Like it or not, the business world has become complex and contractual. Managing contracts is now far more than a mere bureaucratic formality. Today the contract is a growth lever, a means of reducing risk and of optimising resources for companies of every size.
After that opening paragraph, you have certainly already guessed our view on contract management! This article takes you behind the scenes of an essential discipline and shows you how it can transform your business, strengthen its agility and open the way to fruitful partnerships.
1. The strategic stakes of contract management in business
a. Contract management: definition and functions
In this article we will not go back over the definition of contract management in detail; we will simply recall in a few words that it is a recent discipline aimed at optimising every stage of the contract lifecycle in order to extract the maximum value from it.
The functions and main roles assigned to contract management can vary considerably depending on the size and sector of the company. By way of illustration, the same job title covers
- In industry, contract managers responsible for managing and executing complex projects (energy, rail, construction, defence, and so on), who will in particular handle the technical and financial performance of the contract;
- In the IT sector, contract managers more focused on the challenges of managing outsourcing providers, software vendors and integrators, and dealing above all with matters such as SLAs, KPIs, information system availability, or negotiations and tenders.
So while the essential qualities of a contract manager remain broadly the same, the field in which they operate substantially changes their duties and scope of intervention.
b. Contract management in the service of profitability
Contract management is not limited to the administrative handling of contracts. The function actively contributes to the company’s long-term health. First, upstream, during the pre-sales phases, through drafting and negotiation work that supports the sales teams, helping to win orders and secure revenue on optimal terms.
Then, during contract execution, the contract manager makes sure the terms of the contract are respected, that additional works and other departures from the contract are covered by contract amendments, and more generally that costs are kept under control. They ensure that the parties involved honour their obligations, which reduces potential financial losses.
Risk management is another crucial dimension of the contract manager’s work. By identifying and assessing contractual risks, they enable the company to take informed decisions that minimise possible disruption and financial loss. The contract manager also plays an essential part in resolving pre-litigation matters, anticipating potential conflicts and working to find solutions before they turn into costly disputes.
Ultimately, the contract manager is a key player for the company, contributing both to capital-level operations and to those that affect working capital. By ensuring contracts are compliant and minimising risk, they support revenue generation by creating an environment favourable to business. At the same time, by protecting margins, avoiding unnecessary costs and handling pre-litigation matters effectively, they also contribute to project profitability and to protecting working capital. The contract manager is therefore far more than someone who simply administers contracts; they are a strategic asset for the company, with a positive influence on its operational and financial success.
2. The central place of contract management
a. The distinctive positioning of the contract manager role
The contract manager’s role occupies a central place in how companies manage their contracts. Its reporting line, however, can vary considerably: sometimes to the legal department, sometimes to the project department, sometimes to others (procurement, IT, and so on), depending on the company’s specific needs.
This variable positioning is a sign of how young the discipline is. Contract management is a relatively recent field, in constant evolution, and the boundaries of the role continue to take shape over time. It is a role that steers the contractual cycle throughout the life of the contract, calling not only for command of contractual risk, but also for many other skills and areas of expertise, at the crossroads of numerous other disciplines.
b. Contract management, the link between the contract’s players
According to a study carried out by World Commerce & Contracts (which we recently relayed in a LinkedIn post), close to a third (29% to be exact) of a company’s employees are, directly or indirectly, involved in the lifecycle of a contract.
The study highlights the cross-functional role of contract management, which acts as an essential link between the various functions within the company. The interfaces with project management, procurement, legal, finance, sales and other operational functions are all areas where the contract manager acts as a driving force to ensure contracts are consistent and effective.
Working with project management teams, they make sure contracts are aligned with the objectives of those projects, thereby guaranteeing smooth execution. In the procurement department, they help optimise commercial and supplier agreements, and tender processes. Legal relies on the contract manager for operational aspects such as claim management, or for support in drafting technical documents. Finance benefits from their expertise in relaying cash, margin and legal and financial risk matters within contracts. Finally, the contract manager is also an essential partner for the sales teams, in the pre-sales phases as well as in negotiation. In short, the CM acts as a pillar of cross-functional collaboration, reinforcing the effectiveness of contracts and their role as an essential support for the company’s success.
c. The operational impact of the contract manager on the contract lifecycle
As we have seen so far, contract management is not yet another bureaucratic function. It is a hands-on discipline whose essence lies in understanding contracts well beyond their drafting. A contract manager’s added value does not lie in their ability to draft and stack up clauses, but rather in their expertise in grasping the scope of those clauses and knowing how to handle them so as to make them applicable, concrete and value-creating. The distinction matters: where legal is generally a support function, contract management asserts itself as an operational one.
The contract manager acts as a key player within the company, ensuring that contracts not only comply with the law but are also in harmony with the company’s strategic objectives. By protecting margins, minimising risk and handling pre-litigation matters, they play a proactive part in the operational success of projects. By acting proactively, they become a catalyst for revenue generation and for the profitability of operations. The contract manager therefore embodies the idea that managing contracts is not a set of administrative rules, but a major operational lever with a positive impact on the company’s performance at every level.
3. How to structure contract management in a company
a. Put contract management processes in place
The first essential step in structuring a contract management approach within the company is to establish clear processes that everyone understands. These processes are the starting point for properly managing the contract lifecycle, from creation to execution, by way of negotiation and monitoring.
Of course, the form and complexity of contract management processes will vary with the company’s level of maturity. In companies that are less mature in contract management, the processes can be relatively simple. They usually involve a limited number of people, often concentrated in the legal or procurement department. Tasks tend to be reactive and focus on drafting and signing contracts, with minimal monitoring during execution.
As the company matures in its handling of contracts, the processes become more complex. Contract management becomes a more cross-functional role, involving a greater number of departments, such as project management, finance, sales and risk management. The processes become more proactive, with greater attention paid to managing risk, protecting margins and optimising the value of contracts.
Whatever form contract management processes take, they must be clearly documented, communicated to all stakeholders and aligned with the company’s strategic objectives. A solid process structure ensures more effective management of contracts and better risk management, while maximising the value contracts can bring to the company.
b. Introducing a contract management tool
The second essential step in structuring contract management practice within the company is to introduce a dedicated tool. Such a tool makes it easier to manage, monitor and analyse contracts throughout their lifecycle. There are two main categories of tool: CLM (contract lifecycle management) systems such as Hyperlex, Leeway and Gino, and collaboration and project management tools that can be adapted to the needs of smaller or less mature companies.
CLM, or contract lifecycle management solutions, offer advanced features for effectively managing every aspect of contracts, from creation to execution, including monitoring and compliance. They allow greater automation of processes, the generation of detailed reports and centralised management of all the company’s contracts. For large companies, or those needing very fine-grained management of their contracts, a CLM is often a sound choice.
For smaller or less mature companies, collaboration and project management tools can also do the job. They allow basic contract management, offering a space in which to store and share contractual documents, together with tracking and reminder features. Although less sophisticated than a CLM, these tools can be a first step in structuring contract management for companies that do not need a complex solution.
Introducing a contract management tool, whether a CLM or a collaboration and project management tool, is essential to guarantee visibility, control and efficiency in the management of contracts. The choice of tool will depend on the company’s specific needs, its size, its level of maturity and its contract management objectives.
c. Calling on a contract management consultant
Finally, the last best practice for germinating a contract management approach and strategy is to call on a contract management consultant. Consultants can indeed bring valuable operational expertise that supports the company at various levels.
First, contract management consultants have detailed knowledge of best practice and of the methodologies used in the field. They can guide the company in putting effective processes in place, taking account of the organisation’s specific features. Their experience helps avoid the common pitfalls and ensures a swift, smooth roll-out.
Contract management consultants can also bring their expertise to the selection and implementation of contract management tools, recommending solutions suited to the company’s needs. They are able to assist in integrating those tools within the organisation, guaranteeing a smooth transition.
Finally, one of the major advantages of calling on a contract management consultant lies in their ability to provide contract management support on complex projects, at any stage of their lifecycle. Whether for contract negotiation, risk management, the management of financial risk or the resolution of pre-litigation matters, their operational expertise can make the difference to the success of projects that are critical for the company.
In short, engaging a contract management consultant is an opportunity to benefit from sharp expertise in structuring and optimising the management of contracts within the company. Their contribution can range from putting processes and tools in place to providing assistance on complex projects, which makes them a valuable asset for organisations seeking to strengthen their contract management.
Conclusion
Contract management, as a discipline central to how companies handle their contracts, plays an increasingly essential role. Its place, its boundaries and its operational impact are constantly evolving, adapting to the changing needs of organisations. To structure contract management effectively within a company, you need to put defined processes in place, choose the right tools for your needs, and consider the expertise of a contract management consultant where necessary. The aim of this approach is to guarantee compliance, minimise risk and maximise the value of contracts, thereby contributing to the company’s operational and financial success. Contract management is not just a simple set of administrative rules; it is a strategic asset serving the company’s performance and success.