22 Feb Drafting contracts is only the start. The real value in contracts is in their implementation.
Far more time is spent on each contract after signature than during negotiations.
Negotiating and drafting contracts is typically just the first step on a long journey. It could take a few weeks of roping in your business colleagues to determine all of your requirements, followed by counterparty meetings to hear the other side’s perspectives and identify a consensus approach. By the time the agreement is signed, everyone is ready to celebrate a “job well done.”
It’s always good to find a cause for celebration! But many forget what the party is celebrating: the start of a long journey, not reaching the destination.
It is the journey and its results that will create the fortune your company is seeking, not the mere signing of the contract.
Many departments in your company will be involved in the journey. Operations may have service levels to fulfill. Accounting needs to be heed time limits on audit rights, lest they miss the opportunity to contest an overcharge. IT will have security requirements on both sides that create expansive liabilities if not followed. Your product team may need to launch new features or services, such as integrations with third-party systems, by a preset deadline, or else you will face liquidated damages. Your compliance team may need to exercise certain disclosure rights about your contractual relationship in order to stay in the good graces of regulators. And the list goes on……
The one common element in all of the above scenarios is The Contract. Every person and department involved in a business relationship must look to the contract to determine the guardrails, obligations, and limits of their responsibilities.
Yep, the signing party is over. Now it’s time to read, re-read, re-re-read, and re-re-re-read the contract in order to guide each of your teams and departments about how to perform in the relationship. In business-to-business transactions, this need for guidance becomes even more acute because each client may negotiate custom terms that differ from your standard approach.
Suddenly, the glow of those contract negotiating and drafting heroics has faded. Now the legal department risks becoming an operational roadblock if it cannot find and interpret key contract terms quickly. And this can go on for years because that’s how long these contractual relationships last.
The truth of contracts is that far more time is spent finding, re-reading, and interpreting them than is spent negotiating them. Why? Because performance takes a lot more time than just writing the plan. The lawyer is the architect and the contract is the blueprint. Whenever questions arise during construction, it’s time to review those blueprints again.
If you want to buy software for your law department, you will be most successful if you sell your colleagues on making a choice with the highest ROI (Return on Investment). Those in Finance, Procurement, Compliance, Ops, and Sales know firsthand about all the situations where contract-related issues and questions arise post-signature. And they know that the money to be made and lost on any contractual relationship is based on performance of the parties – not based solely on e-signing the document.
To become a Business Enabler (rather than a Speed Bump), you need to invest your energy and technology in contract implementation. The time spent implementing agreements typically dwarfs the time spent drafting the original agreement. You can save even more time by implementing a contract performance system that allows you to seamlessly assign tasks to stakeholders in other departments across the company.