Management Information is the Key to Improving the Velocity and Value of Commercial Contract Review
The term “garbage in, garbage out,” which is often attributed to IBM programmer George Schuesel, is popular in software development circles and has just as much relevance in the realm of commercial contract review. Specifically, when the intake of information at the front-end of a contract review process is done in an ad hoc, unstructured fashion, leading to incomplete or inaccurate information, it makes it really difficult to move contracts through a company’s legal department in an efficient and effective manner. Moreover, and just as important, a structured intake process gives a corporate legal department the data it needs to improve its contract review process moving forward.
In this fourth and final article in our series on commercial contract review and outsourcing (you can access prior articles here, here, and here), we cover the importance of “management information” in contract review. When a company has access to the information it needs to assess and analyze its commercial contracts, and the means by which they move through legal review, it has the opportunity to better manage the entire process—creating more efficiencies and maximizing value for shareholders in the process.
Better Intake Leads to Better Management Information
Intake, which involves getting the right information from the start, is the lead domino of an effective commercial contract review process. When a commercial contract review request is submitted in a well-structured way, it not only leads to better legal review but also better management information.
The primary objective of intake is to ensure that the right information gets to the right person at the right time to enable legal review. However, when we work with clients to design intake systems, we seek to determine what information they need, and in what format they need it in, to analyze and optimize their processes moving forward.
Management information is what enables various stakeholders within a company to extract more value from commercial contracts. For example, management information is what allows: (1) in-house counsel to determine what types and quantities of commercial contracts are moving through their department, (2) contract submitters to easily access contract information and report up to management, and (3) members of the C-suite to gain a holistic view as to the company’s contracting processes.
By understanding a client’s objectives and preferences, we are able to design intake systems that establish rules and capture data so that a wealth of management information can be compiled in various numerical and graphical interfaces. The more data a company has access to, the greater flexibility it has to turn information into action.
Without management information, corporate legal departments are flying blind. With it, in house counsel have access to:
Efficiency Metrics: Information about how quickly contract submission requests are processed and allocated; in a structured system this can be accomplished within 24 hours
Key Markers: Clarity about when the first substantive response is made to the contract submitter as part of legal review; typically within 3-10 days depending on contract complexity
Time to Execution: Understanding of how long it takes from the beginning of negotiations to contract execution
All of these metrics empower legal departments to pinpoint where contracting bottlenecks may occur. The more detailed and comprehensive the management information is, the more effectively legal can drill down on issues by contract type and other variables, which allows contracting velocity to improve.
The Benefits of Management Information
Management information derived from commercial contract review produces important benefits for a company.
First, because management information allows legal departments to continually iterate and improve contracting processes, it can transform perceptions about legal within a company from a department that is an impediment to one that is integral to the speedy execution of contracts.
Second, a focus on management information leads to greater engagement across a business with commercial contract review. Accurate and consistent after-the-fact reporting leads business people to be more thoughtful and strategic about what information goes into the front-end of contract review.
Third, after analyzing the reporting made possible by commercial contract management information, other units within a business often adopt similar data gathering and reporting practices, which allow them to improve their own, non-legal processes. As Peter Drucker wrote in his book The Practice of Management, “What gets measured gets managed.” Better information empowers better decision making across a business.
Fourth, management information helps to improve contracting velocity, which helps a business to improve performance. Earnings, profits, and shareholder value can all be positively impacted when a business can more efficiently move important contracts through a structured system of review.
Finally, in house legal professionals who embrace the power of management information within their organizations distinguish themselves as innovative leaders. It’s easy to get caught up in the day-to-day whirlwind of activity that consumes most corporate legal departments. Despite an immense need for more innovation that is grounded in data and analytics, most in house lawyers don’t have the capacity or technological know-how necessary to push forward new initiatives on their own. By tapping an outside ALSP resource, such as Lumen Legal, an in house lawyer can leverage the power of management information to make an important contribution to their company’s bottom-line.
Creating a structured process that allows a company to access critical management information should be a priority for every business that deals with a meaningful volume of commercial contracts. By being strategic, and integrating the right technology, corporate legal departments and their outside partners can design systems that drive value across the business. It’s important to keep in mind that accessing management information doesn’t always require a complete overhaul of current contract review processes. At Lumen Legal, we often work with clients to design solutions that allow them to access the information they need within existing systems. Even small changes can lead to big results when it comes to optimizing your commercial contract review processes.
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.