As someone who manages contracts, you are constantly under pressure to deliver value as quickly and cost-effectively as possible. However, to ensure you have quantity and quality, you also need to see whether your contracts are meeting the right targets.
This is why you and your organization should regularly measure the success of your contracts against important contract management performance metrics, including general process metrics and efficiency metrics. Without metrics, it’s hard to stay on top of your work, especially since many business contracts can last for years and involve a series of payments, actions, deliveries, and negotiations with stakeholders.
Read on to learn more about how to make sure your contracts meet the right targets. After that, you’ll learn about how three important contract management performance metrics can help you meet your goals. You’ll also discover how to use Ironclad Editor to apply these metrics to your workflow.
How do you evaluate success?
Before we dive into three of the most crucial contract management performance metrics, you need to know what makes a particular stage in contract management successful. These apply no matter what stage of the contract management lifecycle you’re in, from drafting to execution.
Considering timeliness or punctuality
For most contracts, time is of the essence, meaning that all parties must fulfill contractual obligations in a punctual manner.
If either side is always—or even occasionally—late in performing its duties, this can negatively impact the other party and the agreement as a whole. This is particularly the case if you work in sectors that rely on strict schedules, such as manufacturing.
As such, you need to analyze and assess how much time each phase of your contract management lifecycle will take and how you can work towards finishing each phase in time.
Tracking costs, quality, and consistency
In addition to ensuring that you meet all deadlines, you also need to track costs, quality, and consistency.
To ensure profitability and efficiency, you should track both economic and non-economic costs. Otherwise, money, time, and energy will be spent on trivial issues, potentially leading to delays and reputation damage.
It’s also important to track quality and consistency to ensure that your contracts are consistently executed to a professional standard. If you have a high volume of contracts to draft, edit, and execute, try using contract management software like Ironclad. Created with in-house counsel and contract managers in mind, Ironclad empowers you to boost business agility with a gamut of tools, including a searchable data repository, a codeless Workflow Designer, and more.
Engaging in process improvement
Finally, you will need to engage in process improvement from time to time.
As a contract manager, you are responsible for overseeing the contract lifecycle from beginning to end. To streamline this onerous and complicated process, you should use a contract management solution like Ironclad, which helps you manage contracts by reducing contrast risk, improving contract visibility, and boosting productivity.
With software like Ironclad, you’ll be able to use the contract management performance metrics below to make sure that your contracts are meeting the right targets. Sign up for a demo today to see the difference Ironclad can make.
Three important types of metrics
To evaluate success based on the factors above, you need to quantify them as metrics. Metrics are statistics used to evaluate results, compare performance, and track data to boost business outcomes. Used by contract managers, in-house counsel, analysts, and others to improve performance, metrics enable you to learn from historical data and set present and future goals.
There are many different types of metrics that you should look at, depending on what industry you’re in. However, in general, you should be looking at three types of metrics: general process metrics, efficiency metrics, and workforce management metrics.
General process metrics
General process metrics are the backbone of any successful business. Concerned with output, such as the number of contracts launched per month, these metrics will help you:
- Keep your projects on schedule
- Ensure sustainable business development
With Ironclad’s Process Metrics Reporting, you can view, generate, and send an up-to-date report on your general process metrics, including:
- The number of contracts launched per month
- In Ironclad, you would measure these by looking at the number of workflows in the Workflow Designer
- The number of contracts completed per month
- How long it takes to complete the average contract
- A breakdown of contracts by user and department
- Which workflows are “blocked” (i.e., waiting for signature or execution)
Using Process Metrics Reporting enables you and your in-house counsel to answer questions about leadership and understand how their team works. In the same vein, you’ll be able to streamline the contract execution process, grow your team, and use your time more efficiently.
Another important metric is efficiency metrics, which are concerned with the time spent on contracting. Examples include:
- The time spent reviewing a contract
- The time spent completing a contract
- The time spent negotiating a contract with stakeholders
Efficiency metrics will give you an idea of where you may be falling behind. This can be very helpful because the average company loses more than 20% of its productive capacity to “organizational drag”—or inefficiencies in its organizational structures and processes—as according to the Harvard Business Review.
To minimize these inefficiencies, you need to have a firm grasp of metrics so you can steer your team in the right direction and give feedback as needed. With Process Metrics Reporting, you can track the ratio of assigned projects to completed projects to get a clear picture of your team’s productivity. From there, you can start thinking of ways to help your team finish work faster by asking questions such as:
- Are there any organizational or communication processes that slow down the work process? What steps can be omitted?
- For instance, are some team members working long hours but not doing as much as they should? Has too much time and energy been spent writing unnecessary emails or documents?
- Is it necessary for the team to come to work every day? Would it be more efficient if some roles were remote?
- Do certain team members need more training?
Workforce management metrics
Finally, you need to measure your work against workforce management metrics. These concern the people involved in contracting and include:
- The number of monthly active users
- The number of workflows created or approved by Legal
- The number of workflows created by a specific department
- Attendance, or how many employees come to work every day—this also includes how many employees arrive late or leave early within a given month
- Adherence, or what percentage of the time and at what rate employees are sticking to their schedules
- Shrinkage, which is the planned and unplanned time when employees aren’t available to handle work
- Planned time includes coaching, meetings, vacations, paid time off (PTO), and jury duty
- Unplanned time includes unscheduled absences, poor adherence, technical issues, and spending too much time chatting with colleagues in between tasks
By focusing on these metrics, you’ll be able to increase the productivity rate of any given department. Shrinkage is a particularly useful metric, as it will dramatically affect the perception of the resources your organization needs. The higher your unplanned shrinkage rate, the more work you will have to put into updating your organization’s operating procedures. Otherwise, you will continue wasting time and resources, leading to project delays, an ever-increasing pile of unfinished and unexecuted contracts, and even lawsuits.
We know how difficult staying on top of all these metrics can be, particularly when you are already responsible for so many tasks. Fortunately, with Ironclad, you can keep an eye on these metrics as well as give your team a collaboration-friendly platform for negotiating and executing contracts. Designed to streamline the contract revision and redlining process, Ironclad gives your team a DOCX native platform to comment on, edit, and track changes while collaborating with colleagues on a shared platform.
All in all, Ironclad is an unparalleled contract management software that will help you stay on top of your contract game.
With its premier Process Metrics Reporting tool, Ironclad helps ensure your contracts meet the right targets. Our software also comes with powerful tools like a Dynamic Data Repository, which will help you turn contracts from barriers into opportunities.
If you’re interested in integrating Ironclad into your workflow, request a trial here.
- How do you evaluate success?
- Considering timeliness or punctuality
- Tracking costs, quality, and consistency
- Engaging in process improvement
- Three important types of metrics
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Ironclad is not a law firm, and this post does not constitute or contain legal advice. To evaluate the accuracy, sufficiency, or reliability of the ideas and guidance reflected here, or the applicability of these materials to your business, you should consult with a licensed attorney. Use of and access to any of the resources contained within Ironclad’s site do not create an attorney-client relationship between the user and Ironclad.