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Highlights From Forrester Webinar: How to Take Your Legal Team From a Cost Center to a Business Partner

May 28, 2021 7 min read

It’s no secret that legal teams can be perceived as the cost center of your business—but they don’t have to be.

To discuss this very tension, we recently hosted a webinar featuring Andrew Bartels, Forrester’s VP, principal analyst, and leading analyst for contract lifecycle management (CLM), and Mary O’Carroll, Ironclad’s Chief Community Officer who previously led Google’s legal operations team and founded the Corporate Legal Operations Consortium (CLOC).

In case you missed it, we’ve rounded up the conversation’s highlights to share with you. To see the full recording, click here.

The problem

A recent survey from EY reported that 50% of business leaders said that contracting inefficiencies have resulted in lost business. Almost all business development leaders reported that they face challenges working with their law departments on issues related to contracting.

For legal teams to go from cost centers to business partners, they need to align with business and revenue growth and solve these contracting inefficiencies. Yet they are being asked to do more with less, as workloads continue to increase and budgets decrease.

Why are legal teams considered cost centers? What challenges do they face when it comes to increasing contracting efficiency and driving revenue growth?

Mary O’Carroll, Chief Community Officer, Ironclad:

“The biggest challenge is also the biggest opportunity. Of course legal is viewed as a cost center, in fact, if that’s the worst of the reputation, that’s a good day. Let’s be honest, legal is often looked at as the place where ideas go to die or where business velocity grinds to a halt. Why? Contracts are probably to blame for most of this reputation.

Today, contracts are rigid and time-consuming, introducing friction and delay into a company’s ability to close deals and to execute on important business operations

We’ve also lost touch with the purpose of contracts. Contracts consume immense energy and time to create, but deliver very little value. They are static, created and then forgotten, only revisited if there is a problem or disagreement later on, the information contained within them remaining untapped.

For legal teams, contracting is a thankless but unavoidable task. Creating and maintaining contracts is an onerous, highly manual administrative challenge that offers no strategic value and erodes their relationship with the business.

It’s the 80% problem as well… the bottom line is everyone has contracts as part of their companies, and all of them will tell you that the process is less-than-ideal.”

Why is contracting specifically so challenging across organizations?

Andrew Bartels, VP and leading CLM analyst, Forrester:

“Contracts play two roles in business:

When everything works as planned, contracts define who does what and at what price.
When things don’t work as planned, contracts define who is responsible or liable.

Friction arises because businesses tend to only see the first role, while legal focuses on the second. There’s a need to balance the two, and that’s what makes it hard.”

The solution

We’re definitely not the only ones who think this is a big problem, which also makes it a big opportunity. The right solution can help legal teams become more efficient so they can focus on more strategic work, rather than just the administrative tasks associated with contracting.

What is CLM exactly?

Andrew Bartels, VP and leading CLM analyst, Forrester:

“Contract lifecycle management software handles the whole lifecycle of a contract, which includes 6 steps:
1. Contract drafting and negotiation
2. Third-party contract importing
3. Contract storing and repository
4. Contract compliance and administration
5. Contract optimization
6. Contract renewal”

Mary, could you tell us more about your experience at Google and the role that CLM played for your team?

Mary O’Carroll, Chief Community Officer, Ironclad:

“I’ve always thought of a large part of the role of Legal Operations to be focused on right sourcing. That means looking across the demand for work in the legal department and matching the right resource at the right value to deliver that work.

In the world of contracting, that can be a law firm, that can be an in-house attorney, that can be a contracts manager, that can be a law company, that can be technology, or that can be end user, in the case of self service.

CLM was transformative for Google Legal, and helped us support Google’s astronomic growth. Revenue in 2002 was doubling every quarter, and implementing CLM was the only way we could have supported this amount of scale. There weren’t a lot of options to buy 20 years ago, so we ended up building a homegrown system that’s lasted all this time.

We started with automating our NDAs. Google does about 2000 NDAs per month, about 90% of which are run through the 100% automated, click to accept NDA tool we built in 2006-2007. Before that, all NDAs had to be processed manually by Legal.

Another good example of where we moved next was leveraging self service agreements (basically what Ironclad’s Workflow Designer addresses). In 2020 Google put about 10k agreements through its self-service systems that successfully bypassed legal review all together.

Google’s CLM processes around 20k agreements per month worldwide. I can’t comment on how many team members work on contracts, but I can tell you that our CLM definitely allowed us to manage that massive scale and business speed

A big focus was always ensuring that our very expensive in-house attorney time was being optimized to focus on the right type of work at the highest possible value. There are a lot of contracts and contracting workflows that do not require an attorney’s time and energy.

If attorneys are doing this work, it slows the process down, but also importantly, it isn’t the type of work that they want to do either, so from a job satisfaction or professional growth standpoint, it’s not great.

The benefits of CLM are manifold. It doesn’t just make things more efficient for the legal department and its clients, it can also help optimize the attorney experience and now frees them up to do the higher value, more strategic work which is what they became lawyers to work on in the first place.”

To address the issue of legal’s role in the contract process, we also need to look at the role of contracts in business processes.

Andrew Bartels, VP and leading CLM analyst, Forrester:

“Contracts are in the middle of business processes. One of the biggest secrets in being successful is mapping out the game plan for the entire contracting process and the stakeholders who are involved, but the reason why CLM is so hard is because contracts are central to everything.”

What is the next generation of CLM?

Mary O’Carroll, Chief Community Officer, Ironclad:

“I think we have to start thinking about contracting differently all together. If we actually want to unlock the value of CLM and contracts, we can now look to this new generation of CLM, what we call digital contracting. Think about the purpose of the contract—Whoever said a contract needed to be a document in the first place? At its core, It’s really a collection of data. Once you digitize those contracts, you’re unlocking that treasure trove of information which allows you to extract and analyze that data within them.

The question we’re grappling with today is how GCs and legal teams can move into more strategic roles. My answer is by empowering themselves with robust data.

For example, a lot of companies use Salesforce to help forecast revenues for the end of a quarter. Interestingly, there is actually nothing in Salesforce that tells you the likelihood of a deal closing. You end up turning to your account executives and asking for their best guess. Instead, we rely on Ironclad and actual data to do more accurate forecasting. We can also tell the amount of time it takes to turn on our own vs. if they’re on third party paper. We can tell from the stage of redline edits how likely a deal is to close and when. Its fascinating. Think about how happy your CFO or Chief Revenue Officer would be if you could provide that kind of visibility.”

What are the six sources of value CLM delivers?

Andrew Bartels, VP and leading CLM analyst, Forrester:

“The ultimate goal of CLM is to rethink your contract process and optimize. Contracts should achieve the business objective, not just keep doing the same thing over and over. This is the sequence of how it gets implemented—there’s value at each step:
All contracts are in an electronic repository: This cuts costs of finding contracts and tracking renewals
Analysis and reports of contracts: Identify duplicates, conflicts, obligations, and rights
Automate content creation: More efficient use of legal staff, faster cycle times, acceleration of revenues or savings
Connect with upstream apps: More efficient use of employee time
Integrate transaction systems to contractual terms and conditions (More complete and effective compliance with contractual benefits and commitments)
Improved contract optimization (Maximizing business value from contracts).”

What are some lessons learned from CLM implementation?

Mary O’Carroll, Chief Community Officer, Ironclad:

Land and expand: There are a lot of stakeholders with different points of view and priorities. Don’t try to do an end-to-end roll out managing every contract type and pleasing all stakeholders at once. Instead, consider the ‘land and expand’ strategy where you focus on one group and roll something out there.

Clean up your own house: Tech isn’t going to solve everything, so do the work to get ready for the tech. This means template harmonization, unify processes, terminology, taxonomy, etc.

Focus on adoption: The most important piece for tech project success is adoption. At Google, we had two very simple, but important guiding principles to ensure maximum adoption
1. It has to be markedly easier and better than the old way
2. If it requires training, it’s dead. You need your new tool to be as intuitive as possible. Here, we call that ‘walk-up usable.’ Adoption is key because the real value of CLM is data. If there’s no adoption, there’s no data.”

How do you go from a cost center to a strategic business partner?

Mary O’Carroll, Chief Community Officer, Ironclad:

“Remove friction by improving the speed of contract execution.

Bring insights to the table that facilitate business decisions and accelerate business velocity.

Unlock the value of contract data with next-gen CLM.”

Andrew Bartels, VP and leading CLM analyst, Forrester:

“Think holistically across the contract lifecycle—plan for all phases of CLM implementations.
Engage comprehensively—Get all stakeholders involved, legal as well as business.

Implement sequentially—Don’t try to do everything at once; Maybe address your sell-side contracts first, then your buy-side.

Partner appropriately—look for CLM vendors whose vision of CLM aligns with your goals, who have experience in your industry, and have built communities of clients willing to share their experiences.

Don’t stop with CLM when the contract is signed—Address the contract management, compliance, and optimization phases.

Value the effectiveness gains (i.e. increased probabilities of desired outcomes, reduced risk of undesired results), not just the efficiency gains (i.e. lower costs from streamlined process).”

 

Get in touch with our team to see how digital contracting can take your team from a cost center to a strategic business partner.

About Ironclad

Ironclad is the #1 contract lifecycle management platform for innovative companies. L’Oréal, Staples, Mastercard, and other leading innovators use Ironclad to collaborate and negotiate on contracts, accelerate contracting while maintaining compliance, and turn contracts into critical carriers of operational business intelligence. It’s the only platform flexible enough to handle every type of contract workflow, whether a sales agreement, an HR agreement or a complex NDA. The company was named one of the 20 Rising Stars on the Forbes 2019 Cloud 100 list, and is backed by leading investors like Accel, Y Combinator, Sequoia, and BOND. For more information, visit www.ironcladapp.com or follow us on LinkedIn and Twitter.

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