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Contract bottlenecks

December 17, 2018

This year’s IACCM benchmark study of the contracting process shows no improvement in typical cycle times for reaching contract signature. At a time when digitization and robotic process automation are streamlining many other business processes, the continued bottlenecks that delay contract closure are not good news.

Is automation the solution when it comes to speeding up contracts? The answer, based on the benchmark evidence, is at best ‘maybe’. It depends on whether:

a) organizations select the right software solution – something appropriate to the nature of the relationships they form. Too often, we see selections that are incapable of dealing with business needs and which ultimately add to complexity and delay as users battle with the system.

b) organizations try to overlay software onto their current manual process, without meaningful attempts to assess and reengineer underlying activities.

In reviewing the data, I was reminded of a recent article by Kate Vitasek, which highlighted a recent book by Professor Kathleen Eisenhardt, “Simple Rules: How to Thrive in a Complex World”. This title – and the five steps that Professor Eisenhardt suggests – seem especially appropriate in the world of contracting, since ‘complexity’ is the typical excuse for delay. So what should we do to improve?

Identify a bottleneck that is both specific and strategic – the bottleneck should be relatively narrow, a well-defined process or process step, not a broad aspiration. (Contract cycle time seems to be a good example.)

Let data trump opinion – don’t come up with wild, “shoot from the hip” rules; base them on a thoughtful analysis of historical experience. (In other words, gather data, such as ‘what are the actual causes of delay – IACCM has research on this!)

Users make the rules – don’t hand down rules from above, let those involved in implementing the rules develop them. (This requires deciding who the true ‘users’ are – the answer shouldn’t be the lawyers or contracts staff.)

The rules should be concrete – rules should not be difficult to understand; think yes-or-no criteria. (This is where good automation can really help, perhaps via electronic playbooks or apps.)

The rules should evolve – simple rules shouldchange as the company and the market change, and as managers better understand what is actually happening on the ground. (And yes, this is not about rigid compliance; markets change and the new system must continue collecting data and adapting.)

So perhaps a key project for the new year (and a great new year resolution) might be to eliminate contract bottlenecks.



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