4 Strategies to Build an Award-Winning Contract
The Oscars, Grammy and Tony Awards.
Almost every form of art has some kind of trophy that practitioners of that art aspire to achieve. Given the complexity of commercial contracts, any contract manager would make the valid argument that contract management is indeed an art worthy of an award. The IACCM agrees with this idea and in January 2014 it granted the first IACCM Contract Design Award.
The winner of the first IACCM Contract Design Award is Practicus, a UK-headquartered international project and change-management business. Here are the top 4 strategies that Lalit Kumar, Practicus’ Commercial Manager, used to fine-tune the final document submission to create an award-winning contract.
1. Sell the Benefits Internally
“From the start – in spite of difficulties – we gained board sponsorship for the project and our CEO opened our eyes to the wider business,” states Kumar. Basically, you have to walk the talk. You cannot just assume that people will collaborate to change the way that they have run businesses for several years. To truly create a contract management process that sets the stage for the path of least resistance to get the deal done, you need to have the support of the top brass.
You can make your case by using relevant examples from your industry. It doesn’t matter if you are in healthcare, oil and gas, or finance; you need to show how restructuring your contracts or processes can iron out pain points and prevent expensive mistakes.
2. Design Contracts for Your Clients
This a common mistake in the industry. We work so hard at covering ourselves for every possible outcome, that the client has no other option than walking away from such a restrictive “straight jacket”. Kumar indicates that his first submission to the IACCM was rejected because it lacked details on change management.
Kumar explains that he “needed to use contract terms that more clearly define the communications and reporting, change management, early warning signals, change control and relationship development”. The first step in designing a client-friendly contract is providing details on change management. Here is a primer on how to improve SOW change management.
The second step in designing a more user-friendly contract is to take off your lawyer and procurement hats and put yourself in the shoes of your client(s). Kumar suggests to use clear and concise language, such as in this example:
Instead of writing a clause like this:
Nothing in this agreement is intended to, or shall operate to, create a partnership between the Parties, or
to authorize either Party to act as agent for the other, and
neither Party shall have authority to act in the name or on behalf of or otherwise to bind the other in any way (including the making of any representation or warranty, the assumption of any obligation or liability and the exercise of any right or power).
Write the same clause this way:
Neither Party will:
act as an agent for the other, or
act in the name of the other, or
bind the other in any way. This includes making any representation or warranty, assuming any obligation or liability, or exercising any right or power.
3. Provide Specifics
Always include specific details, such as dates, numbers, percentages. By themselves they are not strong, but when paired with clauses they are powerful guidelines for running a business relationship. Kumar and his team realized that they needed to be as specific as possible with items such as these. For example, don’t just say that you will maintain good communication with the client, instead set a specific benchmark to achieve good communication, such as weekly status meeting. The main guiding principle is to provide all parties clear expectations of:
- How processes will be handled
- What deadlines need to be met
- Where deliverables need to be sent
- Who is responsible for action items
- Who is the point of contact
- What the process is for change management
- What the procedure is for mediation
4. Involve All Stakeholders in Contract Creation
“They say that time kills all deals, and certainly time nearly killed the creation of our new contract terms”, warns Kumar. While it’s necessary to have a leader in contract management process, he or she cannot do it alone. The more involved that stakeholders are in drafting contracts, the more buy-in that they will have in their implementation.
Nothing is worse than running into “I didn’t agree to that” or “I was never involved in this” scenarios. By involving internal and external stakeholders as much as possible, you are providing an opportunity for fair play. Your transparency will be noticed by all parties and you will have enough documentation to back-up your agreements.
One efficient way to wrangle stakeholders spread out around the world is to use a contract management system that allows you to:
- Create an unlimited number of custom workflow processes
- Customize workflow steps to track compliance with your unique business rules/requirements
- Create new contracts quickly and accurately using Microsoft Word within the system
- Assign user editing rights at the clause level
- Use template library with drag and drop for the creation of contract templates using approved clauses
- Leverage an easy-to-use email manager
- Configure options for sending and receiving email
- Dynamically check-in/check-out documents from email
These are just some of the key features that you should look when evaluating contract management software.
To create an award-winning contract, you need to sell internally the benefits of newer, better processes, design the contract with the client in mind, provide specifics as much as possible, and involve stakeholders throughout the contract creation lifecycle.