As advancements in technology continue to transform the way we work, many legal teams have come to the conclusion that they need some sort of contract management software to organize the abundance of contracts they have. There’s a lot of information out there about Contract Lifecycle Management (CLM) software. In this blog, we’ll go over what CLM is, how it can be applied in practice, and the multitude of ways it can benefit legal teams and their partners and collaborators across an organization.
What is CLM?
Contract Lifecycle Management (CLM) solutions deal with the contract lifecycle (as you’d expect), which means they help with one more steps along this flow:
- Creating a contract
- Drafting a proposed contract
- Editing a contract (sometimes called redlining)
- Finalizing a contract
- Executing a contract
- Signature
- Counter-signature
- Managing a contract
- Storing an executed agreement
- Extracting data from a contract to parse out obligations, opportunities, and risks
- Pushing extracted contract data into another system
The ultimate aim of CLM is to empower legal teams to work more efficiently and effectively. Prior to the availability of modern CLM solutions, many of the tasks involved in managing contracts -- drafting, finalizing, analyzing, monitoring -- were accomplished via tedious, manual procedures that consume a significant amount of a legal team’s time and resources.
One of the primary benefits of leading CLM platforms is automation. By leveraging artificial intelligence (AI), software can now read and understand contracts, which means tasks that previously required manual contract review can now be automated.
Automation also allows legal teams to communicate and collaborate more effectively, with the completion of one task automatically triggering the initiation of another. The typical flurry of emails (or, worse, faxes and paper envelopes) sending contract drafts and approvals back and forth can be all but eliminated with a good CLM suite.
CLM platforms greatly improve legal teams’ capacity for organization. Rather than operating in functional silos, with documentation and access scattered throughout the team, CLM software provides a centralized repository for all contracts stored, accessed, and shared throughout the organization. This is particularly helpful in light of new and increasingly widespread remote and hybrid work arrangements.
Why In-house Legal Teams Need CLM
Legal issues are arising and evolving faster than ever. Software has made it possible to modify regulations and establish new case law more quickly than ever -- and legal teams need to respond just as quickly. Legal professionals who maintain outdated practices run the risk of being overcome by their digitized competitors. CLM solutions not only allow legal teams to operate faster and more efficiently, but by automating the repetitive legal grunt work, CLM software frees up time for lawyers to act strategically and proactively.
If legal teams are going to thrive and survive in the modern era, they need the extra “bandwidth” that CLM software provides.
What Problems Does CLM Software Solve?
Lots of different CLM suites offer a variety of different features and benefits, but a good CLM solution will solve most or all of these issues.
Centralize and organize your contracts
The foundation of most CLM solutions is a contract repository, which is a central online storage system for all your contracts. A contract repository connects to every local device and cloud storage system you use, draws in all the contracts you’ve got spread out between these systems, then helps you organize them into a cohesive portfolio. Having a single place to manage your contracts makes contracts easier to find and keep secure. This is especially important when different departments each draft and execute their own agreements -- and don’t always put those executed contracts in a single, secure location.
Draft contracts faster and more easily
Most CLM systems have a workflow management function that helps you track contracts from early drafts to redlines to final agreements. This ensures everyone knows where every contract is on your deal pipeline, and helps clear up bottlenecks by identifying who is responsible for what task in each stage.
Standardize your legal language
Advanced CLM workflow tools go a step further and help you “assemble” contracts from boilerplate language and legal templates, so you can develop contracts in less time, and which require less legal review. It also keeps your legal language standardized, so “one-off” versions of your standard policies and best practices don’t make it into binding agreements.
Extract critical data from contracts
Some of the hardest questions to answer for many organizations is, “how many of my contracts renew next quarter?” or “how many employee agreements comply with the new regulations passed last month?” Many legal teams try to track these kinds of data points (often in MS Excel) when contracts are executed, but short of actually reading every contract, few can answer novel contract questions when they come up. Modern CLM software can extract this data from all of your legal agreements in real time, so you can get completely accurate answers any time you need them.
Choosing the Right CLM Platform
While CLM solutions have been increasing in popularity in recent years, many businesses and legal teams are just beginning their journey into contract management software. For these organizations, choosing the right platform for their needs can be overwhelming. Here are three steps you can take to simplify the process.
1. Map out your needs
While many legal teams will require similar solutions, the best CLM platform for your organization will only be identified as the result of adequate planning. The key is to know your legal processes from front to back, and the best way to do this is to write down a list of every stop your contract makes from conception to execution. Once you've accurately visualized the process, you can begin to identify where improvements can be made. Where are your pain points? Which steps in your pipeline are dragging on longer than they should be? Where do errors most frequently occur? Answering all of these questions for yourself will bring the problem into focus, and from there you’ll be in a much better position to acquire a solution.
2. Narrow your focus
Now that you have everything mapped out, you can begin to prioritize specific solutions. No legal practice is perfect, and your team will probably have more than a couple of pain points that stand to benefit from a CLM solution. Instead of trying to fix everything all at once, focus on one or two areas that need the most attention. By identifying these one or two problem areas, you can approach vendors with a concentrated outcome in mind, and have an easier time deciding who can help.
3. Ask questions
When you’re finally prepared to approach vendors and explore different solutions, it's critical to ask the right questions. For example, how long will it take to integrate the platform, and what sort of training will your team need in order to navigate the interface? How secure is the network, and how will data be hosted, shared, and accessed throughout your organization and between trusted partners? What renovations is the platform currently going through, and what changes should you expect to its functionality down the line? More than anything, you want to understand the vendor's services as clearly as possible, how it can be applied specifically to your processes, and what kind of support you can expect should any problems arise.
Conclusion
In this post, we have provided a basic overview of CLM, its various advantages, and how best to go about shopping for contract management solutions. For more in-depth information on how to evaluate CLM solutions, check out this eBook. And if you’re ready to ensure that every contract you create, sign, or implement is managed as well as possible, then contact LinkSquares today.