Contract Management: Driving Greater Value Amid Accelerating Compliance, Security and Legal Pressures

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Robert Half Legal Report

Contract Management: Driving Greater Value Amid Accelerating Compliance, Security and Legal Pressures

March 29, 2021

 

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Intro: Welcome to the Robert Half Legal report where we discuss current issues impacting the legal profession related to hiring, staff management and more with leading experts in the field. Robert Half Legal provides lawyers, paralegals and support staff to law firms and corporate legal departments on a project and full-time basis. The Robert Half Legal Report is here on the Legal Talk Network.

 

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Charles Volkert: Hello everyone and welcome. I’m Charles Volkert, senior district president of Robert Half Legal and the host of our program. Joining me today is Bernie Donachie, global supply chain lead for Protiviti. Bernie has more than 30 years of procurement and sourcing experience including large-scale procurement transformation. He also has experience in supply chain strategy, inventory management, logistics and warehousing as well as strategic cost reduction, working capital management and ERP optimization and implementation. Also joining us today is Frank Serge, managing vice president for Robert Half Legal’s consulting solutions practice. With more than 13 years’ experience, Frank provides consultation and support to corporate legal clients to mitigate risks, develop operational efficiencies and reduce costs through contracts managed solutions. Frank and Bernie, welcome to the show.

 

Frank Serge: Thank you for having us Chad(ph).

 

Bernie Donachie: Yeah, thanks Chad. It’s a pleasure to be here.

 

Charles Volkert: Excellent! Well, our discussion topic has ever increasing significance within today’s digital landscape, namely contract management. Contract

Management serves as a critical foundation for an organization’s success, driving and shaping virtually all business transactions. And in the current environment, many companies are facing heightened data privacy security, economic and legal pressures, all of which underscore why having a comprehensive and effective contract management program is a key business imperative. Organizations that fail to regularly evaluate and update their contract management procedures can expose themselves to a host of operational legal and financial risks. We’ll be discussing the ever-growing complexities and challenges inherent in contract management today and those associated risks. Bernie and Frank will examine how digitization and other technology advancements are reinforcing contract processes, compliance and much more. We’ll also explore critical strategies and actions that can help reboot and strengthen contract life cycle management to achieve maximum control benefits and value. Frank, to set the stage, can you explain why contract management is so critical to organizations today?

 

Frank Serge: Yeah, absolutely. Thank you Chad. You know, contracts are incredibly important to the success and sustainability of any organization. They dictate the terms by which suppliers support critical functions to that organization and the terms by which a company delivers its services and generates revenue. The process of creating, analyzing and executing contracts is a vital component of any contracts management system. That process clearly defines deliverables, deadlines, and other terms and conditions to optimize operational and financial performance for an organization. Successful contracts management supplies controls to help mitigate operational, legal compliance and also financial risks and it is essential to increase financial value to that organization. You know, today, contracts lifecycle management platforms can help automate and streamline the process at every stage and in summary, you know, proactive and disciplined contracts management starting with initiation to negotiation award through enforcement, compliance and renewal is a critical ingredient to building and maintaining a fiscally healthy organization.

 

Charles Volkert: That’s correct Frank, very helpful. And you know, maybe up on that Bernie, what are the key steps in an effective contract management program?

 

Bernie Donachie: Yeah, Chad. One of the key steps is just the planning and the execution of the contract and by the planning, I mean, the contracts you’re having

with your vendors or suppliers in the procurement process, all the planning around that in terms of who you’re going to go with, what the terms and conditions are, the negotiating approvals, the service deliveries or what some people will call the service level agreements, the SLAs, monitoring that performance, making sure that the suppliers and you as a customer, fulfill your obligations. Improving the contracts will actually derive greater value and greater results for both the customer and the buyer, but it will also create great efficiencies. Another key component is just the centralization of your contracts to have them in one place–

 

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–one source truth helps with the overall management of change and really the warehousing of contracts. So, it’s very efficient. A lot of organizations that we go into, we’ll see where the contracts happen to be in some people’s file cabinets across the enterprise. The best of the contracting management program has a centralized data warehouse where these contracts are capped and managed.

 

That’s interesting. Bernie, I’m sure you’ve seen a lot out there within the contracts world. How does contract management factor into the work you’re doing with clients to build a sustainable and resilient supply chain? You are beginning to touch on it, but maybe go a little deeper for us.

 

Bernie Donachie: Well, the number one thing is that a contract serves as a good record for how the organization is working with the suppliers in the entire supply chain relationship. So, everything is documented. There’s a clear understanding in terms of expectations both again on the customer or the buyer and the supplier’s side. It also helps to identify and minimize any risk, so if there’s something that could go wrong, may go wrong or misunderstanding, you can refer to, you know, a robust contract practice to mitigate those risks. The other thing is the contracting process, because you put all this effort into creating the contract, documenting the contract, the suppliers are very interested. It allows you to research the suppliers who you’re doing business with, screen suppliers and the whole negotiating process can illuminate whether you’re working with a good supplier, a good partner, someone you want to work with or if you have problems with the contracting stage, that’s a red flag. And as I mentioned earlier, just have the centralization of all your supplier agreements, so all your businesses or all your plants or all your offices across the enterprise can have that centralized view of what’s going on with the suppliers.

 

Bernie Donachie: Excellent Bernie. Well, you know, key indicator, right? You need to know who you’re partnering with and that can be make or break within this type of work. So Frank, maybe based on the work with your clients, what are the greatest

obstacles in the contract management process and what issues are often overlooked?

 

Frank Serge: Yeah, thank you Chad. Let me start by saying that I think every organization, whether they be a mature company or a startup, has its obstacles. One of the most common that i encounter is prioritization. I think that most of us listening that are in the contract space within an organization probably have contracts management as one of about 100 responsibilities that they’re charged with. Contracts management is not a part-time activity. Depending on the size and services of a company, it should be a full-time function of at least one individual, if not an entire department, you know, comprised of several professionals and the right technology tools. Contracts are, you know, really living, breathing documents and the proper management of those should be prioritized and the appropriate amount of resources provided in order to be successful. Another key obstacle you know, is communication within an organization. Sales is trying to close the deal, legal is trying to manage risk and exposure, compliance needs to ensure that regulations are adhered to, and finance needs to make sure that the deal is physically responsible. Those departments don’t always speak the same language. Strong contracts management is really the glue that binds those groups together and the key to responsibly and profitably moving the business forward. You know, given that many of us are working remotely today due to the challenges that COVID has presented, that is really the binding element that is more important today than ever before. Additionally mergers and acquisition activity presents those types of risks, you know, with legacy agreements that may be absorbed by an acquiring party. If the acquired company has inadequate contracts management, then that is now the acquiring company’s contract management teams to review and remediate certain terms and

conditions that do not align with the parent organization’s controls as quickly as possible. You know, those are really the three most common obstacles that I generally encounter. Other issues that are oftentimes often times overlooked, you know, can be lack of clarity and specificity, in a contract, you know, terms and expectations not being precisely laid out, obligations not fulfilled and dealing with those when they’re not fulfilled, failure to update contracts based on the ever evolving regulatory compliance mandates that are out there, specifically you know, relating to data privacy and security, using dated and inefficient technology and then also finally, just the overall lack of visibility into those risks, renewals because of the antiquated management tools.

 

Charles Volkert: Well thanks Frank, a lot to think about there and to keep an eye on. Bernie, what are additional contract issues or obstacles specific to supply chain matters?

 

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Bernie Donachie: Yeah, there’s a number of them. In particular, one of them is just

intellectual property and that’s really specific to the design, the process — processes, tooling fixtures, any type of really intellectual capital that an organization may have that they’re sharing with a third party. There’s also the risk that falls into that spaces. As Frank mentioned, there’s a risk around a data breach, data security, that those are some of the things that you have to look at when you’re working with a third party on a contract. Then you can migrate over to just the performance that the supplier is going to do in terms of the specific delivery, scheduling, the quality of the goods or services that you’re getting. Those are the other things that you’ll run into in terms of supply chain matters. There’s also a regulatory requirement. Some of these are truly regulatory that’s either by a government department or a government agency and then there’s also the public image or branding that is more along the ESG. So, around labor practice, environmental or social things, this is really important because who you do business with as you may have be very strong in your ESG, in your contracting, if you don’t fulfill that obligation as you go to your tier one, tier two and tier three suppliers, it could affect your brand. People decide who they’re going to buy off in terms of who they’re contracting with and what their practices are and it also results in who some organizations invest with. So, who you’re subcontracting with is very important in the supply chain practice.

 

Charles Volkert: Excellent points Bernie. You know, and when you think, Frank, based on what you’ve been sharing, what Bernie’s been sharing, with your experience, what tools are most effective to overcoming the various challenges you both just noted?

 

Frank Serge: You know Chad, it is critical to have a capable CLM platform that meets the organization’s needs and also an accountable process to maintain its effectiveness. Contracts lifecycle management platforms provide an organized digital environment by which various business units can access key information with a couple keystrokes. You know, this really allows for individuals to gather information and make decisions that move the business forward in a timely and effective manner. However, it’s also important to note that so often clients may spend a significant amount of money on a platform, but that’s really only half of the equation. The data entered into that platform really needs to be accurate and rich. This relates to my earlier point about an accountable process and this is when the company truly reached the return on their CLM platform investment. Without the data extraction process, whether that be automated or manual or a combination of both, it’s like having a beautiful car and no key to turn it on and get you where you want to go you. The contracts lifecycle platform is essential, but the tool is only going to be as useful as the information that’s housed within. Other types of advancements in contracts technology platforms that have certain types of features are those that, you know, automate contract creation, approval, monitoring and

really delivers speed and reduces costs and improves overall accuracy. You know, it provides consistency and control and also enables more effective and systematic analysis of contract performance, expiration, monitoring, enhanced compliance and also risk identification.

 

Charles Volkert: Thanks Frank, great detail and information there and thank you to Bernie and yourself for sharing a lot of great information during our first segment. We have much more to discuss about how to strengthen contract management processes and derive greater value, but first it’s time for a quick break.

 

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To find, hire and retain the best legal professionals, it’s critical to have a sound hiring strategy in place. Robert Half Legal works with law firms and corporate legal departments to create effective staffing plans that can adapt to changing workload levels, realize significant cost savings and improve the overall management of human resources. We offer a wide range of resources to assist hiring managers and job candidates, including our annual salary guide, industry leading workplace research and valuable interactive tools. For more information, call us at 1-800-870-8367 or visit roberthalflegal.com.

 

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Charles Volkert: Welcome back to the Robert Half Legal Report. I’m Chad Volkert and with me today is Frank Serge, managing vice president for Robert Half Legal’s consulting solutions practice and Bernie Donachie, managing director of Protiviti supply chain solutions practice. We’ve been discussing how technology is dramatically enhancing the contract management process.

 

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During the past year for example, manufacturing and logistics organizations address countless pandemic-related disruptions and technology has played a critical role in helping companies overcome those challenges. Bernie, can you talk with us about the tech resources that are being used to support supply chain contract management? Is artificial intelligence, AI, playing a role in any way?

 

Bernie Donachie: Yeah Chad. One of the biggest advantages to AI in the contract management spaces is the speed at which the organization and the contracts can go. These benefits are direct results of automation in terms of taking tasks away from people and taking some tasks that would normally take days to minutes, okay? And also, it’s a great advantage not only for the organization, but it’s form responsive to your suppliers and your customers. The tech solutions have transformed contract management in a particular way in terms of the cycle time that supply chains are expected to perform at now keeps reducing. If you think about something like as a population, we’ve become very accustomed to point and click in delivery. Amazon is a great example. When you buy a sofa(ph) on the Amazon, it shows up the next day. That’s fine grated into business. And what AI has done is that it has allowed organizations to move at that speed. So, AI is definitely important, technology is also an essential function in managing supply chain disruptions. So, the technology if you have everything centralized, you have your dashboards and you can look, you can quickly migrate to another supplier or to another source of supply for something. As I mentioned, AI is faster and more cost effective. It’s also just extremely efficient. During the pandemic, you know, a lot of organizations were looking at alternative sources of supply. These sources typically require contracts and with the contract management tool bolstered with AI, the organization is just faster and more nimble. Approval time is improved, fewer manual stops, faster closing times. Another example of some of the tech tools facilitating contracts provide quick response to complex and widespread distribution of COVID vaccine. So, it’s just that speed, that we’re not accustomed to you think about, previously the fastest vaccination to get approved was four years and that was for mumps and measles and that was a long time ago in the 60s. With COVID contracting and working through things and a lot of pressure, this was reduced to less than a year. AI software automates the workflows. tracks the contract performance, it centralizes expiration and renewals. You just become more responsive both as a customer and as a supplier because everything’s automated, it’s reminding you, there’s not a manual process. It’s also very easy with technology and automation to just extract data in terms of providing analytics about how someone is doing on their contract, how their performance is and also what the revenue and what inherent risk you may have on contracts.

 

Charles Volkert: Fantastic insights Bernie. Obviously, AI is here to stay and certainly accelerating this process as you’ve listed in many different ways. Frank, can you talk about particular technology trends that are driving the greatest advancements in contract lifecycle management?

 

Frank Serge: Yeah, absolutely and to piggyback off of what Bernie was saying, you know, AI really is the key here or the number one technology trend in the market. As AI is helping to strengthen contract functions and emerging AI advancements will continue to offer optimized processes across the contract lifecycle, you know, in the months and years to come. I mean, some are even predicting that the advancements in AI as Bernie alluded to with the ability for us to get the COVID contracts executed in less than a year, what may have taken four years, but you know, people are predicting that we’re going to be reducing the time that it takes for contracts to be reviewed by up to 50% which is ultimately going to reduce internal costs and also expedite both the execution and revenue generation for many of the organizations that we see out there. Also as I alluded to earlier, strong contracts management, being a binding element more than ever in this environment, you know, I think a lot of the tools that are out there today really promote a more collaborative type of effort which allow many different business units within an organization to work in parallel or simultaneously together in order to deliver and weigh in on particular areas and needs within contracts.

 

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And then also, you know, and finally, the organization will need to really look at contracts from a holistic standpoint as opposed to just within procurement or sales or legal is really driving the overall development of very  enterprise level contracts management software.

 

Charles Volkert: And Bernie, would you add any additional trends to that list?

 

Bernie Donachie: Yes, I would Chad. In fact, there are a number of trends I would say. Workflow management, the expectation for organizations to be more responsive and reduce the cycle times is very prevalent and that’s a driving force that’s say, in terms of automation and how contract management should be done, some people just don’t understand or can’t relate to something taking weeks anymore. So, it’s great for the business and I think it’s fair to say it shouldn’t take long. The other thing is centralization as far as everything should be in one file in this age with automation and it should be a shared file, you know, whether it’s in the cloud or anything, people are getting information that’s definitely consolidated, definitely digital and the electronic access to it, it just makes more sense to have centralization. And that and that falls into the digital age both inside the workplace and outside the workplace, the fact that even something like we’re doing right now in terms of a podcast, that’s not as new as it used to be, but when it first came out, it was new. Everything is evolving to this. If you take what COVID has done in terms of we’re all working in virtual space, we’re able to do that because of technology and we’re becoming more efficient. We don’t have to get on airplanes, we don’t have to go to the office, we don’t have to get into traffic. And digitization is driving that and automation is enabling people to do that. Those are the trends. This is what people are becoming accustomed to.

 

Charles Volkert: Excellent Bernie, thank you and maybe can you both outline contract management best practices simply and succinctly for our listeners, that managers should keep in mind to maximize contract value and reduce overall risk to an organization? Maybe Frank, we’ll turn to you first, followed by Bernie.

 

 

Frank Serge: Yeah, first and foremost Chad, you know, we need to adapt and utilize the CLM platform that meets your organization’s evolving needs. You need to standardize contract creation, you need to identify and define key performance indicators for each stage of the contract lifecycle. Then also, you need to make sure that you’re continuously monitoring and measuring and reviewing compliance deliverables performance and obligations. And then you also need to make sure that you’re quickly addressing and enforcing those negotiated terms. Finally, what I like to say, you need to test to trust technology and automation advancements in order to optimize your contracts management process.

 

Charles Volkert: Bernie, what are your thoughts?

 

Bernie Donachie: So, there’s a number of things in this visibility and traceability to the contract, or table stakes, automation of contract communications, cloud-based contracting. As I mentioned earlier, this helps with managing. Scope create compliance. It also lets you know what other businesses are doing, ensuring that there’s engagement and collaboration among the business stakeholders throughout the contract lifecycle management. And finally, building compliance, particularly around security data privacy, the ESG things that I talked about earlier, every step of the contract lifecycle. We can anticipate evolving business needs and adjust contracts accordingly. So, as I said, we keep moving on this digital spectrum and it’s going to continue to move as we go into the future. We’re going to be constantly changing.

 

Charles Volkert: Yeah, good point Bernie. It’s a moving target and constant change and I’d like to add that it’s important to appoint a manager who’s closely involved in the contract process to stay current with innovative best practices, all of which both Frank and Bernie, you’ve mentioned throughout the program today. Those managers can monitor emerging technology trends, new software being marketed and applications that are transforming the contract management lifecycle. They also can conduct ongoing research through industry publications and associations and be ready to evaluate new resources for possible adoption by their organizations. With that, I’d like to wrap up our program and a great one it was. Bernie and Frank, thank you both so much for joining me today and sharing important contract management insights and guidance with our audience. Before we close, how can our audience contact you and where can they obtain more information?

 

Frank Serge: Yeah, thank you Chad. So, I can be reached at [email protected]. That’s F-R-A-N-K dot S-E-R-G-E @roberthalf.com or they can visit our website which is roberthalflegal.com.

 

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Bernie Donachie: And Chad, I can be reached at my email, it’s Bernie B-E-R-N-I-E dot donachie D-O-N-A-C-H-I-E @protiviti.com and the people listening in, they can go to protiviti.com, look in our business process improvement portion of our website and there’s a ton of information there and we’d be happy for you to visit us and contact us.

 

Charles Volkert: Excellent! Thank you Bernie, thank you Frank. And our our listeners can reach me at charles.volkert, that’s V as in Victor, O-L-K-E-R-T @roberthalf.com and you can visit Robert Half Legal website for additional information on legal career and management resources including our latest research including the salary guide for legal professionals at roberthalflegal.com. Thanks again to our speakers and to our audience for listening. Join us next time on the Robert Half Legal Report as we discuss important trends impacting the legal field and legal careers.

 

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