7 Reasons a CLM System Isn’t the Answer
to Your Contract Management Problems
by Nancy Nelson, President, ABiz Contract Management Innovators
I know most people like common or round numbers, so you might be thinking why can’t she come up with 5 or 10 reasons instead of 7?
Well, I could. But I like to work outside my comfort zone. Your other question might be “why focus on the reasons for not acquiring a contract management system?”
The simple reason for that is most consultants/system suppliers focus on coming up with compelling reasons to buy a system and may even portray that as a solution to all of your contract management problems (yes, I said “problems”, not “challenges” as most consultants like to say).
Speaking from first-hand experience, I can tell you that is not the case.
My mission is not to convince or dissuade you from buying a contract lifecycle management system (CLMS). It’s simply to help you consider a balanced decision-making process.
So, with that, my 7 reasons why a CLMS won’t solve your contract management problems.
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#1. No contract management processes.
This can be a topic of an entire whitepaper and range from having no processes to having theoretical processes which don’t work in reality, to having inefficient and inadequate processes. In any of those circumstances, your CLMS will not help you avoid having processes.
What it should do is force you to look at your processes. Prior to determining a CLMS that will work for you, the processes should be created or enhanced. The appropriate system should be selected based on the requirements described in your processes and then implemented as a tool to streamline those processes.
#2. Short Staffed.
Many companies go into a system selection thinking they can eliminate staff or at the very least, not have to hire staff to fill the gaps.
In my experience, I haven’t seen significant overall personnel reductions possible. However, I have seen functions eliminated in lieu of establishing new functions and roles shifting, depending on the system implemented.
Many manual processes and data gathering functions can be reduced or eliminated if the system is implemented properly.
Roles can shift to more strategic, value add contract creation, negotiation and management roles, as well as system administration.
More efficient operating models can also be established which together may bring down the overall cost of the contracting function.
#3. Can't Find Contracts.
A system will definitely not help you here. The CLMS will need contracts to operate. There are some contract discovery tools out there to help you find your contracts in a sea of documents located on a server or in the cloud.
But you will at least have to have a general idea of where your contracts are located.
#4. Client Satisfaction Issues.
Depending on the cause of the client satisfaction issues, a CLMS may provide visibility into some of the common reasons for dissatisfaction.
Take the example of not delivering to the scope of a project. A system may provide visibility into the scope and deliverables, but performance of those activities will still be controlled by a person, not the CLMS.
#5. Supplier Performance Issues
Similarly, if your supplier is not performing in accordance with the contract, having the visibility a CLMS may provide into where the disconnects are happening between the contract and performance (through perhaps a contracted vs. performed analysis) will shed light on the predicament, but won’t solve the problem.
Discussions with the supplier along with a clear remediation plan will have to take place to fully resolve the issues between the parties.
#6. Too Many Internal Approvals
Many CLMS suppliers proudly tout the system benefits in “time to contract”.
While I agree that a system can facilitate time to contract if done properly and with streamlined processes in place, the system alone will not solve this problem.
If the process is broken, the best a system can do is automate a broken process.
#7. Bad Data
Ever heard the adage “garbage in, garbage out”?
A CLMS has the ability to provide an enormous amount of information and statistics. But it has to get the information from somewhere.
If your system contains erroneous or outdated information, or is simply not even there, your reports and statistics will contain erroneous, outdated or missing information.
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“The ABiz team brings a level of real-life experience, knowledge and expertise that sets it apart from other consultancies. Through its links to World Commerce & Contracting, it is at the forefront of the research agenda and industry best practices.”
— Tim Cummins, President, World Commerce & Contracting; Professor, Leeds University School of Law; Chair, International Commercial & Contract Management
