How to Improve Contract Negotiation Using Data
When it comes to contract management, traditional approaches are outdated. They are slow, cumbersome, and typically inaccurate. Instead, you can improve contract negotiation with data. New technologies that focus on data can make the contract process faster, less risky, and much more intelligent.
Contract management processes should be easy to use and allow for a significant return on investment (ROI). At Ironclad, we take great pride in providing a product that can improve the entire contract lifecycle in one convenient place. By improving the contract negotiation stage, you can save time, effort, and money. Here are the types of metrics you can use to measure the effectiveness of and improve contract negotiation.
What is contract negotiation?
Contract negotiation is the process of agreeing to legally binding terms. When negotiating a contract, you need to know the exact terms and how they will affect you so that you can make informed decisions to minimize risk. These terms need to be written in a clear and concise way, and you need to be able to make modifications during this stage to enhance the negotiation process.
Your company may push for certain terms while the other company seeks its own. Negotiating and modifying these terms can be simplified by keeping those negotiations all in one place. With the use of automated software, negotiations can occur in real time. Edits and suggestions can be made to the same document without lengthy delays or redlining. With enhanced data reporting, the entire negotiation process can be improved through the use of data metrics to appease both parties.
Metric 1: Number of redlines
The number of “redlines” it takes to get to the end of the contract negotiation process will greatly impact the overall length of time it takes. Redlines refer to the additions, deletions, and other modifications that occur to the contract. With traditional negotiation techniques, this process can be frustrating and time-consuming.
Missed emails and back-and-forth calls can significantly delay the process of getting to an agreement. This additional time equals lost earnings and productivity. A lack of focus may also lead to mistakes in the contract itself—potentially leading to legal liability.
By utilizing data built into the Ironclad system, you can make informed decisions about how to improve your contract negotiation process. Understanding the number of redlines it takes to get a contract to the end stage can help your business make better choices that increase operational speed. Process metrics reporting puts you in the driver’s seat. Knowing these particular numbers can help you:
- Better understand the challenges of working with particular businesses during the negotiation stage
- Know the average number of redlines it takes to achieve a final contract
- Understand where delays occur in making modifications
- Enhance turnaround time and communication strategies
- Set goals to improve contract discussions with other companies.
With these types of goals in mind, your business can analyze the data created by the contract lifecycle management system. Digital contracting should help you with your legal operations, whether you work in the legal department, human resources, or other areas of your company that deal with making contracts. Using data to improve the contract negotiation process is an essential part of effective and efficient negotiation.
Metric 2: Time spent in contract negotiation stage
The more time that is spent negotiating a contract, the less time that contract is benefitting your company. Negotiations are a costly process when they are inefficient. Focusing on how much time is spent negotiating contracts can help you refine your system and make financial gains. Three challenges have often lengthened the negotiation stage in the past:
- Centralization: Legal teams used to deal with contract negotiations and storage that is all over the place—from local hard drives to separate servers to even old-school filing cabinets. Not only could your team not access things in one place, but there was also no way to negotiate in one shared space. By centralizing the contract lifecycle management process, parties can negotiate in a shared space. This saves an incredible amount of time and provides convenience to everyone on the negotiation team.
- Adaptability and Ease of Use: The technologies in Ironclad provide a high degree of control—something that’s essential for in-house legal teams. New contract negotiation tools allow users to comment on online documents and loop in necessary colleagues. It provides access to negotiation between companies when desired. It even provides metrics so that you better understand how to improve these processes in the future.
- Security and Universal Compatibility: Both parties should be able to use the software to efficiently negotiate a contract. A well-crafted contract management software is compatible with many company’s systems to provide better ease of use, redlining, and commenting. This can all be accomplished securely to protect your company’s information.
Utilizing data can help you overcome these unnecessary challenges, which can significantly lengthen the contract negotiation process.
When improving contract negotiation efficiency, it’s helpful to understand where improvements can occur on a global scale. Improvements to the process as a whole can be highly beneficial, but every company you work with is different. Data can be automatically compiled on specific relationships. If you work with a company on a regular basis, data provided by the software can help you make improvements with party-specific information. How you negotiate with one company may be very different than another. Utilizing data specially tailored to this relationship can greatly improve efficiency in future contracting.
You can track contract negotiation across your business. You can tell where each contract stands, the length of time it takes to finish, and understand if delays are caused by your team or theirs. The data provided by the Ironclad contract management software will help make these types of analyses. Seamless integration with a contract lifecycle management platform can help you better handle the challenges associated with each party’s negotiation timeline.
Metric 3: Commonly redlined clauses in contracts
Contracts are full of critical information on how you handle your business and relationships with other companies. Many clauses are specifically tailored to the individual situation. Others may include form language that your company uses in most or all of its contracts. All of it—whether it’s unique clauses or form language—is subject to editing by your contracting partners. If a certain clause is consistently subject to redlining and changes, understanding these changes may help you improve this language for the future.
A successful contract management software can help identify commonly redlined clauses in your contracts. With this information in hand, you can make necessary changes or predict challenges that may arise. Data-driven processes are more efficient. With the Ironclad software, data is streamlined in an easy format to provide you with valuable insights.
Contract clauses are commonly redlined for several reasons, which may include, but are not limited to:
- Inaccurate language
- Legal language not applicable under contracting partner’s state law
- Grammatical mistakes or unclear word choices
- Terms are considered too “one-sided”
- A particular company prefers their own form language.
Contract management software automatically identifies challenging clauses to provide you with the data you require to make improvements. This data demonstrates clauses that are consistently redlined by many different contract partners, or with a specific company. This individualized data puts the power in your hands to predict potential delays in the negotiation process. With in-app contract redlining, you can create and negotiate language that works best for you.
Template clauses to reduce negotiation time
Once challenges have been identified, new form language may be drafted to improve negotiation efficiency. Template clauses improve operational efficiency and reduce the number of redlines that occur in the negotiation process. Data-driven processes provide you with the information you need to make informed changes to contract clauses. These improvements can significantly reduce the close rate for redlined contracts.
This information may be especially helpful when dealing with specific business relationships. If a particular company routinely redlines your contracts, personalized templates for that company can be created. This specialized language may satisfy their particular needs and prevent any more delays. Reduction in negotiation time saves both companies significant time and money and improves the business relationship. Improvements led by this data can help create lasting relationships that see significant returns on investment.
Use data to improve your contract negotiations stage
The contract management lifecycle is the life-breath of a successful company. Contracts are essential to forming good business relationships and simply getting things done. When there are unnecessary delays in this process, there may be a significant loss of resources, opportunities, and income. Data provided by a specialized contract management system can provide you with useful insights to enhance your company’s processes.
Try Ironclad to improve your negotiation timelines and processes. Data provided by our automated systems can optimize future contracts and reduce the amount of time spent in negotiation. We are ready to help.