This week’s installment of Contract Heroes featured contract management veteran Tom Fuchs, a legend in the industry with tons of knowledge to impart about the early steps of implementing contract lifecycle management (CLM) tools.
The overall goal of Tom’s contracting work is to leverage contracts as a strategic tool that can empower the sales organization, maximize revenue, and control the way revenue leakage is managed via informed decision-making about the contract process. With Tom’s excellent background in mind, let’s take a look at what he had to say about the ins and outs of CLM.
Understanding Your Business
We started off our conversation with Tom by asking him for his take on how every organization can benefit from taking a closer look at their contract management process. Tom began by explaining the importance of understanding every aspect of your business, from your place within the industry to the type of product or service you’re selling. Each of these aspects needs to be present in the four corners of your contracts in order to ensure that everyone involved in the process understands it fully. Aside from just protecting against risks, contracts have the ability to empower the sales team, which is something not all organizations realize at first.
Tom also pointed out that pulling in the commercial aspects of the business’s relationship with clients can be extremely useful when outlining the basis of agreements. By keeping in mind the baseline template of your sales terms, you can create a highway that facilitates easy relationships with customers while also mitigating and avoiding potential risks via informed decisions about the actual process that takes place between the sales team and the client.
As he mentioned in his introduction, one of Tom’s main focuses in CLM is understanding the complex combination of people, process, and technology and finding a way to ensure all three aspects fit together in the unique way that your business needs.
Depending on your industry or the products you’re selling, your contracting process is going to have a different balance of those three puzzle pieces. The key is to keep in mind your needs in terms of risk management and use those needs to shape a solution before seeking out the technology that best matches that solution.
When it comes to using contracts as a tool, the first thing Tom recommends focusing on is understanding your organization’s contracting culture. Typically, there are two ends of the spectrum for assessing contracting culture: legal-centric or finance-driven. Legal-centric contracts center on minimizing risks, whereas finance-driven contracts will approach agreements more from the commercial perspective, emphasizing delivery and performance over risk management.
You should aim to have your contracts fall into a balance between those two ends of the spectrum. Tom used the metaphor of a contract as a dining room table with one end being the sales team, the other being the legal team, and the rest of the company lining the edges. The sales and legal teams can ping-pong back and forth to set up the foundation of the contract, but ultimately these agreements are a unifying factor for the entirety of the organization. They represent the customer relationship, which is essentially the source of revenue for every business.
Once you have an understanding of the different aspects of your contract that cater to each side of the spectrum, both legal and commercial, then you can begin to figure out how to fit a technology solution into that process. That deeper conception allows you to see which pieces of the process are suitable for automation and which are not.
How Technology Helps
Tom also provided a few ways that CLM technology can improve revenue as well as relationships with customers and between the sales and legal teams. A CLM tool has the ability to simplify lengthy or complex areas of an agreement that may be difficult for the sales team to understand. Rather than having to go to a member of the legal team for clarification, they can read through the summary of a long paragraph provided by your CLM tool and gain a better understanding of how they can use that aspect of the contract to their advantage when building relationships with customers.
CLM tools also have the potential to unify the sales and legal teams, which may normally be at odds with each other. Using the same platform and having access to all the same information allows legal and sales employees to understand each other’s perspectives in a much deeper way while also learning how to work together for the betterment of the organization. CLM tools provide valuable information to both parties, from prices and timeline for the sales team to risks and term changes for the legal team.
When any organization wants to get on the track toward implementing a CLM tool, the first step has to be what Tom refers to as “phase zero.” Phase zero is essentially based around figuring out what you need to stop doing with your contracts. Even if you have a goal in mind of all the different things you want to do in the future with your contracts or that you want the technology to help you accomplish, you first need to focus on eliminating the aspects of your process that are either harmful or simply not valuable.
Harking back to the people, process, and technology that he mentioned before, Tom explained that phase zero involves figuring out what changes need to be made in all three of those aspects, mapping out those changes, and determining how a digital transformation can help you to adopt that solution. CLM tools that are formulated and adopted based on a process like this that has a good phase zero tend to last longer and grow along with the organization because each step in the implementation process has a foundation.
If your company is looking for a full automation process, it’s certainly doable, but patience and careful planning are required because properly planning out the process, implementing the technology, and gathering all the correct data will be at least a three to five year process. Attempting to automate your current process exactly as it is without first assessing your current contract lifecycle would be a huge waste of money and resources because that process as it stands is not at the capacity to properly utilize everything a CLM tool has to offer.
For more exclusive chats with expert guests in the contract lifecycle management sector along with valuable legal-tech advice, check out past installments of Contract Heroes and be sure to subscribe so you don’t miss an episode! If you have any questions for our guest, Tom Fuchs, you can get in touch with him via LinkedIn.