How Intake can Make or Break Your Company’s Commercial Contract Review Process

 
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Commercial contracts are the lifeblood of business but are often the bain of corporate legal departments. In house lawyers get bombarded with requests to review, negotiate, and approve commercial contracts and often struggle to keep up with the immensity of the challenge. Sending contracts out for review by a law firm is not always feasible or advisable due to budget and time constraints. But attempting to do all the work internally can grind business to a halt. It’s a big problem.

The solution does not lie in merely throwing more resources at the problem. It involves having better systems and processes, and the right partner, in place to streamline and improve the contract review. With better systems, which lead to better allocation of resources and improved results, in house lawyers can extract themselves from perpetual contract review busywork and immerse themselves in more sophisticated, value-added legal work.

This post is the first in a series in which we will discuss the elements of effective commercial contract review and management. Through years of experience helping corporations with their commercial contracts, we’ve developed a framework that allows corporate legal departments to build smart, synergistic commercial contract processes that save money, result in higher quality legal work, and create efficiencies.

The framework includes the following elements: 

  • Intake

  • Allocation

  • Legal Review

  • Management Information

In this post, we address the importance of contract intake. In our experience—and probably yours—if a contract review request doesn’t start out well, it rarely ends well.

The Problems with an Ad Hoc Intake Process

We define a commercial contract review process that is efficient and effective as “structured” and one that is loose and disorganized as “ad hoc.” In an ad hoc environment, contract review requests flow into corporate legal environments through many channels and from many sources. There is little discernment between what types of contracts get submitted to which in house lawyers (or outside law firms). Often, that decision comes down to past practices and personal relationships rather than thoughtful, strategic consideration. Without systems and checklists in place, it’s common for contract submitters to make requests without including all of the information that lawyers need to do their jobs.

All of these ad hoc symptoms can lead to negative consequences, namely a commercial contract review process that is slow, inefficient, costly, and that leads in house lawyers to become frustrated because they are unable to operate at their highest potential. Moreover, blame is cast upon corporate legal departments by business people who perceive lawyers, who may not have the information they need to do their jobs, as the bottleneck that is slowing down contracting processes within the company. When business slows down because contracts can’t get approved at the pace business units desire, the refrain “it’s stuck in legal,” although often unwarranted, becomes increasingly common.

In the not-too-distant past, this wasn’t a concern, or at least not a major one. Times were different, as were expectations. The way in which legal work was submitted to in house or external lawyers was based on trust and relationships. Lawyers were expected to provide high-level, high-touch, concierge services, which meant that longer lead times for contract review caused by incomplete or inaccurate information were tolerated to a greater extent. 

Times have changed. While trust and relationships obviously remain important, they don’t scale when it comes to contract review. Today, legal work—internally and externally—must be done as efficiently and productively as possible. For both the submitters of commercial contract review requests, and the lawyers who must complete them, efficiency and productivity starts with a well-structured, technology-enabled intake process.

The Promise of Structured Intake

Several years ago, we were approached by a Fortune 500 telecommunications company whose contract review practices had all of the typical hallmarks of an ad hoc process:

  • Legal work was distributed one-off rather than through a centralized intake system;

  • Information accompanying requests was incomplete or inaccurate;

  • Submitters were not trained regarding what was needed and what to expect;

  • Legal work slowed down because lawyers did not have what they needed to do their jobs;

  • As a result, everyone was frustrated and the business couldn’t operate up to its full potential.

By viewing the situation with a fresh perspective, we quickly determined that what was needed, first and foremost, was a structured intake process. Just as a defect or error at the start of a manufacturing assembly line will derail the entire production process, ad hoc intake instigates and exacerbates inefficiencies throughout the entire contract review process.

We worked with the client to craft an intake solution that allowed for contract submissions to be gathered in a structured, organized fashion, which then enabled the client to allocate, review, and analyze work in a much more effective manner.

While every client situation is unique, and each intake system we design addresses the context and circumstances of the situation, intake is always based on certain fundamental principles, including: 

  • The assessment of current practices in order to identify problems and opportunities for improvement.

  • The creation of a centralized, technology-enabled portal (a website or designated inbox) through which all contract review requests must be submitted, and that require submitters to include all information necessary to complete review.

  • The formal training of submitters so they understand the process requirements, and the distribution of standardized checklists that reiterate processes for future reference.

  • Ongoing review and refinement of intake to ensure that contract review evolves along with the business.

As our client experienced after refining its own intake processes, there’s great benefits to be realized from more structured intake. For one, it allows lawyers to be elevated to their highest and best use. Internal and external lawyers are among most businesses’ highest-cost resources. Those resources are misallocated when lawyers are forced to chase down information that’s needed for them to do their jobs effectively. With an effective intake system, lawyers have all of the information they need from the start. They can do what they do best—grapple with complex problems—rather than scrounging for details.

In addition, with better intake work moves through the contract review process more quickly. Business units and business people get what they need when they need it in order to keep customer and supplier/vendor relationships on-track and cash flowing.

Finally, structured intake enables the entire process of contract review to improve over time. When requests come in to a centralized portal, the process of allocating work to the appropriate in house or external resource becomes easier. When requests are made with all necessary information included, the process of legal review becomes more efficient. And when data is aggregated from the start, the process of management information—which is the way legal departments organize and communicate regarding the information it generates—is more effective. 

Bottom-line: For companies big and small, structured intake for commercial contract review creates a virtuous cycle that leads to better business results, as opposed to the vicious cycle that flows from an ad hoc approach.

In the weeks to come, we’ll be addressing the additional elements of a structured approach to commercial contract review: Allocation, Legal Review, and Management Information. In the meantime, if you’d like to discuss the benefits of outsourcing your company’s commercial contracts, please contact David Galbenski, EVP of Strategic Initiatives, at dgalbenski@lumenlegal.com or 248.872.5533. To learn more about our commercial contract outsourcing services click here.


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DAVID GALBENSKI
EVP Strategic Initiatives

Dave founded Lumen Legal 25 years ago. He enjoys providing his thoughtful, creative, and innovative counsel to law firms and corporate law departments looking to solve problems and reduce costs.

He also enjoys staying abreast of all developments in the legal industry and has contributed to the dialogue with two books: Legal Visionaries and Unbound: How Entrepreneurship is Dramatically Transforming Legal Services Today. He is a frequent speaker at conferences.


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