracts in large volume, and are open to innovative solutions. Most importantly, they should be people who will directly benefit from a CLM implementation.
- Create a plan of action. Work with key stakeholders, as well as your pilot group, to create a step-by-step roadmap for switching to a CLM workflow. Agree on a timetable, and assign roles and responsibilities for each step.
- Train, implement and track. Instruct your pilot group on the contract lifecycle management tools and practices you’ll be using, then roll out your new workflow as agreed. Make sure your pilot group keeps tabs on metrics that’ll demonstrate the impact of your program.
At the conclusion of your pilot program, you’ll have a real-world dataset that proves the positive impact of contract management in your organization. Leverage this data when talking to other decision makers, and you’ll soon have their support for CLM rollouts in their departments, too.
Tactic #4: Create a company-wide training program
As you continue to build out your CLM strategy across more departments, it’ll generate value in proportion to the number of people who follow your playbook. A company-wide training program will be crucial for making sure everyone knows how to use the system, and follows it consistently.
Here are four steps for maximizing the effectiveness of your training:
- Set clear training objectives. Choose objective and measurable goals. For example, you may want all teams to switch from paper signatures to legally binding electronic signatures, to automate their contract negotiations, and/or to be able to find document attachments in your contract database.
- Create a standardized curriculum. Work with stakeholders to develop teaching materials tailored to your organization’s contract workflows. You may also want to develop specialized resources for departments like legal and procurement.
- Combine multiple instruction methods. In addition to classroom instruction, implement online learning modules, interactive role-play, hands-on exercises, and on-the-job training. Cater to different learning styles as much as possible.
- Track, iterate and improve. Assess each learner’s performance at the end of the training, and target any areas that need improvement. Ask for their feedback as well, and look for opportunities to strengthen your training courses.
CLM training isn’t just a one-time event, but an ongoing practice. Make it a standard part of the onboarding process for all new hires, and you’ll soon see efficiency improvements take hold as legacy processes fade away.
Metrics for evaluating the success of CLM adoption
As you roll out contract management workflows and training courses across all departments, contract management reporting tools will help you track performance improvements. In particular, keep an eye on the following 10 key performance indicators (KPIs):
- User adoption rate: The percentage of employees using the CLM system and following best practices. The goal is to get this to 100 percent.
- Training completion rate: The number of team members who’ve completed the training program you’ve put in place. Again, the goal is for this to reach 100 percent.
- Contract creation time: The time it takes to create a new contract with your CLM system. Shorter completion times are a positive sign.
- Contract approval time: The average time it takes for a contract to go from submission to internal approval. Shorter approval times are a positive sign.
- Contract signing time: Faster signing turnarounds indicate that deals are being closed faster, freeing up work hours for higher-value tasks.
- Compliance rate: The number of compliant contracts as a percentage of the total number of contracts. This should steadily increase toward 100 percent.
- Contract renewal rate: The percentage of contracts renewed before their expiration date. Higher renewal rates indicate more efficient contract management.
- Number of active users: High numbers of daily and monthly active users, as well as frequency of activity, indicate that the system is seeing wide adoption.
- Metadata completion rate: A high percentage of contracts with completed dates, values and other fields indicate that people are using the system correctly.
- . Issue resolution time: The average time it takes to resolve system-related issues. Short resolution times indicate a smoothly functioning contract management system.
In addition to this list of metrics, you may also want to track additional KPIs that are important to particular stakeholders and departments. The more data you collect to demonstrate the return on investment (ROI) provided by contract management, the more compelling your case for broader adoption will become.
Conclusion: Don’t just adopt – adapt.
Adopting contract lifecycle management isn’t simply about adding a new software to your tech stack – it’s about adapting your organization’s existing processes, culture, and outlook towards proactive contract management. What’s more, contract lifecycle management adoption isn’t an end destination, but an ongoing journey of contract tracking, iteration and improvement.
That’s where the “adapt” part comes in. As industry regulations and organizational priorities evolve, so should your CLM strategy. Remember, the real success of a CLM system is realized when it becomes an integral part of your growth plan – when it’s no longer seen as an “add-on” tool but as a necessary and valuable driver of operational agility.
By continuing to adapt your contract playbook and training to your industry’s evolving landscape, you’ll position your organization to maximize efficiency and mitigate risk even in the face of emerging challenges. Stay flexible, and you’ll progress from simply managing contracts to mastering contract lifecycle management.