contract-management-software
Legal12 January, 2021

Making the business case for contract management software

In recent years, the volume and complexity of the contract has increased, which has created all sorts of challenges for legal departments. According to the Legal Departments in a Digital Era Report, by Wolters Kluwer and the European Company Lawyers Association, 43% of legal departments rate the level of contract management as intermediate while an additional 20% rate the level as basic. These findings suggest there’s room for improvement.

However, it can be difficult to convince the business to prioritise investing in contract management tools, especially if the legal department is perceived as a cost centre. After all, why should the business sign off if there other, equally, urgent matters that the business wants to spend money on? That’s why it’s important for the legal department to make an effective business case that will ensure user adoption and transform the position of the legal department from a cost-centre to a strategic business partner. In this article you’ll learn how to make the business case for contract management software and win stakeholder buy-in.

Identify your squeaky wheel

While it may be tempting to start by looking at the tools first, but this approach is likely to fail because you don’t know what your challenges are. The first step is identifying your pain points because it will help your stakeholders understand why it’s important for the legal department to address this particular pain point. Some examples of pain points related to contract management include incurring costs associated with missing deadlines, losing deals because it takes weeks to get sign-off, and being unable to respond efficiently to requests from the business regarding contracts. The key here is to detail how your pain point is affecting the business at every level. You can build a much stronger use case when you can back it up with numbers and real-life examples.

Set metrics and KPIs

You need to let stakeholders know how your work will change once the new contract management tool is implemented. If you’re having trouble mapping this out, talk to your vendor and see if they can walk you through the contract management process and give you some ideas. Set out metrics that you would like to track, for example:

  • Contract creation will be reduced from 2 hours to 20 minutes
  • We’ll use electronic signature to get contracts signed in one day instead of two weeks
  • We’ll reduce the time spent on contract lifecycle management from 30% to 10%

Involve your stakeholders early on

You need to define who you need to convince, because you might need to convince them in different ways. When defining your stakeholders, make sure you know their role and what they care most about. Keep in mind that decision-makers may have different motivations for purchasing and using contract management solutions. To illustrate, the CFO will probably care more about how your contract management software demonstrates ROI and less about the features. Once you’ve defined who your stakeholders are you’ll be able to tailor your business case more. Make sure that the stakeholders are involved in any trials or demo sessions so they can see first-hand how the tool is supposed to work in practice.

Show how contract management solutions prove ROI

Contract management software is a serious investment, so your stakeholders want to see how you will demonstrate return on investment (ROI). This is an extremely powerful method because the cost of extra headcount is high. In terms of calculating ROI specifically for contract management, calculations are typically driven by cost savings, increased revenue and risk reduction.

How can you ensure that your contract management tool delivers ROI? Make sure to involve your stakeholders early on in the process. Tech investments fail because they don’t live up to their expectations or go unused because of the lack of user adoption. If only a few users actually use the tool it will be harder to justify the cost savings and impact on the bottom line. The key to ensuring user adoption is looking for a tool that’s user friendly and takes a few months to set up. If you’re already using tools in your legal department or throughout the organisation, consider how the contract management software you’d like to purchase fits with your existing technology landscape.

In addition to making your case for the financial benefits of contract management software, you also need to mention benefits that are less tangible. Legal risk is a very important one. How would implementing the tool have an impact on the way the legal department manages legal risk? How will the tool enable the legal department to proactively manage unexpected occurrences like an audit or a crisis? For more information on calculating your risk, check out our risk assessment calculator.

Another important thing to consider is the scalability of contract management solutions. While you have chosen to invest in the tool now, it’s important to consider how easy it is to expand and add users as your department, or organisation grows.

Why this contract management tool and why now?

By now your stakeholders should be convinced that of the pain points that need to be solved. Most likely there are a number of tools on the market that can address your pain points. How do you go about choosing the tool that’s the best fit for your legal department?

When choosing contract management software that’s the best fit for your legal department, it’s easy to get overwhelmed by all the features the tool has to offer. However, consider what features are absolutely necessary to help you overcome your pain points. These features will help you solve your most urgent, persistent problems and deliver quick wins. It may be tempting to focus on everything at once but this approach is risky given the enormous amount of change required.

What happens during the onboarding?

Once you have an idea of what tool you would like to purchase, and when, you need to have a rough idea how long the onboarding process will take and what information you need to get up and running. At this stage, it’s a good idea to think about what kind of information you need to store in your contract software tool and where this information is currently located. If you need to involve stakeholders outside of the legal department, make sure it’s clear what is expected of them and when you need their input. Being transparent will help to ensure the onboarding process goes smoothly and how the tool is expected to impact their work.

The role of the general counsel

The general counsel plays a dual role in ensuring stakeholder buy-in. The general counsel has to manage laterally, meaning they manage the colleagues in the legal department but also the other related business functions, facilitate knowledge sharing and taking ownership of the project. The other role is managing up, which involves managing business leaders and ensuring that the new tool fits with the legal department’s strategy and organisation’s roadmap for the next three to five years.

When structured right, making the business case for contract management software should be one of the easiest cases you ever make. Once you have streamlined the contract management lifecycle, you have more time to focus on high-value strategic work and can transform the position of the legal department from a cost-centre to a strategic business partner.

If you’re unsure whether you’re managing contracts effectively at each stage of the lifecycle, find out how the Legisway portfolio can help you centralise your contract information and implement workflows configured to the way your legal department works.