Procurement CLM: A Special Case for Operational Efficiencies Where Legal Can Shine

Procurement CLM by Lucy Bassli for Contract NerdsLawyers over-functioning? Never! Stepping in to handle business tasks? No way. I wish we didn’t meddle in business processes, but we can’t seem to help ourselves when the process is the contracting process. There are many reasons, and some of them are very good reasons, why in-house teams tend to handle tasks that other teams should handle. I’ve heard everything from “We can’t trust the business” to “It’s just easier if I do it myself… Otherwise it will come back to me anyway”. Perhaps this is true, but isn’t this a self-created situation in many ways?

In-house teams have an obligation to educate the business, and many are trying. It is hard to find the time to educate and train the business. Moreover, the business may undergo high turnover or a hiring spree, and keeping up with training a growing or revolving population is hard. So, many teams turn to technology to enable their clients. In my book, CLM Simplified: Efficient Contract for Law Departments, I write a lot about the importance of starting with a simple legal review policy that sets forth what Legal will and will not review. Then I get on a soapbox about the importance of templates so the business can be enabled with simple-to-use documents they can handle themselves. Templates should be accompanied by playbooks and negotiation guides, and a robust and clear RACI (roles and responsibility matrix). Finally, I discuss how technology can be used to amplify these efficiencies. All of these elements are part of improving CLM and the contracting process across any organization.

The Procurement Problem

One common pain point we see in companies of all sizes is the absence of a business owner for vendor contracting. In many situations there may be a small, unempowered procurement team who is not focused on contracting. Other times, there is no procurement function at all, leaving all vendor contracting to fall on Legal. There is something about procurement contracting that burdens legal teams across all industries, geographies, and company sizes. Every law department seems to have this nagging volume of contracts that fall on some attorney who likely was not hired to handle those types of contracts. Larger enterprises tend to have a procurement lawyer, but those are the exception rather than the rule, leaving Legal to be the guardian of vendor contracts.

Procurement contracting deserves some special attention because I’ve seen it too many times; orphaned processes that have no real owner and few people willing to raise their hand. Yet there is often quite vocal criticism and concern raised by departments like InfoSec, Privacy, Finance, Audit, and others. Guess who they end up looking to for support (because after all, a contract is involved)? You guessed it – Legal. So, the lawyers step in to help figure out how those contracts would be done, and they get them done. The lawyers make sure interested stakeholders are involved. They identify the right signatories. They design approval routes. Legal makes sure contracts have a home and help others locate them when needed. The truth is, MANY of those steps of the CLM process should not be handled by Legal, but if there is no one to turn to, what can Legal do?

The CLM Solution

Legal should partner with leaders in Finance to develop an enterprise-wide program and procedures for procurement contracting. At my firm, we’ve come up with some best practices, based on both my personal experience while supporting global procurement in-house at Microsoft for 13 years and in the last few years as a consultant to several companies:

  1. The frenzied rush to CLM technology is a great time to establish the best cross-department enterprise processes for vendor contracting and to include those critical workflows that require approvals from subject-matter experts (Data Security and Privacy come top of mind). Use the CLM tech goals to align processes and make tough decisions about roles and responsibilities.
  2. Legal can be seen as a real business-enabler by extracting itself from those low value, low risk contracts that can be handled by any company employee (even where there is no procurement function). This is the best opportunity for Legal to show that it is not risk-averse and can simply let go of some subset of vendor contracts.
  3. The GC can provide business guidance to the CFO and other C-Suite leaders, encouraging the development of a broader risk strategy for the company with regard to engaging vendors and enabling the business to move faster by taking smart risks. Being proactive and driving the “smart risk-taking exercise” will be a breath of fresh air for most C-Suite leaders, especially when it comes from Legal (it’s no shock that Legal is not the go to for permission to take risks).

Legal vs. Procurement Roles

Here is an excellent visual depicting the various roles played by Legal vs. Procurement:

The different roles of Legal vs. Procurement.

Bottom line advice – when looking to experiment with CLM technology, optimize contracting processes, and re-aligning Legal resources to the most critical work – start with procurement contracts. Every company struggles with these. There are easy wins for Legal here, which can catapult the law department into a modern and innovative team in the eyes of the business.

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