Chief legal officers (CLOs), general counsel(GCs) and their in-house legal teams have dramatically accelerated their digital transformation initiatives since the start of the COVID-19 pandemic. In fact, according to a recent survey by World Commerce and Contracting, 81 percent of legal teams plan to implement, replace, or add to contract automation over the next twelve months. This has resulted in an explosion of contract lifecycle management (CLM) software adoption, but after the purchase decision has been made, how can organizations measure the success of CLM software implementation? What key performance indicators (KPIs) should they track? And how can they use CLM software to quickly deliver value to the business and demonstrate an ROI?
Planning Is Everything
Every successful CLM implementation requires the right level of planning and preparation. This means first working with your CLM vendor to answer some important questions around business challenges, ownership, business process, and what success looks like before jumping in.
First, organizations need to be clearly focused on what the use cases and priorities of different user groups are. Are they concentrating on buy-side or sell-side contracting, vendor management, addressing pre-award issues such as approval bottlenecks, or something else? Is the organization trying to increase sales velocity, compliance, or perhaps trying to minimize risk of missed obligations? Whatever the challenge, the most successful CLM implementations are those that take small steps. Clearly documenting the business problem(s) that need to be solved and organizational priorities around them is key to success. After the organization defines requirements, it can then map measurements, KPIs, and timelines back to them.
The second step in a successful CLM implementation is determining ownership and clarifying who is involved in the organization’s contracting processes. This requires getting extremely specific around everyone’s role in implementation and the actual software usage so don’t forget to involve your end users here. To accomplish this, it’s critical to establish a RACI model to identify all those who are responsible, accountable, consulted, and informed in the project. You will also need to ensure that all those stakeholders understand and are on the same page regarding what the solution is expected to do.
The third phase helps organizations address questions about how existing contract data is managed today as well as current business processes and workflows for CLM. For example, what contract data exists already and what needs to be incorporated into a new CLM system? Are contract dates and obligations tracked via spreadsheets? What format are they in? From a process standpoint, this phase also helps organizations better understand how contracts are currently requested, drafted, approved, and executed. What is the process today and does it need to change? All of this influences the configuration of templates, workflows, fields such as contract and organization types, and security features in the CLM system.
The final step to a successful CLM implementation, after laying the important foundation of understanding the business challenge, ownership, and data and architecture, is to define what it will take to start realizing business value. This is where organizations should define what time to value looks like for the business, both from a basic value and exceeded value standpoint. This ties back to the business challenge or problems the organization is trying to solve with CLM software, and setting realistic timelines for achieving solving them.
Once an organization understands time to value expectations and timeframes, it can start thinking about benchmarking and tracking KPIs to measure the success of the implementation. And while there are hundreds of individual KPIs a business can track, the four main areas of initial focus should include usage, automation, reporting and security, setting 30-, 60-, and 90-day goals for each.
Security KPIs should cover goals for setting up roles and feature permissions, organizational hierarchy, users, and other IT considerations such as multi-factor authentication or single sign-on. Reporting and analytics KPIs are all about how the organization presents contract data and information back to stakeholders to deliver the business actionable insights not previously available. Automation KPIs help the business work through making business processes faster, more efficient and compliant, and with a better user experience. Look at current processes and determine which steps take the longest or fall through the cracks, as well as who needs to be alerted about important contract events and the approval process. Where possible, automate these processes early on. Usage KPIs are a key measurement of success and can measure usage in several ways including volume and activity across individuals, departments, vendors, requests, and contract types. The more the CLM software is being used, the greater the ROI.
Demonstrating Business Value
Purchasing legal technology is only the first step in modernizing contracting processes. The real challenge is successfully implementing it in a way that it delivers real value within an acceptable time frame. With CLM software, in-house legal and contracting teams are not only updating contracting efforts -- they have the ability to harness the data in contracts to deliver actionable business insights that continue to drive digital transformation.
Published September 9, 2021.