One of the best aspects of my job is catching up with my legal connections over 1:1 virtual coffees or happy hours. Many of my connections who have made the move in-house or are general counsel are all managing similar challenges, including the pain of finding the right contract management system for their unique business needs.
We commiserate. With a beverage of choice. At all times of the day. With kids and pets in the background. No one judges.
What happens in zoom, stays in zoom!
Of course, I also use this time to learn about their unique contract pain and I noticed that regardless of the type of company they work for, I hear a pattern of similar CMS-related complaints. This inspired me to put together a checklist of questions legal teams should ask when determining contract management system requirements for their organization.
But first, what’s a contract management system?
Before diving into details, let’s get clear on what a contract management system is. A contract management system (or CMS) is a digital solution that helps legal teams collaborate with other business departments and external stakeholders to draft, negotiate, finalize, and renew legal agreements.
It eliminates the need for disparate google folders or dropbox locations, and brings all your contracts into one repository. A good system will not only help in the storage of contracts, but with reviewing, editing, task management, etc. When your CMS does all of this—and more—it might also be called a contract lifecycle management solution, or CLM for short.
Do I really need a contract management system?
Contract management systems aren’t just for your legal team. Entire organizations can operate more effectively thanks to the organization and automation that a CMS offers. Moving the contracting process into the digital age creates more streamlined workflows and increases efficiency by allowing teams to access, edit, and collaborate on the same documents all in one place.
Legal, sales, HR, finance, and marketing teams with access to a well-organized and easy-to-use CMS will streamline the contract lifecycle from end to end. Simply put, you’re closing deals faster!
What to look for in a contract management system
Because your CMS has to serve a wide range of departments while ultimately meeting legal standards, deciding on the right solution is crucial. Start your search with these five questions to see which platforms meet your contract management system requirements.
1. How does your service organize and onboard existing contracts?
Before your company hired you or any in-house counsel before you, they signed a lot of contracts—probably thousands of them. Bought a company? Yeah, they have a lot of contracts, too. And now those contracts are stored in different places—in Salesforce, in a file drive, on a laptop, and probably even more places that not everyone can access (or knows about).
You can be a hero and bring order to that chaos.
One of the main reasons to invest in a contract management solution is to have a “single source of truth.” A lot of CLMs claim to be a “single source of truth,” but that’s not true until all of your company’s existing contracts are loaded and organized in the system. In my experience, organizing and extracting the metadata of thousands of existing documents was the biggest hurdle to actual use, adoption, and realizing value.
My team was often buried doing day-to-day tasks (often low-value work, sadly) and had no time to manually input data. I’ve hired legal interns to get a system organized initially, but that didn't solve the ongoing data hygiene problem.
This meant my team never used the capabilities of the system we bought. Instead, we continued to look for and report on contracts the old-fashioned way: searching email inboxes and file drives and creating manual reports with spreadsheets.
In short, it wasn’t a good use of money or resources because we received no value from the system.
2. All in, how much will it cost to buy your CMS?
It’s tough for legal teams to get buy-in to increase their budget or have funds to buy software. I’ve had these discussions and have heard, “Show me the data to justify your ask.” I’d reply, “Sure; give me the time, tools, and resources to get you that data.” It was a super awkward chicken-or-the-egg conversation (luckily, I secretly enjoy awkward conversations) because day-to-day tasks and fire drills couldn’t be put on the back burner to collect this operational data.
Cost is an important question to answer early on because if the system is completely out of your budget, it doesn’t make sense to move forward with discussions, no matter how amazing the tech and beautiful the user interface.
Plus, cost isn’t just limited to the initial purchase; you have to account for onboarding, annual subscriptions, and necessary add-ons as well. I’ve received price quotes that were astronomical for a contract solution where I would still need significant additional funds over the original quote to hire a contractor to manually type in the contract details of each existing contract. And this was required for any of the system’s valuable features to work.
3. How long will it take to completely implement your CMS?
In addition to the implementation question, I’ll ask an important bonus question: “Does your system require that I train users outside of the legal department to use it?”
Some contract management systems dazzle you with workflows and collaboration features that work well if there’s adoption by other departments or outside parties. That’s a big “if.” Best of luck with that.
In my experience, lawyers like drafting and redlining in Microsoft Word (include me in that bucket; I love my Microsoft Office products) and non-legal users want to stick with their department’s go-to CRM tool (often, this is Salesforce) and Slack/email.
Getting buy-in to spend on legal tech is hard enough. It’s arguably more challenging to get business buy-in to change processes that affect other departments and add a new system that requires adoption by the non-legal team. I am often asked, “Can we do this from Salesforce?” (Hint: With Lexion, you can).
Even if you get business buy-in, getting others to learn and actually adopt a new system is a major block and requires a lot of work many legal teams don’t have the capacity to do, especially remotely. This is why I love features like our chatbot for Slack—we go to where your internal clients are.
4. Have you experienced a security breach in the past three years?
When it comes down to it, data security is about trust. Once there’s a security breach, there’s a breach of trust with your customers, employees, vendors, and partners that’s incredibly hard to regain (if you ever regain it at all).
If you care about retaining the trust of your key business relationships, make sure the CMS provider earns your trust by doing more than just checking a security box and checking that they haven’t had a serious data breach.
5. What features does your service include to speed up manual tasks?
The value of most CMSs or CLMs is that they reduce the time it takes to perform manual tasks, such as creating custom spreadsheets to track and report on specific contract terms. This is an area where AI technology can actually help.
Although artificial intelligence is the cool tech buzzword of the moment, and a lot of overhyped promises have been made about its capabilities (I’m still waiting for a true self-driving car I can trust), the reality is that AI is a valuable tool to assist legal experts, not replace them.
In the contract management space, AI’s job is to help save time wasted on manual data entry or scrolling through pages to find a specific clause.
AI can save up to 80% of the time it takes to properly extract and report on key issues like non-standard terms.
Several contract management vendors now claim to have AI technology, but many continue to use it simply as marketing hype. Regardless of their claims, make sure their AI is suited to your task, works as advertised, and ultimately helps you create the reporting that will help you drive the business (or like Lexion’s AI Contract Assist, helps generate clause language for you).
Why a contract management system is important for your business
The most important question to ask yourself is, “What is the core problem I’m trying to solve with a CMS?” If there’s a system out there with many bells and whistles, it’s normally extremely expensive and a heavy lift to implement (6+ months of implementation, and then the cost/time of change management to train users to adopt a new system and processes). Warning: A lot of your internal business clients have tech fatigue, and you’ll likely face resistance.
I’m grateful to all of my legal connections who provide their valuable time to have a virtual chat with me. These conversations with in-house attorneys, contract managers, and paralegals of various company sizes and industries have taught me that there isn’t a single solution that will solve all of your contract problems. The key is finding the right solution that meets your organization’s needs and budget.
Find me on LinkedIn or schedule a demo with our team to see if Lexion is the right contract solution for you.