We define it as a systematic way to handle written agreements with third parties by utilizing standard language, procedures, tracking key terms and pro-actively addressing issues before they escalate. The ultimate goal is to extract the most possible value out of the contracts portfolio.

Contracts management simply put enables you to get organized and gain more efficiency. This puts you in a position to grow without putting more stress on overhead costs. As a first step, getting organized and having a way to track your contracts and related documents minimizes your risks overall. Developing standardization and teaching your teams to follow certain procedures will add efficiency to your business. Lastly, the close monitoring of your contracts will enable you to extract more value out of your contracts, not just monetary value but also in terms of better relationships, innovation and the ability to proactively address any issues.

You probably already know this, but perhaps are not quite sure how to approach implementing improvements in your organization.

Organize | Analyze | Standardize | Institutionalize | Synergize

This approach will get you from point A to point B. Can you identify where your organization's contracts management function is at on this continuum?

Your staff is unable to keep up with the volumes. You are trying to locate an agreement, you can't find it, or when you do find it you find out it hasn't been fully executed or an amendment or other supporting document is missing! This seems to be a recurring problem.

This is a common situation for organizations that have experienced growth spurts. It is easy to underestimate the time and care it takes to keep, maintain and archive contract documents. The first step to improving your situation is to get organized.

a. Centralize your contracts. If one group has control of the documents it is less likely they will get lost.

b. Set up a searchable platform that stores documents, tracks expirations and provides some automation.

c. Establish a process and procedure for all documents to be routed to the platform or centralized location.

Question: Do you have a clear overall picture of what your organization has agreed to with its customers? How consistent are the terms across the board? I.e. are you agreeing to vastly different indemnification provisions with your vendors? Are all departments in the organization represented in the contract terms? How many different types of agreements are there?

Answer: There are two basic reasons to thoroughly review and assess the organizations existing contract portfolio. First, to understand the current state of risk, compliance issues and liability exposure. Second, to prepare for the standardization of contract terms, both business and legal. You will need to understand how to segment the contracts into groups, i.e. services, products, software, reseller and others depending on your particular business.

Start by creating a tactical plan that takes into account all the activities necessary to achieve standardization. What are all the tasks that need to get done to get from point A to point B? Typically general terms that apply to everyone are developed. Then specific terms, obligations, expectations, exhibits and forms are incorporated per segment.

1. Appropriate departments are consulted
2. Business and legal requirements for general terms established
3. Specific terms that address segments are identified
4. Templates, exhibits, links and other forms established
5. Written process, procedure and authorization matrix

Note that once standards are in place, that does not mean they will not change over time. Keep this in mind when developing the standards so that it is easy to notify the entities subject to the standards and/or amend the respective agreements.

This step is often overlooked but a very important part of whether a new process is successful or not. Here are a few keys to success:

1. Executive Sponsor
2. Participant Involvement
3. Web-based Training Program
4. Cross-Functional Workshops
5. Communication Plan
6. Improvements Plan

Standardization and institutionalization sets the foundation for several things:

1. A high degree of efficiency when it comes to negotiation, exceptions and execution of contracts. Foster competence and develop your teams with continuing training and educational opportunities.

2. Better and more collaborative cooperation between departments as it relates to the terms, negotiation and procedures for contracts. A strong on-going communication plan and periodic cross functional workshops will keep everyone on the same page.

3. Monitor performance, build positive relationships, prevent avoidable costs and innovate together with your third parties.

You may need to have agreements, handbooks, policies or documents translated into other languages. Some countries even require agreements be in the country's official language to be valid. You may also want to have your training programs produced in multiple languages to ensure everyone understands! Intuitive Edge also provides translations services as part of its comprehensive contracts management program.