IBM Commerce

to Better Contract Management

11 Steps

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Made with data from the International Association for Contract & Commercial Management

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The average cost of poor contracting is 9.2 percent of a firm’s annual revenue. —International Association for Contract & Commercial Management

Businesses that view contracts and contract management as tedious costs of doing business tend to neglect them. That can be a costly mistake:

contracts are fundamental tools that can spark innovation. By improving contract management practices and processes, you can eliminate any low-

quality fragmented approaches that can hurt your overall business.

Here are the 11 ways you can improve contract management.

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By setting guidelines and sticking to them, you can avoid issues down the road.

Define your scope and goals to avoid disputes.

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Lack of clarity is most often cited as a source of claims and disputes. Confusion hurts an estimated 40 percent of all projects.

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If your organization views its legal counsel as risk-averse, it might seek legal guidance at the last minute—or not at all. But putting legal counsel in the picture early will help that team improve the structure

of a deal while protecting the company.

Keep the legal team informed from the start.

Early legal staff engagement cuts time to a signed contract by 20 percent.

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Make sure your project goals align with your stakeholders' interests—or you risk their opposition down the road.

Engage your stakeholders.

Collaborating with stakeholders creates value for the company by encouraging innovation and trust.

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Forward-thinking organizations use principle-based templates containing equitable baselines and prescribed fallbacks. These speed negotiation and are more effective at tackling the risks posed by today's dynamic markets.

Keep your negotiations moving fast.

These market-based models account for: • faster closure times—400 percent better than the worst

performers. • a 15 percent reduction in claims and disputes on average. • improved financial returns due to negotiations based on

trade-offs, instead of compromises.

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Focusing too much on risk allocation means working to avoid unpleasant consequences instead of working to make positive results more likely. An innovative

business must be comfortable with risk.

Make negotiations about more than risk allocation.

A general counsel's point of view: "Let's suppose that our company could gain $1 million per contract by agreeing to a more onerous liabilities clause. We have 10 such contracts, but one of those contracts will go wrong—and the resulting liabilities will cost an additional $3 million. While our net gain will be $7 million, I don't want to be the attorney who caused a $3 million loss."

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Contract flexibility: Account for changes in market speed and volatility by exploring risk likelihood—as well as risk consequences—and

determining how to reduce that likelihood.

Focus on contract flexibility and governance.

Governance: When evaluating contract management performance, incorporate positive metrics, instead of focusing solely on assigning blame.

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More than 90 percent of managers surveyed found contracts difficult to understand.

Make your contracts simple.

Contracts should be business enablers, supporting communication and action.

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Each team should have the right tools, so neither misses any obligations.

Ensure a smooth transition from the deal to implementation team.

5 Questions for Contract Managers: 1. Do I understand what's required of me and of others? 2. Do we have a system for managing risk? 3. Which performance measurements are in place? 4. Does the supplier understand our organization and what

we need from it? 5. Are we getting useful reporting and updates?

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By using software to automate typical business processes, your organization can improve quality and

performance analyses.

Take advantage of automation software.

More than 85 percent of organizations lack key performance data or insights.

Only 14 percent of organizations plan to plug gaps in contract management data.

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What will happen once the contracts are signed? Are you prepared to adjust and revise based on changing needs?

Closely monitor post-award governance.

Top-performing organizations suffer a decline in contract value of less than 4 percent on average. The need for significant contract revisions during execution has increased by almost 40 percent. Technology companies with holistic, structured contract management see profit margins more than double the industry average.

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Learn more about IBM Emptoris Contract Management Solutions

Identify new revenue opportunities, improve supplier, partner and customer relationships, and mitigate risk.

• Structure more profitable contracts. • Streamline the contracting process. • Increase visibility. • Improve compliance. • Automate and manage all stages of the contract lifecycle. • Use data analysis to monitor performance and make

adjustments.

Watch the Demo