What is contract lifecycle management and why is it important?
Part 1: the research phase
“Mastering Contract Lifecycle Management” is a 15 part, bi-weekly series dedicated to expanding your mastery of Contract Lifecycle Management (CLM). The series is divided into 5 parts and encompasses the entire lifecycle of purchasing a CLM solution, including: the research phase, launching your CLM project, implementing the key building blocks, strategies for driving user adoption, and continuing down the road to success. Enjoy!
This past weekend I got a text from my son who is in the midst of his first year of college. He had run out of money on his electronic laundry card and needed me to go online and load it up with more funds…whatever happened to those dingy basement washers that always ate your quarters? His clothes were in the washer and needed to get transferred into the dryer. If he didn’t get them in there right away, his shorts would not be ready in time for his soccer practice in an hour. Of course being the always-responsive father, I did the needful. Tragedy averted.
I started to think…why did my son assume that I fund his laundry as well as his tuition and room and board? Did we agree to this? Why did he also assume that when he texted me, I would act within minutes to fulfill his request? Was I responsible for the ensuing consequences? What would happen if I refused to comply?
As I pondered this, my wife came up to me and asked if I had ordered Domino’s Pizza at midnight last night? I paused to re-create my evening…I had a rare outing with the fellas…and then said “of course not – I was asleep by 10:30 and if I actually ordered pizza late at night, it certainly wouldn’t be Dominos!” “Why do you ask," I said? Being the family Chief Operating Officer she said, “Well, there was a charge on the credit card and I wanted to make sure there was no fraud.”
I jumped on-line and drilled into the charge – no information. I then called the credit card company and discovered that the charge was from the same town where my son’s college is located. Mystery solved.
Contracts between fathers and sons
A parent-child relationship is a contract. Yes, one party had no choice in entering into the agreement, but once the relationship was established, so too was a de facto contract. The table stakes in the contract template include one party ensuring the health, welfare and safety of the other. There are some other implied provisions – hopefully cross-obligating both parties…respect, kindness, fealty and love. Sometimes these provisions are violated, but they are never removed.
There are also optional provisions with varied scope. The level of financial support provided by one party to the other, and the lifespan of the obligations in this provision, are only sometimes in the contract and occupy a broad range of intensity and expectations. I can say with a high degree of confidence that late Saturday night pizza binges are not part of the contract and the granting of car keys when requested is not subject to a blanket approval.
There was nothing ever codified in writing that outlined my son’s obligations to me and mine to him. However, there is an agreement, there are guardrails to the obligations contained and there are natural consequences to violations of these obligations. The process of getting into this contract was peppered with iterative negotiations – some of which were subject to confidentiality provisions - and there was certainly an approval workflow. In our family the approval hierarchy for any codified or verbal agreement goes something like this – a brainstorm is a series of random aspirations, an idea is a proposal and a plan is anything approved by mama.
A contract, defined
How does all this relate to contract lifecycle management? Well, in my metaphorical brain, it is a very close parallel.
A contract is an agreement between two or more parties where one or both parties have obligations to the other(s). Simply stated, a contract memorializes these agreements and obligations.
Every contract has a lifecycle. It is created, it is negotiated, it is approved by involved and affected parties, and it is formally executed to ensure there is somebody responsible for ensuring the performance of the obligations in the agreement. Every contract also has an effective time-frame – some are perpetual, some are time bound and some are just event driven.
There are consequences for non-performance and there are rewards for meeting or exceeding milestones. Contracts can expire at the end of their term, but some obligations associated with the contract may continue beyond the expiration date – sometimes resulting in ugly, adversarial events, such as litigation.
What is contract lifecycle management?
The “process of managing this process” is called contract lifecycle management, and is often made more efficient and effective by invoking technology. In my example above, the technology was a smartphone and the notification trigger for acting on my parental obligation was sent to me via text.
Contract lifecycle management is a very important initiative in organizations today. Since contracting is a foundational element of how business is conducted, ensuring that a company understands all the obligations they have to counter parties—and counter parties to them—is tantamount to fulfilling ones fiduciary responsibility as a company steward. Knowing whether these obligations are active or expired is also critical.
It is also important for the process of contracting to be efficient. Every contracting event is not bespoke (me being asked for the car keys is not an isolated event). There should be a negotiation playbook and a clause library with alternate provisions in the case of differences in opinion (the destination, the passengers, and the proposed time of return all impact which risk-adjusted clause I invoke).
Finally, when the contract has expired, it needs to be formally sunset. There should be a record of the closure of the contract and the fulfillment of all obligations – or in some cases, there should be formal documentation of the elements of the contract that are existing in perpetuity.
I can say with confidence that parts of my parenting obligation have been completely fulfilled. I no longer need to walk my son to school – though I do sometimes pine for those days. I don’t need to fund his social life (though I still have not gotten paid back for the pizza). However, there are other contracting obligations that will live in perpetuity. My obligations to respect, love and remain eminently available are codified in the parent-child contracting template. I’m pretty sure that these provisions are not editable by this user.