As the vice president and general counsel of PointClickCare, Richard Guttman knew if the company wanted to continue to grow quickly, it needed a better contract management system.
The company provides software for retirement homes, assisted-living facilities, and other senior-care operations. It has all sorts of agreements in place including those for business associates and third parties, as well as contracts with laboratories, pharmacies, and health-care providers, plus employment agreements, supplier and contractor agreements, non-disclosure agreements, and commercial documents such as loan agreements.
Managing all these contracts was cumbersome. Worse, it was unsustainable.
“We have 12,000 facilities today, but two years from now, we’ll have twice as many,” Guttman says. “It was clear that with the existing approach we might have been able to limp along for a little longer, but it certainly wouldn’t scale.”
When Guttman arrived at the company in 2014, PointClickCare’s document storage systems were limited, unorganized, and not integrated. Hard copy libraries were still the primary storage mechanism, with partial use of Microsoft’s SharePoint document management software, but without any specific contract management capabilities. It was difficult to access contract information, and the company had no data mining or business intelligence capabilities with which to analyze the documents beyond some basic finance features in the enterprise resource planning system.
“We stored and archived everything in a secure manner, but it had become this giant, disconnected, and unmanageable warehouse of information,” Guttman says.
One sign that the company needed a new contract management system was that the legal team couldn’t answer other departments’ important questions without doing a lot of work. How many customers allow PointClickCare to use their data in aggregate for analytic purposes? How many customers have locked-in annual subscription prices? Without a way for Guttman and his employees to search the company’s contracts efficiently, queries like that could take hours or even days to answer. The company decided to install a contract management system from Contract Logix. This solution enables the company to store all its contracts in a searchable digital repository, such that the legal department will be able to answer questions about contracts quickly and efficiently.
“It gave us the ability to expand our usage over time,” Guttman says, explaining why Contract Logix was the chosen platform. “We could start by scanning agreements and capturing some preliminary data and get into more sophisticated usage later, like e-signatures and complex workflow support.”
PointClickCare’s legal and finance departments are the main users for now, so only about 20 people are on the system at this early stage. But other departments have expressed interest in accessing the software, too, which means the user base is likely to grow.
For PointClickCare, the signs that it needed contract management software were clear. The existing system was holding the company back with respect to growth. The current platform also made it nearly impossible for the organization to inspect and learn from its contracts. But judging from interviews with people in the contract management software space, most legal executives don’t know if or when a new contract management system would make sense for their organizations. In fact, many in-house counsel feel that they have no real need to implement the technology — until it’s too late. Too often, they realize they could have used it only after they’ve experienced a contract disaster, or once their contract volumes have ballooned to the point that spreadsheets and calendar reminders are no longer useful.
To help pinpoint the signs that you might need this technology, we canvassed lawyers, consultants, and software providers to develop a clear understanding of when, exactly, in-house teams should make the leap to contract management software. You probably need contract management software when:
YOU CAN'T FIND A CONTRACT
“If the business departments are continually trying to source contracts nobody can find, that’s a strong signal,” says Jason Moyse, manager, legal business solutions at Elevate Services, an alternative legal service supplier and software provider. “It’s pervasive,” he adds, “even among some of the most recognizable companies.”
When you have to scramble to find a contract, you waste time — which means you waste resources, both human and financial. By contrast, with contract management software, you store all your contracts in a digitally searchable repository, making it easier for you and your team members to find documents with just a few keystrokes. That saves both time and money.
Moyse points out that the software gives you version control as well, so you know the contract saved in the system — rather than the version, say, saved on your colleague’s laptop — is the most up-to-date iteration.
YOU CAN'T ANALYZE YOUR CONTRACTS
Joe Milstone is the founder of and practice manager at Axiom Cognition, a technology-focused legal services firm. He points out that many in-house legal departments have trouble finding contract details. So if someone in a business department needs to know how many contracts contain a certain provision, for instance, “you’re working frantically to respond,” he says.
“That’s another drain on your team and your budget.”
It’s easier to extract business intelligence from contracts when you keep the documents in a dedicated management system. The data is searchable, “so when your executives come to you and say, ‘How many agreements have these provisions?’ or ‘How many agreements are for this amount of revenue?’ you are able to provide that data in real time,” Milstone says.
Moyse adds that when you use some of the advanced features of contract management programs, you pave the way for not only better business insight but also better business processes.
For example, you can create a library of information to use during negotiations. Your negotiating team will know that if representatives of the other side ask for A, your company won’t necessarily do B but sometimes C. Moyse sums it up this way: “You get to the point where you can determine your playbook for certain types of contracts based on information you already have.”
YOU DON'T KNOW WHO'S RESPONSIBLE FOR A CONTRACT
Olivier Fischer is the managing director and chief executive officer for North America at Legal Suite, which provides contract management and other software for in-house counsel. He says that at some companies, contract management is effectively orphaned, considered neither the responsibility of the in-house lawyers nor the business side’s purview. That’s a mistake. It increases the risk that the company will renew contracts it should cancel, or that the business will miss a delivery deadline.
“You want to make sure contracts are managed from A to Z, because there could be deliverables and payment terms that are important aspects of the contract,” Fischer says.
Using contract management software, you can assign contract control to a department or an individual, so your organization is less likely to miss a deadline.
A single employee is your main source of contract knowledge.
Fischer says some companies rely on a single employee, or sometimes a small group, to manage contract information. But as he points out, that means important contract knowledge could be lost or compromised if one person leaves the company. Empower managers to upload all agreement details to an information management system and you reduce the risk that your institutional memory will walk out the door.
YOU MISSED A CONTRACT DEADLINE
“That’s more than a warning sign,” Milstone says. That’s a failure of the system.”
Fischer agrees. He recalls one company’s position: The organization realized after a contract auto-renewal date that it should not have continued to participate in the agreement. It had to pay $100,000 to cancel the contract.
“When you buy contract management software, there’s a cost,” Fischer says. “But if you don’t have it, are you really saving anything in a situation like that?”
In summary, you should consider implementing contract management software if your organization has experienced any of the situations mentioned above.
Now, should you decide to install a contract management system, experts in this area have some tips to help you run the software smoothly.
Make sure your team is willing to use the software.
“You could have the best software in the world, but if people are not using it, it will fail,” says Fischer. He recalls how one general counsel avoided that pitfall. The executive wanted to convince his team that a contract management system would help them work more efficiently. Rather than explain the benefits of the software to his department staff, the general counsel decided to let the product speak for itself.
“He said, ‘I don’t want to see the product. Show it to my team. They will decide,’” Fischer says. “He wanted them to be part of the decision.”
That company did become a Legal Suite contract management software customer. Users at the client-organization largely embraced the system, exhibiting far less resistance than users in other companies have, Fischer says. He believes the high acceptance level is linked to upper management’s decision to prioritize staff buy-in.
Get ready to rethink your business processes.
Moyse knows that some companies fall out of love with their contract management software. Discontent could stem from the fact that not every contract management system is created equally and certain programs have more features or are easier to use. But it’s more likely that people think contract management software is plug-and-play: Turn it on and all your contract management woes will disappear.
That’s unrealistic. “You don’t just push a button and everything works,” Moyse says. “There is some operator know-how required, which is reasonable when you think about the volume of insight you’re trying to extract. You still need to have process around it.”
You should consider a number of questions. For instance, what information should you derive from your contracts? What data would benefit which departments? What’s the best way to share that information? Who should have access to the contract management platform? If the software helps you stay on top of renewal windows, who’s responsible for followups? Address questions like those to develop a framework for using the software day-to-day.
Here’s a process question a lot of companies never ask: What is our upgrade road map for the software? After all, you’ll likely use only basic features in the beginning as you and your staff become familiar with the system. But you shouldn’t stop there. “It is hardly worth it to get [contract management software] just for deadline tracking,” Moyse says. “There’s a lot of value in the more advanced features.”
Moyse recommends a managed-services approach, which is no surprise. That’s the sort of service his company and others offer: Elevate and firms like them are more than happy to monitor and optimize the software once it’s up and running — for a fee — to make sure customers are making the best use of the program’s features and capabilities. It’s worth noting that Moyse has seen companies insist they can do that for themselves, only to complain later that the software hasn’t provided the return on investment they expected.
PARTNER WITH YOUR IT DEPARTMENT
Fischer recommends assigning two project managers to the contract software selection and implementation process: someone from legal and someone from IT. The legal lead knows what the company requires; the IT lead knows how to assess the programs according to the legal representative’s specs, and how to roll the technology out across the organization.
Guttman from PointClickCare agrees. “Lawyers are generally not good at technology project management,” he says.
But it’s usually best not to let IT have too much control. Fischer remembers one company that blindly followed advice from an overly confident technology manager who said a contract management system could be developed in-house. “Two or three years later, having spent $200,000 to $300,000, they stopped the project and came to us. Trial and error? We’ve done that. And we know what works.”
At the end of the day, good contract management doesn’t just help in-house lawyers find information or meet requirements. It also helps lawyers transform their departments from necessary cost centres into knowledge hubs that other parts of an organization will find valuable. “The legal department controls that information,” says Milstone from Axiom Cognition. “It’s in an opportune position to extract, filter, and analyze the data, and offer it to the business to provide value in a way that the legal department is always looking to do.”