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Contract Lifecycle Management – How to Improve your CLM process

Contract Lifecycle Management (CLM) has taken on a new urgency within the corporate ecosystem. While control and compliance remain fundamental elements of contract performance, today’s dynamic environment demands that contracts also become a critical source of management information and must offer mechanisms for greater adaptability and agility in trading relationships.

With this in consideration, PwC teamed up with the World Commerce And Contracting (WorldCC) to develop a survey intended to gather perspectives on CLM adoption from leaders of legal, finance or those who oversee procurement, supply, contract or commercial management. Below we share highlights from the findings, including factors that make action increasingly urgent and outline the steps that are delivering results when it comes to leading automation efforts, responding under pressure to streamline services and dealing with the volume of operational workload. Keep reading to see some insights from the main personas built from the Contract Lifecycle Management, Building the Case for Change Survey by WorldCC.

CLM perspectives

Success implementing CLM depends not only on the technology, but also on building consensus across stakeholders, users and suppliers while maintaining progress at pace.

Law departments can work with external specialists on a market assessment to understand their options. This may help them define the value for the organization, agree on the nature and source of the CLM technology solution to align to the short and long term goals, and identify the terms of the processes, the roles and responsibilities, and the performance framework critical to success.

In successful projects, stakeholder management is seen as more than just talking to people, it is viewed as a mechanism for creating followers and, where necessary, changing hearts and minds. By soliciting opinions and testing options, those impacted by change may feel part of the process and give an opportunity to prepare and adapt.

Some key steps for underpinning adoption include: leadership and engagement, communication strategy and plan, requirements alignment to facilitate user adoption, training strategy and considerations, and change management roadmap. But it’s important to keep an eye on the balance of investment, where the amount of effort in winning hearts and minds often absorbs significantly more investment than the technology rollout and must not be under-estimated. Progress often follows an S-curve, where visible progress is likely to be slow initially before ramping up; so phasing of activities and communication of progress is critical.

How to improve contract management? Even if a CLM has been implemented, there could be opportunities to evolve and expand its impact.

Companies that have already implemented a CLM technology solution might have a foundation for unlocking the power of Commercial Data Management, such as: undertaking template standardization across the enterprise, reviewing the clause library, developing common taxonomies, re-engineering elements of the core business processes and cleansing much of the core contract data. However, CLM technology implementation shouldn’t be seen as a fixed end project, but as ongoing in nature.

Upgrades could enable enhanced management reporting, clause management, integration with the ERPs, risk and performance management, and contract portfolio analysis. Additionally, work in relation to template standardization, development of a new clause library and simplification could be reviewed to allow for greater flexibility in the use of different contract models. Extended platform functionalities could take the CLM solution from a contract repository with basic obligation management to a new level, but this will be successful only if it is underpinned by a comprehensive data architecture and digitization strategy, inclusive and focused on the needs of the business rather than the needs of the functional teams involved.

Some aspects to watch out for are decision making versus decision support (seeing and accepting insights in this context is often critical to success), sunk cost bias and loss aversion, and the need for change management.

As businesses evolve they’re turning their focus to ensure that suppliers and contracts meet their enterprise ESG goals

The SEC has proposed climate-related disclosure regulations, and to make sure companies are complying, it’s important to build a robust ESG strategy. For legal departments, some of the considerations include key areas such as: having a regulation tracker, mapping out the third party relationships, and creating risk and data models and asking themselves questions on their alignment and preparedness to follow the strategy.

To increase levels of trust, visibility and transparency with supply networks, law departments can leverage technology, of which a CLM technology solution is an important part. Digitization is often at the heart of such projects since it will provide the data flows and information required for reporting. But it’s critical to note that when looking at contracts as a tool to manage supply chain or climate change risk, this is not a one time review - templates and executed contracts should be constantly reviewed in line with an organization’s evolving ESG strategy and the ever changing regulatory and legal landscape.

The increased importance of data and information may also require upskilling in areas such as data analytics and visualization and may require a mindset shift from seeing the management of data as an administrative task, to one where its assurance is critical to business success and about communication. For some, a cloud-based solution may be the best way to achieve cross-business boundary sharing, but security and access protocols will be fundamental, giving room to potentially leverage some form of private cloud approach.

Moving to an integrated information architecture represents benefits to the entire supply chain and could be the foundation for a longer-term relational approach, potentially helping to identify opportunities for innovation and continuous improvement. Some aspects to watch out for include: agreeing the purpose (it’s important to create consensus), the need for trust, the acceptance of standards (in terms of what data flows, how it flows and how it is used), and perceived benefits (the project should provide rich data for trusted suppliers in the network to be positioned as a customer of choice).

Final thoughts

CLM is critical to the delivery of efficient, effective business performance. In many respects, it represents ‘the plumbing’ for the trading relationships that deliver economic and social value.

But remember: CLM is not a technology roll-out program: it is a business transformation program, well worth the effort with top-level sponsorship and an implementation collaborator with knowledge and experience.

Download the full report Contract Lifecycle Management: from technology to performance

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Tyler Marion

Principal, Legal Business Solutions, PwC US

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Katie Passaretti

Director, Legal Business Solutions, PwC US

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Sandeep Agrawal

Partner, Legal Business Solutions, PwC United Kingdom

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