Contract Management

In a recent Ken Adam’s posting, he discusses some of the tension that exists in organizations between the business folks and the legal folks and asks some good questions about how the two can work together to better serve the organization itself.

These questions stem from long-standing assumption the neither party really respects the value provided by the other. Business folks assume that the lawyers are simply there to be the “Order Prevention Department” (Ken called it the “Business Prevention Department”) and Legal folks assume that the business people will buy anything shiny (or with a power cord) put in front of them without considering anything other than “do we have enough money to pay for it?”. But the truth is that neither side is actually as bad as the other sometimes believes. The trick is getting people to work together for the common goal of helping the company move forward efficiently.

So, if it’s really that simple, then, how do we make it happen? Well… yes, saying the words is simple. Walking the talk, well, not so much. The problem is that each side has a competing interest with the other. Like any good negotiation between disparate parties, then, the key is to find the common ground and to build off of those shared goals to craft a relationship whereby both sides feel that they are getting what they need, but are allowing the other side to “win”, too.

It’s complicated at times, of course. Even if you have a business unit that recognizes the importance of legal, a particular deal (usually a result of some sort of end-of-year fire sale) that has to get done now will derail even the most stable legal-business relationship. Likewise, for smaller in-house legal teams, larger business distractions such as lawsuits, high-level corporate governance issues and other items seen as more pressing than contracting, sometimes takes away legal’s ability to be responsive to the needs of the business units.

Although I’m obviously biased as a contract negotiator myself, I feel it only proper that such organizations should have an internal contract management group. This is a dedicated team of specialists who understand the contractual terms and conditions (and know how to get support from legal when they need help or see something new or particularly difficult)… but they also understand the shifting and sometimes hurried needs of the business, too.

A contract management team is NOT an administrative group of paper-pushers, though. The team members must be highly-skilled professionals (sometimes even lawyers themselves). They have to receive continued and intensive education on contract review, drafting and negotiation. They must be able to spot potential risks and know how to mitigate those risks without sinking the deal. Additionally, most also need to have a solid grasp on many facets of the business units to which they provide support, so much so that in some medium-to-large organizations, contract professionals are even sub-specialized to these units. The end result is perhaps a contract management department that has an IT contracts person, a facilities contracts person, a services contracts person and sometimes even a dedicated HR contracts person (just to name a few).

This team then works diligently to assist the business units in closing their deals (by the way, this specialization works in sales-organizations, too, with sales contracts people) as efficiently as possible. In companies that really understand the value of how this group can work, they allow the contract management team the ability to function autonomously – managed by the organization, of course, but not controlled by the groups they work to serve. They have priority access to Legal – as the lawyers learn to trust the contracts professionals to come with key, important and already-reviewed issues… allowing the lawyers the ability to only have to provide tactical contract assistance and review, rather than read/negotiate the entire document from top to bottom.

At the end of the day, I’ve never seen an organization that creates a contract management group ever disband it. Centralizing this function offers a high level of benefit to the entire company, and in my personal experience, these groups are usually well-respected in their organizations for providing prompt, sound business and contractual judgment and advice. I would be interested in hearing your experience with these groups (though I suspect that many of you are in these groups).

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