How to Transform Your Contract Review Process from “Painful” to “Productive”
By Sarah Nord
It’s funny how the mere mention of “contract review” causes tension in a room. In one corner, you have the people who are trying to execute a contract and get down to business. For them, the review and approval process can’t move swiftly enough. In the other corner, you have those who are responsible for going through contracts with a fine-toothed comb. They don’t want to be rushed in their work. It’s too important to get it right—and far too costly if things go wrong.
At the end of the day, everyone wants a contract with favorable terms. But the process to get there can be very painful, especially when that process lacks structure and transparency.
Here are a few warning signs that your contract review process is due for an overhaul:
“What’s the status?” If people who submit contracts for review are frequently badgering reviewers for an update, you may have a contentious issue on your hands. This is a common problem that can cause internal strife between contract owners and the procurement, legal, risk and compliance professionals who are responsible for reviewing contracts and protecting your company’s interests.
“Is this the latest/greatest?” If you lack a central repository for contracts, you may find yourself in a constant document chase, never certain that the version in your hands is up to date. And even if you make it through the review process with the correct version, what happens then? When the contract is up for renewal, you may struggle to locate the original document if it lives on someone else’s computer.
“Did we sign too soon?” The contract review process can be multi-faceted, and if your business functions aren’t working in concert and communicating with one another, you may inadvertently execute a contract before the full due diligence process is complete. This can cause major headaches if an issue arises days, weeks or months after the ink dries.
“Why on earth did we renew?” If you find yourself renewing contracts without really knowing if the vendor/supplier/partner is meeting your expectations, you may be extending relationships when you should be pulling the ripcord. (Our CEO, Chris Pantaenius, wrote a great post on this topic: “Do You Like Your Vendors?”)
For those who are nodding (or shaking) your heads at these scenarios, don’t despair. You’re in a crowded boat, but it’s not a sinking ship. Here are a few ways to gain control of your contracts:
Start with a central contract repository.
This may sound simplistic, but the very act of gathering contracts into a single, access-controlled location can dramatically improve your contract management process. You’ll never have to wonder where a contract is squirreled away or whether you have the latest version. The contract repository places the information you need at your fingertips.
In addition to contract documents, your repository should contain the following metadata:
- Contract purpose/description
- Counterparty (vendor, supplier, partner, customer, etc.)
- Owner and signatories (with their contact details)
- Effective date, expiration date and renewal terms
- Any related contracts (master agreements, child agreements, etc.)
Define and communicate the contract workflow process.
You may have a thorough process for reviewing contracts, but if stakeholders don’t know the process, they’re bound to break it. So once you’ve gathered your contracts in a central repository, it’s wise to spell out the specific process for:
- Requesting contract review
- Negotiating terms with the counterparty
- Performing additional due diligence (based on contract parameters or thresholds)
- Expediting the review process (when, why and how)
- Alerting stakeholders to contract renewal, expiration or termination
Also be sure to define which internal/external stakeholders are responsible for each stage of the workflow. A visual process flow with supporting narrative can be helpful.
Once you’ve defined the process, communicate it! Hold a training session, and be sure employees can easily access instructions when they need them. (Also, don’t forget about new employees; they need training, too.)
Automate wherever practical.
If your business is anything more than a fledgling startup, you likely have hundreds or thousands of contracts in play at any given time. Tracking status, expiration, renewals and other factors is a huge challenge. This is where automation can become a life saver (or at least a sanity saver). Consider the following:
- Set up auto-reminders when contracts are nearing expiration or renewal so you’re not caught with a last-minute review process.
- Use workflow automation to ensure that the right stakeholders are providing their expertise at the right time.
- Consider auto-cancellation of child contracts if the parent contract is terminated.
Enable stakeholders to help themselves.
This last suggestion is aimed at contract reviewers who are beleaguered with “drive-by” requests for status updates. Offer a self-service portal where stakeholders can go for live updates. Sure, you’ll have people who will not use the portal. They’ll continue to email, call and stop by for information. But if you can reduce the volume of status requests by sharing updates on a live dashboard, you’ll gain back valuable time. And if your contract repository offers this self-service reporting, then it’s no additional work for you to provide stakeholders with a window into your work.
Just remember: Contract review doesn’t have to be contentious. With a solid process in place, supported by reliable technology, you can transform contract review from “painful” to “productive.” You may need to invest in tools for automation and communication, but that investment pays off every time with greater efficiency and productivity for your team.