40% of legal budgets spent on contract support

IACCM research “has found that in many organizations, bid and contract support can account for more than 40% of the legal budget.”

Accordingly, recent comments made by Colleen Gallagher of Huron Consulting should come as no surprise. At an IACCM meeting, Gallagher explained that current pressure on legal departments to increase efficiency has made contract management ‘top of mind’ for many in-house lawyers. She then outlined eight issues on the agendas of law departments that analyze their contracting processes. IACCM President, Tim Cummins has posted a summary of Gallagher's talk which is definitely worth reading.

Poor understanding of contracting costs

Of particular interest to me was the point that “few organizations have any consolidated understanding of the costs associated with the development and management of their contracts.”

Even though it’s entirely consistent with our experience at Exari, I never cease to be amazed by this. I just don't understand why companies seem so oblivious to the level of waste in their contracting processes. Yes, I know that the cross-functional nature of the process adds complexity. But isn't that what all those lean/six sigma/process improvement people are there for?

If you knew that your contracting processes accounted for around 40% of your costs, would you want to look for potential efficiencies?

Have you already improved efficiencies in your contracts? If so, please tell us about it in the comments below.

Click here to learn how Exari helps corporate law departments achieve higher levels of efficiency.

Related Posts:

Is Your Procurement Team Best in Show?

The 4 Key Challenges of Contract Management for Law Departments

Breaking the "Groundhog Day" Curse

In this month’s Global Broker and Underwriter Magazine, Lloyd’s CEO Richard Ward, talks about the market’s need to “get it’s act together” to provide better service to its clients, or risk them going elsewhere. He emphasises the need for the market to embrace the Lloyd’s Exchange initiative and says that, “To some respects the market is like a Groundhog Day as nothing has materially changed.”

The challenge of the Exchange is to get more information flowing between broker and underwriter. This initiative is at the exact same point where others have failed and we have heard the same rallying cry from previous advocates of change. But how can you break through to the next level and actually get meaningful volumes of information being transmitted between trading partners?

The answer is certainly not to ask the brokers to work harder or spend more money to make it happen. They will merely smile sweetly (again) and carry on with their own priorities.

So, how do you break the cycle of failure? - Change the path of least resistance.

Today, brokers often use Word to generate the documents they need to negotiate a client’s risk. In doing so, they trust their support staff to be on top of the latest market reform initiatives and their company’s rules. And then, most of the really useful information ends up locked inside these Word documents.

There is a growing recognition, however, that by using specialist document automation technology such as Exari, brokers can improve turn-around times (documents produced in 80% less time) while ensuring greater accuracy and built-in compliance. Our broker clients tell us that it’s easier to use a structured mechanism for building their documents than relying upon the free form use of word processing.

Using Exari, documents are “assembled” from the relevant sections, clauses, paragraphs and words that are applicable to the risk class. During that process, data is automatically being gathered in the background. It is that data that can be transformed into a message and sent to underwriters via the Exchange.

Everyone wins - Brokers get better documents faster; Underwriters have to do less checking since there are fewer elements that can go wrong; Clients get better service and the Exchange builds up its message traffic.

If you use a document assembly solution like Exari to structure the creation of your documents at the beginning of the placement process you can break the Groundhog Day curse.


This post was guest authored by Martin Kett, Exari's VP of Insurance Client Development.

Too Much Sales Time Spent on Contracts

“In many organizations, up to 25% of sales time is spent on contract-related issues,” states Tim Cummins on his blog Commitment Matters. Tim is president of the IACCM, a non-profit organization that’s become the global forum for innovation in trading relationships and practices.

This is astounding. As we emerge from a very deep recession (knock on wood as GDP came out positive this week), organizations around the world are struggling to do more with less and to close sales more quickly. How do you do this when 25% less time is spent selling or prospecting?

An alternative to the manual, slow and risky process of creating contracts and sales documents such as NDAs and proposals, is to use document assembly/contract automation software. These solutions allow sales reps to create structured, approved sales documents on the fly by answering questions in a browser. These systems can integrate into the CRM system so the sales rep doesn’t have to re-enter data and all contract data can go back into the system. This allows the company to also manage, analyze and report on these contracts.

Another interesting subject touched on by Cummins comes from a report by CSO Insights on Sales Compensation and Performance Management. It talks about how the recession has caused many sales reps to miss their quotas and to begin to push the boundaries of what is ethical. The report goes on to say that sales reps state that the biggest cause for losing business is the “competitor’s price and terms.”

And this brings us full circle back to contract automation. If you automate your sales contracts and capture the data, you can control what the rep can do with the Ts & Cs and give them some controlled flexibility to negotiate on their own as well. You can also risk- rank your contracts and start to compensate your reps not only on revenue but on the value of the underlying contract to your company.

Dow Jones & DLA Piper joined us for a webinar on this topic: "How sales teams can reduce the time and expense of closing deals by 50%" Download the recording now.

Document Assembly Software Explained & Reviewed

Noted document assembly expert, Seth Rowland, has written a beginner's guide to Document Assembly that does a good job of explaining how document assembly software works.

Document Assembly goes by many different names, depending on the related job function and industry. It can be called document automation, document generation, contract automation, policy configuration, loan documentation, document creation and many more. For simplicity, we'll stick with document assembly here.

Recently, Seth reviewed Exari Document Assembly Software in the TechnoFeature Newsletter. Below are some excerpts:

• In evaluating a document assembly system, one must look at what the user sees when he or she launches the document assembly interview. If the user's experience is "pleasant"; if the user can easily navigate the questions; if the user is guided to make the correct choices; and if the user can easily review and change his or her answers, then you can say that the system succeeds. The Exari interview shines in each of these areas.
  


• At the end of the interview, Exari presents you with several optional outputs including Word and PDF. The most interesting option is a document preview. You can see the document with variables and optional text indicated...Exari adds a further output option that is unique in the document assembly industry. Called the Exari RoundTrip, it produces a Word document that can be negotiated and edited.
  


• Exari has just about every feature you could imagine for a document assembly system. Variables and various other components, just like documents, are stored as XML objects. Exari has variables, conditions, repeats, calculations, conditional expressions, multiple choice questions, and user text questions. To the standard list, Exari adds smart phrases, blocks of text that are reusable in the template and may or may not contain conditions, variables, and logic.
  


• Exari includes several other components that round it out as a robust and powerful programming language.
  


• Clearly, you'll need to conduct a return on investment analysis. Look at the number of users who will use the system, the number of documents they will assemble, the location of the users, and the level of expertise among the users regarding the documents. In the proper setting, Exari will pay for itself in under three months after full production.

You can read the complete review here. And please, let us know what you call Document Assembly below in the comments.

The 4 key challenges of contract management for law departments

Well known legal department consultant, Rees Morrison, reminds us of the four key challenges contract management poses for in-house lawyers:

1. Standardizing and simplifying contract drafting.
2. Setting policies regarding legal department review of contracts.
3. Streamlining contract negotiation.
4. Facilitating the company's adherence to its contractual obligations.

Morrison notes the role of document assembly in addressing the drafting issue. Interestingly however, all four issues can actually benefit from a document assembly solution.

1. Contract drafting
Most legal departments try to improve contract drafting by using MS Word templates. However, these create problems for all parts of an organization:

• Business users hate Word templates. Their eyes glaze over when they see square brackets and verbose user instructions. Instead, they either ask Legal to do the work, or they cut-and-paste from a previous agreement.
  

• The lawyers are unhappy too. Word templates are too risky. Often, business users can't get the substantive terms right and Legal has no visibility into the deal.

In contrast, document assembly enables drafting to be pushed out to the business as a self-service model, while ensuring the generated agreements are legally compliant. The business users are guided through an intuitive web interview. The lawyers retain control by pre-determining what content is included. Further, PDF output ensures that the business user can't modify the document post-production.

2. Contract review
For legal departments with contract review policies in place, document assembly systems can enforce those policies by embedding them into the system as rules.

When there is non-compliance with a rule (e.g. in answer to an insurance question, a user might respond that the counter-party has insufficient insurance), the system automatically routes the contract to the legal department for review.

3. Contract negotiation
Document assembly can improve negotiation in two ways:

• By building commonly negotiated fall-back scenarios into the system (with different answers triggering the inclusion of particular provisions) the negotiation process is made much faster.
  

• Some systems can actually capture all edits made to a document after it has been generated. That ensures any changes made by a counter-party are visible (even if MS Word Track Changes has not been used). Further, these negotiated positions can even be applied to subsequent agreements such as renewals.

4. Contract tracking
Typically, there is both a functional- and system-separation at the point of contract execution. Pre-execution work (drafting, review and negotiation) is controlled by Legal, while post-execution tasks (obligation management) are usually handled by a contracts department or business unit.

For companies that have implemented a contract management system, the right document assembly system can provide huge advantages via integration. They are able to:

• Automatically push the execution version of an agreement into the contract management system in electronic form (even if the document has been heavily negotiated).
  

• Flag the extent to which clauses have been modified; which changes are simply approved fallback provisions, and which contain bespoke wording.
  

• Enable analysis and reporting on the risk profile of an organization's entire contract portfolio.

Conclusion
Currently, a few innovative legal departments are realizing the full potential of document assembly. For various reasons, most organizations have not yet analyzed contracting the same ways they have other business processes. However, when they do, they will discover that the contracting process is highly inefficient, and that the potential cost savings from automation are just too great to ignore.