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Installment 4: Process Matters

Quick show of hands: Who loves a contract review process? Other than those in the legal department, I’m guessing not so many of you.

Well, I’m going to drop a little truth bomb on you: That process is a big deal.


I have seen organizations waste a lot of time and money, incur unnecessary obligations and miss critical deadlines because their process stinks.


And while a well-designed contract review process will not save a bad deal, a poorly designed process can absolutely mess up a really good deal.


So, while you are thinking about the quality of your service deals, you should also evaluate the quality of the process that generates them.


Here are ten “must-haves” when designing your process for drafting, reviewing and executing service agreements:


1. The process must be efficient. The more complex and time consuming the process is, the more likely your stakeholders will make mistakes and/or try to find ways around it. One of the most common mistakes I see in contract process design is having too many cooks in the kitchen during the review process. Instead of defaulting to an “all hands on deck” approach, instead think of the phrase “maximum appropriate involvement” with an emphasis on “appropriate.”


2. There must be a clear owner of the process. There needs to be one person who is accountable for making sure the process is running smoothly and efficiently. The owner makes sure stakeholders are trained, the steps of the process are being followed and is also responsible for soliciting periodic feedback for improvement.


3. Make sure folks understand HOW to initiate the process. To maximize process efficiency, you want to get out of the blocks strong. So, it is vital that stakeholders know not just who to contact, but also what information is going to be needed to get a contract or review started, such as counterparty details, budget and scope of service information.


4. Make sure folks understand WHEN to initiate the process. As I noted in an earlier post, timing is everything in contracts. Initiating the process too early can result in wasted time and effort while necessary details get ironed out. Initiating the process too late can cause project delays and destroy negotiating leverage. So, it is vital that stakeholders know what time is the right time for firing up the engines.


5. Include a step for getting necessary feedback from subject matter experts. It is not uncommon for a service agreement to include provisions that require particular subject matter expertise. For example, there may be data security requirements that require input from the IT team or there may be background check requirements that require input from the human resources department. Your review process should include a step where someone is identifying those provisions that need expertise, farming those provisions out for review and managing the feedback of the experts.

6. Establish a clear understanding of who can approve and sign agreements, including backup approvers. Committing an organization to the terms of a service agreement is no joke. It is important to clearly identify who has the authority to sign your agreements and to also designate backup approvers so that a deal is not delayed because a signer is unavailable.


7. Educate employees on confidentiality agreements and how they fit into the mix. Before you get to a well-crafted service agreement, the parties are necessarily going to be exchanging confidential information. Make sure your employees understand the importance of safeguarding confidential information and when they should be asking for an NDA.


8. Include a system for tracking contract execution, expiration and renewal. Why go through all the fun of negotiating and finalizing the deal, if you don’t ultimately sign it? It happens more than you think. Once the parties have finalized the transaction, the owner of the process should make sure signatures are exchanged and execution copies are filed away. Also, expiration dates should be tracked to make sure a timely renewal is executed, if desired and necessary.


9. Include a step for disseminating relevant information to stakeholders. Once the deal is executed, make sure folks that have responsibilities flowing from the agreement are aware of those responsibilities. Borrowing from the example in #5, the human resources department will need to understand and comply with whatever personnel background check requirements were ultimately included in the deal.


10. Train, train, train. Every stakeholder that has a role in the process should receive initial training and periodic refresher training to make sure they understand the overall process and where they fit in.


Broad Cove Advisors LLC (“BCA”) is a consulting firm that provides strategic advice to brands, agencies and other service suppliers. Among the services that BCA offers is advice on process design and negotiation strategies that improve transparency, collaboration and service outcomes. BCA is not a law firm and does not provide legal advice.