Success Factors in Contract Management

Critical Success Factor #1

Most respondents anticipate that executive sponsorship will be key – and indeed it is. The sponsoring executive must have authority, be willing and able to overcome resistance and demonstrate ‘sticking power’.

It is increasingly common for the General Counsel to sponsor automation projects, but this is by no means universal. When General Counsel’s are involved, the ambitions for the project may be quite limited – for example, a searchable repository may meet narrow legal priorities. The benefit of such limited scope is that costs are low and contention limited; the disadvantage is that there has been no wider discussion or acceptance and the selected solution may not be suitable for wider business needs.

Any contract management software implementation is likely to require broad organizational consensus, because it impacts many stakeholders. It is because of this complexity that the project has the potential to yield so many benefits.

Analysis of projects suggests that:
a) a powerful and high-level executive must act as sponsor;

b) the team and the wider organization must understand and accept that automation will require significant process definition / reengineering in order to succeed (and offer substantial benefits);

c) successful projects are frequently overseen by an executive steering committee, drawn from the major groups impacted by the new tools and process.
The steering committee will often be more symbolic than requiring active executive engagement, but it is essential to overcome resistance and to ensure adequate resources are applied. It also offers continuity in the event that the executive sponsor moves.

Critical Success Factor #2Gaining and maintaining support from other functions and groups within the company turns out to be a far more significant issue than many anticipate and is the most common cause for projects to fail. The challenge in building consensus takes several forms:
- Some oppose automation; they see it as threatening (to their jobs, authority, flexibility) or challenge its benefits. They may also be unwilling to allocate the resources needed to support implementation.

- Some question the solution. Earlier in this report, we highlighted the array of options and specific groups may feel that their specific interests are better served by alternative solutions.

- Some disagree over the functionality. One of the biggest dangers is that the project team lose control over scope. Other functions or groups welcome the initiative –and then seek to expand functionality to unrealistic or unaffordable levels.

All these challenges can be overcome – the right executive sponsorship / steering committee is of course one key element. But the project team should take a number of steps to build support.

a) Work with your sponsor to agree initial scope; discuss this with the steering committee and incorporate their suggestions. Welcome further inputs (make the process inclusive), but be clear that most of these will be noted for future release.

b) Anticipate the drivers and concerns of different functions and groups and position the project accordingly. For example, while the CFO and General Counsel will welcome increased controls and greater visibility of risk, business unit managers or sales groups will interpret these ‘benefits’ as introducing increased bureaucracy and reduced ability to respond to market needs. Therefore focus on other benefits, such as reduced cycle times and easier access to delegated standards.

c) Obtain external benchmarks or data that can support your direction. Objective data is the best way to overcome the subjective opinions of the many stakeholders who will take an interest in this project.

Critical Success Factor #3
Credible return on investment (ROI) statistics have proven to be less significant than many expect. In fact, they are frequently a diversion – demanded by executives or groups who want to delay or avoid a decision.

The challenge with calculating ROI is that baseline data typically does not exist. Given the typical lack of established process, there is rarely good information on existing costs or missed profit opportunities. If the project has resulted from documented exposures – missed deadlines, lost agreements, incorrect billing or discounts – the justification may be simple and relatively narrow. But if it is driven more by a general wish for improvement, it may be harder to establish tangible benefits (many of which are more generally attributable to process reengineering).

It is important to realize that in most organizations, precise data simply cannot be obtained. Therefore – as with many software investments – it is more meaningful to set targets for improvement and to base benefits on estimates of current state. Areas to consider when looking at ROI include:
• Time Savings
• Spend savings
• Revenue/profit increase
• Sales cycle decrease, improved win rates
• Cost/cost overruns avoidance
• Reduction in missed commitments, disputes and claims
• Renewal rates

When looking at opportunities, consider areas like sales force or business unit productivity (how much time is absorbed finding the right documents, establishing approvals etc?) and customer or supplier satisfaction (what are things that ‘make you hard to do business with?). If users of the service experience difficulties, the chances are that these represent areas of inefficiency – so you can save money and raise their satisfaction levels at the same time.

Critical Success Factor #4

Project management is recognized as important – and this is confirmed by those who have led successful projects. Organizations must allocate not only adequate resources, but also appropriately skilled resources.
The core team does not need to be large. While the project will need extensive support from around the organization, its success depends on the ability of the project manager to gain resource commitments and to manage the team and its goals. The core team must have subject expertise, but its leader may not be from a contract management background. Functional knowledge matters less than leadership, communication and the ability to sustain executive support.

Other Factors

Our research suggested that the four factors identified above are the key elements behind project success and other factors only derail projects that lack one or more of them. For example, lack of support from the IS function, pressure to ‘build our own’, or push-back on vendor viability are all readily overcome if there is strong executive support and good project communication. Therefore, while these are cited as significant factors by a substantial number of respondents, they were never in themselves causes of project failure.