On this week’s episode of Contract Heroes, we had the honor of chatting with the legendary Procurement Doctor, Karthik Rama.
Throughout his 17 years working with over 40,000 contracts, Karthik has taken up the title of Procurement Doctor thanks to his strategies when assessing his clients’ contract processes. Just as a typical doctor would do when diagnosing their patient, the Procurement Doctor evaluates his client’s contract process in order to locate the pain areas before suggesting recommendations on how to go about fixing those areas.
Clients come to him with both general and more specific problems, and he is able to use his wealth of experience working with various contract administrators and procurement organizations to help them mend or establish their contract database and start to align their processes in a way that readies them to adopt contract lifecycle management (CLM) tools.
Throughout our chat with Karthik, we had the opportunity to explore some of his experiences in working with the procurement side of contracts vs. the sales side while also learning about implementing a contract playbook in order to cut costs, bring in more revenue, and reduce the overall contract processing time. Read on to discover how the Procurement Doctor handles his cases and hear plenty of valuable tips for fixing up your own contract processes.
Contracts Are the Bloodstream
If you’ve been with us at Contract Heroes for a while, you know we usually like to start out by asking our guests why, in their experience, every organization can benefit from paying more attention to their contract management and trying to fix up CLM processes. Karthik responded with an excellent analogy, his first of many throughout our conversation. He explained that contracts, no matter what their subject matter is, are like a bloodstream, while the company itself is like a body. The bloodstream runs through the entirety of the body and keeps every piece of it interconnected. If the limbs of the body are different departments like sales, legal, or procurement, the contract bloodstream weaves its way into each one and gives them fuel.
It’s important to keep this analogy in mind when thinking about your contract processes because it’s all-too-easy to simply view contracts as a formal way of closing a deal, a document to be filed away and never seen again unless something goes wrong. But in reality, the information contained within contracts is vital to every organization. A contract details the flow back and forth of every commercial relationship, including how you deliver products or services, how you get paid for those products or services, and what needs to happen when something goes wrong in the middle. In this way, contracts act as both the bloodstream and a manual to the commercial relationships that produce economic value for your company.
In order to keep the body healthy and the bloodstream flowing smoothly to all its parts, Karthik noted that you need to maintain it with a fitness regime. Just as you would live without stress to reduce high cholesterol, you should strive to reduce stress in contracting processes by simplifying them as much as you can. In his analogy, Karthik suggested redoing the health of the body from a contract standpoint. Remove blockages from the bloodstream by throwing out overcomplicated steps that slow your process down. Facilitate your circulation by keeping up with a successful fitness regimen, aka managing and maintaining the valuable data that each contract contains by placing contracts within an active database. In this way, you can better the health of the company and help all its moving parts work together more smoothly.
Karthik also emphasized the importance of hammering down your processes before implementing a CLM tool by pointing out that simply wearing a FitBit will not give you 6-pack abs. The tool only assists in your fitness regimen, which is the real source of health in the body. No matter how complex or expensive the CLM software that you purchase is, it will be rendered useless if it is slapped on top of clunky, overcomplicated contract processes.
Procurement Contracts Vs. Sales Contracts
Since Karthik is the Procurement Doctor, we also wanted to hear about his experiences working with procurement contracts and how they differ from sales contracts. He explained that procurement and sales generally operate with different priorities in mind. Someone creating a procurement contract will need to focus on minimizing or preventing risks as well as accounting for mistakes when they happen throughout a transaction. For that reason, they will likely check with a legal team much more often when negotiating with a client than a sales employee would. Sales employees, on the other hand, will usually prioritize speed over double checking with legal counsel because they know that a deal needs to happen quickly in order for the customer to have a good experience and for the company to gain revenue.
Keeping these differing priorities in mind is a key aspect of renovating contract processes because you need to be able to adhere to the needs of every team in the company, not just one. The goal of simplifying contract processes should be to empower all members of the company to be able to make decisions about contracts and amend them without having to seek assistance from the legal team for every small negotiation issue. This is where the creation of a contract playbook comes in handy.
Defining Your Company’s Playbook
Towards the end of our chat, we asked Karthik to tell us about the concept of a contract playbook and how building one out can help teams operate more efficiently in their contracting processes. He began with another brilliant analogy, explaining that the playbook is similar to a game of chess. There are rules that dictate which pieces can move where, when they can move, in what direction, how far, and so on. Each piece also has its own distinct role to play on the chessboard and within the larger game. The playbook works in much the same way, detailing a set of rules that applies to contracts and contract languages.
Take confidentiality language as an example. Many companies have their confidentiality language set a certain way that may be one-sided, resulting in customers pushing back in the attempt to gain a more mutual agreement. Normally, you would have to run to the legal team and have them amend the language to fit the customer’s needs. However, with a playbook in place, getting advice from legal for common problems like this is no longer necessary. The playbook acts as a secondary set of clauses that can be substituted in to replace the original clauses. In the case of the confidentiality language, the one-sided clauses will be replaced by a ready-made set of mutual clauses. This can, of course, be expanded beyond confidentiality to apply to most, if not all, clauses within a contract, generating a fallback language that can quickly and easily replace the current language without requiring the intervention of the legal team.
Karthik went on to explain that having a set of fallback clauses for the entirety of the contract facilitates the empowerment of individual team members that he mentioned prior. Both procurement employees and sales employees alike, despite having different priorities, can close deals efficiently and avoid needless risks by using the playbook. This method is especially useful for companies that do not work with insurance, sensitive topics, or high amounts of risk because each individual contract does not necessarily require thorough examination from a legal specialist. In this way, the playbook can help to greatly reduce costs by decreasing the need for legal counsel, which becomes expensive very quickly. And, by simplifying processes and speeding up the closing of deals, it also generates higher amounts of revenue for the company.
To wrap up our excellent conversation with Karthik, we decided to ask him what his biggest tips are for any organization looking to focus their attention on their contract management processes. The Procurement Doctor emphasized the importance of managing data and maintaining contracts without filing them away, never to be seen again. It is ideal to begin creating your contract database early on, especially for small companies that are just starting out. Make it a part of your company culture so you can avoid having to work backwards when the time comes to implement a CLM tool or software.
Having a contract database in place also makes creating your company’s contract playbook much less painful because all the contracts, data, and information are located in one convenient place for reference rather than scattered throughout different departments. An active contract database is an excellent resource for all branches of the company, and it allows you to ensure that everyone has access to the same information. In this way, you can cut down on communication issues and focus on making sure that you follow through on everything your contract promises both to your own company and to the customer.
For more exclusive chats with expert guests in the contract lifecycle management sphere 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, Karthik Rama, he is the most active on LinkedIn, but he is available on Twitter and YouTube as well.