Checking the Pulse of the Contract Management Industry

In a recent report on The State of Sales Contracting Management, the International Association of Contract and Commercial Management addresses a prevalent problem among sales organizations.

“For many sales people, ‘getting to yes’ with the customer is only half the battle,” the IACCM observes. “Coping with the inefficiencies of their own organization can be almost as challenging, and this is frequently the case with the contracting process, where complicated rules and limited visibility can undermine sales productivity and threaten business controls and financial performance.”

The IACCM report is based on feedback from more than 250 corporations. They were asked to explain the contract management challenges they face and to discuss the benefits that have resulted from contracting process improvements.

The results illuminate the widespread need for improved contract management, as well as the productivity and revenue gains possible when contracting processes move from relatively unorganized, inflexible, and costly paper-based management to contract management software.

The Findings

Highlights of the report include:

• Forty percent think their contract management process puts them at a disadvantage, while only 10 percent said it gives them an advantage.
• Inefficient, bureaucratic contracting rules and approval processes often cause contracts to not close, resulting in lost revenue.
• Two-thirds of salespeople think that their enterprise’s contract management does not maximize value or minimize risk and that it hinders sales.
• According to sales people, the top problems with their organization’s contracting process are:

1. 1. Late involvement in sales contracting issues.
   2. Unapplied best practices or lessons learned.
   3. Poor internal collaboration.
   4. Difficulty in getting timely support.
   5. Delayed negotiation due to reviews.

• The respondents who are responsible for producing or managing contracts are no happier with sales people than the sales people are with them. These legal and management respondents complain that sales people often don’t internally communicate necessary information, that they don’t have relevant skills, and that they often set customer expectations too high in order to make a sale, eventually resulting in dissatisfied customers.
• Specifically related to the legal department, 25 percent of salespeople said their number-one problem with legal was “slow to respond” and 20 percent said “doesn’t update on status,” both of which are issues that enterprise contract management can fix. For their part, 30 percent of respondents from the legal side said “poor visibility into contract management” was their number-one problem with sales, while 20 percent said “better info for forecasting needed,” again, problems that can be fixed with automated contract management.
• Only 6 percent have a contract management system that it is closely tied to the automated sales processes.
• On a scale of 1 to 4, the quality of the contract management system for companies that had automated contract management solutions integrated with the sales automation was 3.22, compared to 2.55 for enterprises with automation but only partial integration, 2.12 for those with some automation but no integration, and 1.87 for those still using manual contract management.

Takeaway

Based on this evidence, it’s hard not to see that automated contract management as part of an overall enterprise management system should be the direction forward for all organizations that routinely deal with sales contracts.

“Integrated sales process automation has a consistently beneficial effect on the quality and integrity of the process, yielding substantial increases in the satisfaction of all internal business groups,” the IACCM summarizes.

Enterprises that have not yet recognized the tremendous advantages of automated contract management- as well as the competitive disadvantage they will be at without automation – are simply sticking their heads in the sand.