W.W. Grainger, Inc.
Author: Tim Cummins
Today, I'm feeling surprised. And a little disappointed. I thought that progress was happening at a greater pace than it is. The fact it is not is bad news for the commercial community and its ability to innovate.
Self-service contracts and the law department
I spent much of yesterday reviewing the input to an IACCM survey on self-service contracts. This study focused particularly on the frequency of legal review and approval when there is any form of amendment to the approved standard. And the answer is that, on average, a staggering 85% of such agreements are subject to legal review. Of course, that implies that there even is an approved standard. Some 17% of those responding are still working to develop or expand their stock of templates.
We know it's a problem
The one encouraging finding from this research is that a majority recognize their current approach is a problem and needs to change. But in general, the approach to change is remarkably limited and fails to tackle the real issues of increased speed, agility and market-appropriate terms and conditions. Only a very small percentage – perhaps around 5% – have grasped the point that many of the risks they perceive are illusory, that their legal department is innately conservative and that real change depends on new thinking.
For example, rather than fret over when and when not to undertake legal review, why not seek to eliminate or minimize the question?
Templates are a good example of the problem. Yes, they have historically helped to reduce the volume of legal reviews. But by nature templates are rigid, constraining and constantly out of date. The future is about clause libraries that support self-service contract creation and that are dynamic in nature due to constant market feedback.
Training is another example, with some 20% of respondents planning investments in this area. Perhaps it will help, but in most cases it seems that the training is traditional and generic in its form, rather than delivered through on-demand modules that tackle specific topics or issues. And there is very little evidence of training that seeks to reduce or avoid the need for amendments, even though separate research suggests that a high volume of negotiation occurs due to the fact that Procurement and Sales lack sufficient understanding of the offering.
Is there an answer?
Some 12% of organizations stand out for their relative success in reducing legal review. They benefit from faster closure rates and no evidence of increased risk exposure. Their approaches vary and some are without question more sustainable than others.
Those at the top of the heap are deploying technology, but not simply as a way to automate today's processes. They are working to embed contracting competence across the business, developing systems to ensure easy access to market-appropriate terms, user-based contract design, on-demand knowledge and instructions embedded on mobile devices …. These groups undertake regular market and competitive research, having grasped the point that contracting is a major source of value -add and key to ease of doing business. For them, self-service is becoming the norm.
IACCM's report on self-service contracting will be issued to its 55,000 members this week and will be available on the association's web site.