Episode Transcript
[00:00:01] Speaker A: Hello. Thank you for joining us. Welcome to what Counts, the podcast where we dive deep into the world of information governance. Here we highlight proven solutions developed through our experience working with companies across various industries. We talk about how you can apply these solutions to your company.
Whether you're interested in information governance, have a need, or just curious to hear about information management challenges like email management or retention management or asset data management, this podcast is for you. This is Lee, and in this episode, Moore and I will revisit a recorded conversation that we had back in January of 2024.
You know the saying, timing is everything, and honestly, this episode is perfect example of that.
At the time, Trailblazer Learning Academy was still a concept and our governance accelerator templates were artifacts that we used at client sites.
Fast forward to today and the Academy is live. The templates are live, and the organization and organizations of all sizes are using them to build clarity, compliance and operational maturity.
Which means this conversation about contract lifecycle management or clm, is even more relevant now than it was when we first hit record.
So I'm going to play a snippet of the original episode. After that, we'll have more frame the discussion with some something we've seen over and over again across organ industries.
[00:01:30] Speaker B: Sounds good to me.
Let's go.
It's a big topic and we want to give you enough information, the same as we've done with our other topics. Enough information so you can follow a path, you can do some thinking on your own, you can do the legwork and make sense of the contract situation in your organization.
We are not in this take one version. We are not going to get deeply into every nuance of what happens when you go through an implementation, because there are frankly a lot of nuances, a lot of variables. But we will introduce them and we will give you some ways to further explore and find some insight. So how does that sound?
Okay, so we talked in the snippet you heard us talk about nuance and how many things you don't think about when you start to work on a CLM implementation.
I like to, I've seen it with our clients. It's like the oh, but another thing. Oh, but another thing. Oh, but another thing.
And sometimes those are small things like, oh, we forgot to add this user. And sometimes they're big things like, oh, we forgot to tell you about the 25,000 contracts that are not in the system but that we'd like to include in the process.
So 25,000 is actually not even that many from some things we've seen.
But here's the thing. The truth about CLM implementations is they rarely fail because of the software.
Generally, the CLM software market is a mature one.
It's growing, it's a little bit of consolidation going on. But the functionality, the basic functionality that you need to support a full contract lifecycle is well understood, comes out of the document management world, which is a long time, very mature area of software and the basics of contract management, you know, correspondence agreement on terms, tracking changes so that both sides can agree.
Here's where I'm tempted to put in my, you know, ancient Sumerian reference, but I'll hold off for regular listeners of the podcast, you may know about it.
So we like to think of CLM implementation success being based on a couple of things. First, are you ready? Are you ready to use a clm? And readiness takes a lot of work. Actually. It's understanding your processes, understanding the types of contracts that you have, and understanding where all your data is. Now, how is it working today? So that's number one.
The second thing is alignment.
Contracts are the boundaries around every single part of your business.
You might think it's only about sales, but it's not. It includes customer, it includes suppliers, vendors. How do you do what you need to do? Software, especially as software becomes more sophisticated. And so software as a service is a much more common thing than a software package that you download and have on one machine.
Everyone in the organization may be able, in theory, to find some software and use it.
And they're signing you up, they're committing the company in some ways to hold your data, to carry out a process.
And you need rules around that, you need process around that to enforce the rules. And that is something that a CLM can do. So the alignment piece of this success factor, the alignment success factor is making sure everybody agrees that this is what you want to do. Everybody in the company can be affected. So everybody needs to agree.
And we've seen, and we'll go into this more, but what we've seen over and over again is one group usually takes the lead.
It's often supplier management or supply chain or procurement, and they're really focused on buying things for the company.
Other organizations where there's a heavier focus on commercial activity, it might be the commercial team that takes the lead. And everything is sort of on the sell side in the contract management vocabulary.
So making deals with partners, making deals with your customers, especially for large commercial organizations, where those deals represent a lot of work or a lot of money, but you also have the legal department in some cases the legal department takes the lead because they're the hands on group doing contract administration, although they paradoxically often say they don't own any contracts. So. So something you have to get into. That's one of those nuances that we talked about before.
So how do you make this work? The third success factor is about structure and we look at that mostly around templates.
So templates for contracts, pretty common thing where you have these, this is our standard non disclosure agreement, or this is our standard master services agreement.
But we actually look at templates more broadly because you have templates for how do you collect data about your existing contracts in order to do the conversions and the migrations into the new systems that you need to do. Or templates for process documentation and making sure that you understand who are all the actors in certain workflows and how do they get represented in the new system or in any system.
And what happens when the happy path isn't it doesn't work, or there's somebody who's out on vacation or somebody has changed jobs and so the old person doesn't do that job anymore, but it still has to get done. And there are best practices around that. And templates for documenting workflows and actors and escalation paths and communications and notifications. And that's all pre signature just to get the contract signed, but then post signature to actually carry out the work under the contract, whether that's delivery of goods or services or some kind of an ongoing partnership or building something together, you and your company and another company.
There are milestones, there are thresholds, there are checkpoints, there's deliverables, there's reporting that are all spelled out in your contract.
How does your contract management solution help you make that happen? Make sure that it happens to your advantage and that you're not losing money or losing time or not getting what you need to get what you've agreed to get.
So the templates that we talk about COVID all those things too. It's beyond just a contract template. Is that a good frame there, Lee?
[00:08:50] Speaker A: Absolutely. I think we're getting into some of the nuances, but you're definitely explaining that there is so much more to just the words contract lifecycle management. And that's what that first episode or the one that we played that snippet from, that's what it goes into just the basics because we had other episodes then to go into some of these items that you're talking about.
[00:09:15] Speaker B: So those are still available if people want to go back and listen to our original discussion, but I think it's worth revisiting here.
So.
Yes.
[00:09:25] Speaker A: So let's start with contract management or contract lifecycle management.
What does it mean to you?
[00:09:32] Speaker B: So for me, contract management carries some connotations that I think are outdated and that's why we always try to go with contract lifecycle management. But the connotations that I feel are this is about managing contract documents. When you say contract management, it ends up being more about document management.
And when you talk about contract lifecycle management, in contrast, this to me is about managing the activity that the contract was put in place to ensure happens. So it's the fees around a delivery and due dates and what are the specs for whatever good your or materials are being delivered to you? Or it's the timing and the, the reporting and the work to be performed that you've committed your firm to do for someone else, for a customer of some kind.
So that life cycle management gets beyond just the negotiation and execution of the original agreement and then managing that document so that if something goes wrong you can go back and refer to it. But more proactive approach.
What do you think?
[00:10:48] Speaker A: I think that's fine. And I think we have some examples of where you would scale that in different levels. Right. Whether it's a bakery, which you're good at those examples, but you're also good at.
[00:11:02] Speaker B: I really want to be a baker, but I'm an information governance consultant.
[00:11:08] Speaker A: Or whether you're an energy company. So can you go into the difference there and from a life cycle or.
[00:11:13] Speaker B: Is there so the principles are the same and the life cycle is the same. Right. As you go from creation through negotiation to execution, that's your pre signature steps. So have an idea. We need a contract. We need to get into agreement with somebody to do something. It could be we need an agreement with a flour company or an ingredient company to supply us with baking powder and flour of different kinds, maybe chocolate for whatever it is we're baking.
And then we go through a negotiation around terms, what's the timing of deliveries, what's the timing of payments, what are the quality requirements that we're going to get in our deliveries and what's our escalation path or our complaint path if it isn't true, if we don't get them.
And then you get to the execution which typically today is an electronic signature. There are some contracts, primarily real property based contracts. So titles or deed to a land or a real property of some kind, some land leases or acquisitions of related other land related agreements typically require a what signature, but almost every other contract type you can execute electronically.
So those are the, that's the early part of the life cycle. That's usually a very small amount of time and honestly a pretty small amount of effort compared to the rest of the life cycle, which is managing it, renewing it, terminating it and closing out the contract. So that management step of the life cycle ends up being enormous.
So in the case of our bakery example, we're going to get regular deliveries on a weekly basis and at some point in the course of the period of performance of the contract, we may have, it may be evergreen, it may be a year to start with or something. We may change our order because we're growing or we've decided to introduce raspberry chips into our cookies or something.
So everything about how we manage that contract, how we continue to get those supplies and pay for them and change the orders and they may have actually get the raspberry chips from a third party and we don't like the quality and we like the original quality better or something. And what's our, what recourse do we have? That's all in the contract. A good robust CLM will highlight those, those terms, those conditions, the, the thresholds or the escalations notifications. The system will tell us what we are looking for, but we can ask it questions if the form of a search or something and it will bring us back to the page of the document and tell us what's involved. And what we've seen in many companies is that if you don't have a good CLM that is data driven, that can help you be reminded of all those things, then what you will have is a lot of people who are reading those contracts, making up their own spreadsheets or their own calendar entries, or stick some other way to remind themselves that they need to go check everything every month. Like we need to go check if there's downtime, if there's a, if there's an unexpected repair, then what's the process for operations to tell the commercial team, to tell the contract team to send a notice to the customer that oh, this pipe is going to be down for a while unexpectedly. And what's the impact of that from a cost perspective? Do you owe your customer recompense compensation for the fact that you had an unexpected repair? And how much notice do you give for an expected repair for scheduled maintenance to avoid fees?
So all of those management activities, they can be carried out by a person, but it takes a lot of effort, a lot of discipline. And, and it typically involves the creation of some manual tracking system that is subject to being lost, being corrupted, and also being sort of idiosyncratic. You know, the person who's doing it, when they set it up, they were part of the deal, they understood it, they had shorthand, they just made notes ten years later. These contracts last a long time.
And all of those sort of big industrial areas, they last very long, they're evergreen or they're 10 years plus 5 year renewals or something.
The person in charge is going to change at some point, they're going to get promoted, they're going to move to a different part of your organization, they're going to leave. Who knows that idiosyncratic tracking system that they came up with, that worked great because they had half of it in their head.
That's a lot harder for the next person to carry on or the third person to carry on.
So spending the time to outline in your system, these are the critical factors, these are the pieces of data that we need.
And either we can get them from another system through an integration, or if we can't get them through an integration, we can at least have a notice in the CLM that reminds the person who's monitoring to go ask for that data on a regular basis.
So that is the real benefit of the contract lifecycle management systems, from my perspective, because the first piece is where you have standard clauses and templates and you want to create consistency in your contracts. You can do all of that with a document management solution.
You can create those templates, you can manage workflow, basic workflows in a collaboration system or a team site or SharePoint site or Google Suite or something like that, that's pretty straightforward to get to.
The creation of a document that has the terms you want and the execution of it through an electronic signature or a wet signature. But that management activity, making sure that you're on top of every detail, especially, especially the way those details interact with the rest of the business.
Because whoever is administering this contract doesn't sit in operations and in commercial and in legal all at the same time. They can't unless you're a very small company.
So, so there's that.
Where was I going next? So the next, the last, the last pieces of the, of the life cycle are about renewal or termination.
And that's, that's a pretty straightforward task. Hey that we've entered the dates when we start this contract, we say it's up for renewal in two years. Here's the date, the notice period for we want to renew or terminate is 60 days.
The system easily can set up a notification to remind you to say, do you want to renew? Do you not want to renew? Do you want to terminate? Do what notice do you have to give to the other party to either renew or terminate?
Renewals sometimes carry escalations and you should be able to build those into your system as well so that all of that management activity about fees and thresholds and everything, if it changes after the first renewal, those things should update based on the data you've provided from the contract.
And then the termination step is critically important.
Coming back to being a records manager at heart, because closing out the contract, which we define as fulfilling the final obligation, which includes payments, delivery of services or goods, inspections, possibly an audit period that's built into the contract itself, the end of all of that activity is what starts the retention period, for how long you have to keep that information before you should destroy it.
[00:19:37] Speaker A: Okay, again, that was a lot.
And the last piece of what we talked about in that previous episode was all around alignment. So we don't need to cover that again. So I think we should just reiterate the thing. The three things that we. That we kind of gleamed from all of the work that we've done, which is readiness comes first.
If you want to add a snippet there or anything.
[00:20:03] Speaker B: I think we're going to have to have another episode entirely about readiness.
But it's the piece of the CLM implementations that always gets neglected. I think from what we've seen, a lot of people just want to go buy a piece of software and they think that'll do it. Software vendors are happy to sell you a piece of software and say we can sell your all your problems, but we're going to have to spend some more time on the readiness piece in future episodes.
[00:20:32] Speaker A: All right, that works. Alignment. We talked about that. Make sure your entire organization is in alignment.
And then templates are the quiet heroes. I think that's key too.
So we definitely covered everything. Do you have anything closing comments?
[00:20:49] Speaker B: Yes, I have a. I have a wrap up comment here about why it matters.
Okay, so I mentioned that contracts are sort of the boundaries around every part of your business.
Even if it. Even if it doesn't necessarily seem like a contract. If you are selling something in a storefront to a customer, you've made a. It's a short term contract. You've agreed to hand them the thing that they bought, they agreed to give you payment for it.
But that contract has a little bit of Legs to it, a little bit of life to it. Because suppose they wrote you a check and it bounces.
Or suppose they have given you a credit card and it initially gets approved, but then it turns out that the bank won't honor it in some way. You have some recourse if you can track down the customer and say, hey, you still owe me.
If you're on the other side of that transaction, you're the customer and you came in and you bought, I don't know, some sort of electronic device. You expected it to work and then it didn't. Or you bought an electronic device and you asked a question about, is this compatible with my other peripheral devices that I have? And the answer was yes. And that answer is reflected somehow in the sales receipt, but it turns out it's no.
So bring it back and you say, hey, this didn't work with my watch or with my, whatever, my printer. So.
So that, so that transaction isn't finished when it walks out the door. That receipt or whatever other sales document that you. That is transferred between store owner and, or store employee and customer, that represents a contract.
It's just usually the terms are pretty lightweight. You know, there's not as much at risk when you're buying book or when you're buying shoes as there is if you're buying a car, when you have to sign, you know, 52 pages of information before you can walk out the door with that car and you can come back if something's wrong.
So all of those things, every single transaction from your company to another company or your company to an outside person, there's a contract and probably it's documented in some way.
So it's an enterprise function. Legal cares about risk. They care about getting the terms right to be favorable to you and making them as clear as possible.
Procurement. And anybody else who's on sort of the buy side, they care about cost, but on the sell side, on the commercial side, they care about what. What are we going to get out of this?
Finance or operations might care about obligations and delivery and reporting. And can we do what we said we would do?
Depending on the type of organization you are, the size of organization you are, say you're a publicly traded company.
There are compliance elements to it. There are rules around how we buy and sell goods and services here. And you can't break them. You can't have, you know, insider trading. You can't have kickbacks if you're buying something for your restaurant or who knows? So, and then there's speed.
So the, the thing about a CLM where everybody is aligned around what we're trying to accomplish is that the CLM can help make sure that all of those different needs that are that are all valid, that they are reflected not only in an individual contract and the terms of that agreement, but in the way that your company manages all of its contractual agreements.
So it's important.
[00:24:49] Speaker A: Hey, if you have any questions, please send us an email at info trailblazer.us.com or look us up on the web at www.trailblazer.us or take a look at the Trailblazer academy@trailblazer learning academy.com thank you for listening and please tune in to our next episode. If you like this episode, please be a champion, share it with people in your social media network or like and subscribe to our podcast. As always, we appreciate you the listeners. Special thanks goes to. Jason Blake created our music.
[00:25:24] Speaker B: All right. I can't wait to get into readiness in our next episode.
