1. Actionable Analytics: The IT Factor
for SMART Contract Lifecycle
Management
TOP TEN KPIS OF CLM AND WHY THEY MATTER
Whitepaper | March 2016
®
2. www.revitasinc.com | 2
Introduction
Contracts are central to the operations, business strategy, and success of your organization. They define the products, solutions,
and services you offer to your customers and govern the means in which you conduct business with your channel partners. They
are the instruments representing the legalities and authenticities of the operational functions and terms of your business and remain
paramount within legal departments for their validity, auditability, and the enforcement of compliance. In addition to their position
of representing the strong-arm of governance and control, contracts also represent the long-arm of impacting the monetization of
business performance and contain incredible insights to business value drivers across the enterprise.
Traditionally existing only as paper-based documents with manual or email based routing
for reviews, contracts moved along their lifecycles with a clear delineation of beginning,
in-state, and end-state purposes. Once terms were defined, shared and agreed upon with
constituents, they were signed in ink, and either stored away in a file cabinet or scanned into
an electronic document repository. Contract monitoring and control were primarily focused
around risk prevention in contract terms. Access to contract documents was likely limited
to counsel and separated from scrutiny to actual business performance, obligations, or
measurements of returns against the business terms contained within the contracts. The
contracting process was typically lengthy, manual, and considered to be solely a legal or
administrative function, and a cost of doing business.
Today, companies recognize that contracts remain integral to their legal roots, however,
their impact and value to improving overall business performance is directly interrelated,
and contracts are increasingly recognized as an imperative asset to the enterprise, and
not as simply a cost of doing business. According to recent research findings from the International Association for Contract and
Commercial Management (IACCM), implementation of a centralized contract management function saves time and money; high
performing companies can close contracts twice as fast as the average; and the most efficient contract managers can handle
nearly 70% more volumes of contracts, when compared to the least efficient organizations.1
The effectiveness of Contract Lifecycle
Management (CLM), as well as contract design, is growing in importance, and companies recognize that contracts need to be
monitored and measured against Key Performance Indicators (KPIs) for three primary ROI justification factors:
• Tactical results pertaining to the contract management process efficiencies
• Effectiveness and performance outcomes of contract terms
• Potential costly impacts to risks and compliance
Once a contract is signed, its journey within the enterprise is actually just beginning . As terms
within the contract are transacted, they should be monitored and measured for performance.
This whitepaper explores how the utilization of enhanced actionable analytics and insights with
a “Top 10” list of KPIs throughout the CLM processes — both pre and post execution — is a vital
attribute for CLM and can dramatically improve contract management efficiency and overall
impact on business performance.
1 Source: IACCM: Contract and Commercial Management 2015 Benchmark Study, 2015.
A centralized CLM
function saves time
and money, closes
contracts twice as
fast, and improves
volume efficiency by
70%(Source: IACCM)
Once a contract is
signed, its journey
within the
enterprise is
actually just the
beginning.
3. www.revitasinc.com | 32 Source: Gartner: Market Guide for Contract Lifecycle Management, Nigel Montgomery and Deborah R. Wilson, 16 July, 2015.
3 Ibid. 4 Source: S.M.A.R.T. Management Goals/Objectives, Management Review, George T. Doran, 1981.
5 Figure 1: Revitas Contract Lifecycle Process Flow Diagram, Revitas 2015.
The Connected Enterprise Reinforces “SMART” CLM
The digitization of information is a driving factor in the transformation from the utilization of
fragmented systems towards the interconnected enterprise. According to Gartner, market
trends such as the increase in global business velocity, increased demands on governance
risk and compliance, and the digitization of paper documents is forcing recognition that
CLM is no longer a nice-to-have, but a need-to-have necessity across the enterprise.2
Organizations are seeking CLM in a wider context, encompassing all or most contract
processes and agreement types across the organization, as an “enterprise CLM”, and it is a
priority to implement as an enterprise level core system addressing business risk, cost and
the pursuit of revenue maximization.3
With organizations moving more towards managing the data contained within documents,
rather than the documents in and of themselves, opportunities arise for an enhanced,
enterprise-wide, SMART approach to CLM, and to capitalize on the trends and analysis
contained within the associated business activity, obligations, and results from contracts in place. With SMART4
CLM, the ability to
approach and manage CLM objectives that are Specific, Measurable, Attainable, Relevant, and Time-based becomes an enterprise-
wide scale, as well as lower level, and with an automated processing and reporting function, more actionable. With organizations
managing upwards of hundreds to tens of thousands of contracts each year, many of which contain multi-stream, global scale
workflows, the complexities increase and the opportunities for finding ways to become more SMART, collaborative and efficient
in contract processes also increases. The importance of having a deeper understanding and ability to take action based on KPI
measurements contained within contracts grows in significance. The efforts put towards the input of information into the contract
shifts more to a deeper knowledge and understanding of the outcomes of the contracts in place currently, historically, and in the
identification and predictions of future results.
The Evolving Role of CLM and Impacts on Contract Design and Automated Workflow
As organizations move closer towards the transition of the connected
enterprise, the role of CLM is clearly also evolving, and becoming more
integrated into the business processes. There is a growing interest in
understanding how contract design and automation can impact efficiencies
along the stages and continuous lifecycles of contracts for request, creation
and editing, reviewing and redlining, approval and signature, activation, and
amendments, and assessments and review, as illustrated in Figure 1.5
As contracts become more performance and outcome based, it is necessary
to have an enterprise-class system that can automate the entire CLM
process and manage data extraction and validation from contracts and terms
throughout their lifecycles. The system also must keep pace and integrate
with the technologies and methods in which companies are conducting their
businesses. It is costly and no longer a best practice to consider contracts
as manual processes or to file away executed documents in a document
repository or filing cabinet. Contracts are living documents, and contain
business terms that remain relevant post-signature and execution.
”(Source:Gartner)
“CLM is no longer a
nice-to-have, but a
need-to-have
necessity across
the enterprise.
Figure 1: Revitas CLM Process Flow
4. www.revitasinc.com | 4
As illustrated in Figure 26
, the lifecycle of contracts
extends beyond the signature, and the traditional
lifecycle of creation, authoring, approving, amending, and
signature. Sell-side contracts often contain integrated
agreements and are tightly linked to the sales, channel,
and financial transactional processes. They need to
integrate with Customer Relationship Management (CRM)
and Configure Price Quoting (CPQ) systems, enabling
sales representatives to streamline agreement execution
processes and accelerate the quote to cash sales cycles.
Linkage of data between systems is a critical function for
CLM during the pre-signature phase for the definition of
contract terms, obligations and business transactions.
Similarly, for post-execution processes, the data extraction elements from contracts
for monitoring performance obligations, and execution upon terms must seamlessly
transact financially with back-end ERP systems. Organizations that lack such closed-
loop transactional system integrations typically utilize time-consuming and costly manual
processes and store contracts into electronic repositories, where the data elements are not
integrated within the systems—resulting in a lack of knowledge for KPI measurement activity
and actionable intelligence. In fact, according to a recent report from Aberdeen, a robust
contract management solution is the key enabler to maximizing your contract’s potential,
as well as managing elements of regulatory compliance and risk as well.7
Results from
Aberdeen’s study on organizations utilizing a ‘best-in-class” CLM solution also indicate that
74% of spend in contracts is under management as compared to under or close to 30% for
other management types, and that reporting against KPIs for performance management is
utilized 91% of the time, as compared to 49% for others.8
This is a significant difference in
a company’s ability to have control and visibility of their contract’s spend and performance
that greatly affects overall corporate strategy and growth initiatives.
Organizations with
best-in-class CLM
solutions utilize KPIs
for performance
management
91%
(Source: Aberdeen)
of the time.
Figure 2: Revitas Enterprise-Class CLM System
6 Figure 2: Revitas Enterprise-Class Contract Lifecycle Management System, Revitas 2015.
7 Source: Aberdeen Group, Contract Management: Key Attributes and Best-in-Class Results, June 2015.
8 Source: Ibid. See Figure 3.
Contract Management Process Best-in-Class All Others
Reporting and analytics (e.g., KPIs, performance management) 91% 49%
Contract creation/authoring 77% 27%
Contract repository 77% 44%
Approval workflow 73% 37%
Electronic signatures 73% 34%
Figure 3: Best-in-Class Contract Management Processes
Enabling Process Automation
Source: Aberdeen Group, May 2015
5. www.revitasinc.com | 5
Business Model Transformation Drives Growth Opportunities for CLM
Changes in business models, such as from a product to a solutions and service solution
approach, are another driving force for the connected enterprise and renewed perspective
towards contract design and effectiveness monitoring. Contracts are frequently being
renegotiated for a more performance and outcomes based approach and, according to
IACCM, the frequency of contract renegotiations for this purpose is up by 28% in the last 5
years in 2014.9
In addition to being re-negotiated based on performance monitoring results, there is also
a significant shift in the marketplace towards cloud adoption business models and many
companies are either in the midst of a change, settled on hybrid, or are being born in the
cloud. This business model transformation is also a driving factor for contract re-negotiations,
or new methods of contract construction and design. As more and more companies shift to
Software-as-a-Service (SaaS) and change their selling methods, growth in sell-side types
of contracts is increasing and also driving a strong growth rate for CLM, as CLM helps
companies create and manage contracts more effectively. According to Forrester, the CLM software market is on a strong trajectory
with a growth rate of 14% through 201510
, with SaaS subscriptions as the fastest growth rate of 28% while becoming more acceptable
to legal teams as depicted in Figure 4. The transition is also driving complexities in business models and methods in which companies
are contracting with their partners and end customers. This simultaneously causes a rise in complexities with managing contracts,
increases in cycle times, and demands for internal governance and a system in place for monitoring the obligations and performance
of terms within contracts on a more time-specific and continuous basis. According to IACCM and outlined in Figure 5, contract cycle
times increase significantly based on the level of complexity contained within contracts, and can take as long as 28 or more days to
execute.11
As businesses grow and models evolve
and transition to the cloud or hybrid models,
complexity within contracts also increases, and
contracts may take longer to execute. The type of
contract also plays a significant role in complexity
as well. A basic non-disclosure agreement (NDA)
may be standard and low in complexity, where
a service-level agreement (SLA) or Procurement
contract may contain many customized clauses,
cross multiple business units, or geos. With such
complexities, it is vital to remain aware of the
impact on on overall business performance and
to operational efficiencies. Complexity within
contracts varies greatly by type of industry
and business and is not based mainly on the
number of contract pages or volumes. It is
greatly related to the amount of authoritative and
hierarchal infrastructures that are in place as well
as governance and regulation pertaining to the
industry or business at hand.
The CLM market is
growing strong at
14%
(Source: Forrester)
with SaaS subscriptions
leading the way at
28%
,
Figure 4: Forrester Research, Inc., CLM Market Overview, 2014
9 IACCM Reseach, 2015.
10 Forrester Research, Inc., Market Overview: Contract Life-Cycle Management, Andrew Bartels, December 29, 2014.
11 IACCM Research: Benchmarking Study, 2015.
6. www.revitasinc.com | 6
Use
The Top 10 KPIs of CLM and Why They Matter
A “Top 10” list of KPIs is outlined below to illustrate the key factors that legal teams, contract administrators, sales, and channel
operations should monitor in order to make the most impact to business and ROI justification with their CLM processes. With insights
and controls in place to automate and manage the CLM process, as well as monitor performance and results through enhanced
reporting and alert capabilities, organizations are able to understand how to ensure contracts act as valuable assets—not only
representing the foundations of business conduct, but also to ensure continuous contribution of monetary value to the overall business.
As the CLM market continues to grow and also as technologies evolve in sophistication, the level of monitoring and reporting that
becomes available grows in importance and becomes increasingly critical to the overall success of any CLM initiative. KPIs must
provide insights and visibility to the results and need to be displayed and available in intuitive dashboards or easy-to-digest reporting
methods available in real time, so that immediate action can be taken related to the information at hand.
TACTICAL KPI MEASUREMENTS
Tactical KPIs pertain to monitoring results that are pertinent
to the contract management process efficiencies throughout
the lifecycle of contracts. Tactical KPIs are instrumental in
maintaining a keen eye on what is happening in real time
with regards to overall contract administrative processes
as they are moving along within their lifecycles, as such
insight has a profound effect on the ability to react quickly
to improve contract execution. Tactical KPIs assist in
ensuring your CLM activities are staffed properly, that you
are managing contract volumes efficiently, and that you
are meeting contract deadlines and milestones such as
approvals and workflow escalation procedures.
KPI 1: Cycle Times from Contract Initiation to Signature
Measuring cycle times from contract initiation to actual signature helps to understand how quickly deals are closing, how business is
accelerating, and how to recognize revenue faster. This is the most common and frequently asked for metric to track performance of
the overall contracting process; however it’s surprising to see how many organizations lack the ability to measure this KPI. Cycle times
vary greatly from type of agreement, scope, and stakeholder involvement within the contract design and execution. Cycle times for
complex contracts can be lengthy and costly and, in many cases, organizations may not realize the overall time it is taking to execute,
or the cost impact of contract backlogs and inefficiencies in manual or paper-based contract processes. Cycle stages and objectives
Low Complexity
2015 Sell-Side
0-25% <4
25-50% <4
50-75% 4
75-100% 11
Medium Complexity
2015 Sell-Side
0-25% 5
25-50% 7
50-75% 11
75-100% 18
High Complexity
2015 Sell-Side
0-25% 8
25-50% 16
50-75% 24
75-100% 28+
Figure 5: IACCM Research, Sell-side Cycle Times (Days) and Contract LIfecycle Complexity
KPI
1
Cycle Times from Contract Initiation to
Signature
KPI
2
Duration of Contract Bids in Queue, by
Type and Geo or other Measures
KPI
3
Delays in Approvals and Cycle Times
7. www.revitasinc.com | 7
can be set depending on the type of contract, and setting performance
attainment goals for improved cycle times can result in closing deals
faster and improving overall business performance by improving
cycle times within complexity of agreements. A sophisticated CLM
system enables efficient contract authoring and review processes with
embedded clause templates and libraries and streamlines the process
of assembly and negotiation of contract terms across multiple divisions,
or geographies. Configuring KPI measurements along the lifecycle
stages enables the ability to track overall business performance at each
stage, resulting in closing deals faster and accelerating revenue.
As illustrated in Figures 6 and 6a , stakeholders such as Legal
personnel or Contract Administrators can quickly and easily see a
snapshot of how many contracts are within a particular stage along
their lifecycle (the current lifecycle status of a particular agreement)
and monitor overall performance of a contract type by seeing the
average amount of time this type of agreement is being spent within
each of the phases of its authoring lifecycle—from when it is draft state,
in-signature, active, or inactive. Delays in the signature phase or any
processing bottlenecks can be quickly identified so that action can be
taken to fix, expedite, or escalate any issues as they arise in real time.
Contracts can be compared against each other and benchmarked
based on performance trends within lifecycle states. Attainable
performance goals can be set and determined based on performance
history and improvement trends. Detailed views can be quickly found
by drilling down into a slice in the pie chart in the summary, or in the
graph highlighting cycle times overview to identify who’s contract it
is, numerous details, as well as how long it’s been in that state. There
are also additional views to quickly identify amendments to existing
contracts that are in review.
KPI 2: Duration of Contract Bids in Queue, by
Type, and Geo or other Measures
Having the ability to see real-time status of new deals or bids in the
queue and drill down into details of contract type and geography
enables you to identify if there are bottlenecks or backlogs occurring
with certain types of bids, or geos. This assists in monitoring for potential
anomalies as they arise within a particular stage of the contract’s
lifecycle that are perhaps being affected by the organizational structure
or staffing structure within divisions and regions.
Figure 6: Contract Lifecycle State Summary
Figure 6a: Revitas Contract Cycle Times Overview
Figure 7: Contract Duration within Life Cycle State
8. www.revitasinc.com | 8
KPI 3: Delays in Approvals and Cycle Times
Delays in approvals and cycle times are mission critical KPIs to ensure
that business is actually progressing and deals are being closed. Sales
directors are particularly interested in any delays in cycle times because
it directly impacts overall business performance. Workflow automation
can be custom tailored to streamline review and approval work streams
with clearly defined paths, authors, and delegations.
Tactical KPIs Business Value Summary:
Figure 8: Contract Cycle Time Administrative Report
For Legal Counsel
• Instant access to a contract or agreement in its actual state
• Quickly identify status of contract and monitor its progress
• Drill down quickly and easily to identify details of any anomalies found in
contract terms
For Contract Administrators
• Monitor how long it is taking to execute a contract
• Set performance improvement metrics for improving time to complete
contract execution
• Identify what contract/which partner may need assistance to complete to
signatures
For Financial, Sales, and Business Executives
• Close deals and accelerate revenue faster
• Understand impact contract processes and bottlenecks are having on
overall business performance
• Meet quarterly deadlines and contract approvals more efficiently
A billion+ dollar software company uses Revitas
to manage 70,000 contracts and thousands of
users across 33 countries and integrated with
multiple instances of Salesforce.com®.
After implementing Revitas® Contract
Manager™ solution in the cloud, they achieved
global contracting excellence with
enterprise-wide consistency, visibility, and
control within a secure, single, secure, and
global CLM solution. Multi-stream, automated
workflows eliminate rogue contracting, speed
up approval times, enhance revenue, ensure on-
time contract execution, and reduce risk.
The implementation of Revitas Contract
Manager in the cloud cut their contract cycle
time nearly in half, by 48%, saving the
company millions of dollars in regained
costs from CLM inefficiencies and
accelerating gains in revenue.
Voice of the Customer
9. www.revitasinc.com | 9
EFFECTIVENESS KPI MEASUREMENTS
Contract effectiveness KPIs are primarily concerned with
understanding the overall effectiveness of contracts and
their performance, as well as enabling the enforcement
of obligation management. This can be focused on
monetization realization metrics, such as profitability
and performance based on the contract terms and
conditions with partners and customers, to meeting
milestone and obligation metrics contained within the
contracts themselves. Contract effectiveness also
takes into consideration the overall value the contract
is serving for the organization and the terms contained
within the contracts, such as understanding how many
concessions or deviations are actually being made to
terms contained within the contracts. In some cases,
companies are shortsighted in their approaches for
measuring contract performance and may only focus
on the higher level tactical insights, such as cycle times
or top level profitability only. This could be because they may lack a system in place to rationalize CLM with ERP. The ability to track
customized metadata elements, and attributes that correlate to the unique terms and conditions of your business, enables the ability to
truly monitor the value of your contracts from their legality standpoints, as well as to their effect on business. To do this effectively, it is
necessary that contract terms contain custom transaction data validation processes to be rationalized against ERP systems pertaining
to the attribute and metadata parameters, in order to have a truer picture of how terms and obligations are being met.
KPI 4: Contract Volumes per Customer, Partner, Program Type, and Geo
Visibility into channel contracts by volumes per partner, program, type,
and location enables the ability to monitor the progress and performance
quickly of contracts in-state. Business teams are able to quickly identify
and track how many contracts are in progress with partners and how
partners are performing against contract terms and their completion, as
well as in comparison to other partners. Comparison and trend reports
can quickly provide details as to what type of contracts are increasing vs.
other types of contracts, and with which partners and in what geo. This
level of detail greatly affects business planning and development activities,
such as understanding what types of licensing contracts are growing more
quickly than others, which ones are scaling globally or performing well vs.
struggling in which market, what types of services offerings or SLA’s are
growing in volume with what partner, and in what market. Details pertaining
to contracts, in addition to volumes per trading partner, include contract
revenue ratios, profitability, and other performance metrics that can be
quickly and easily drilled into from visual dashboards as illustrated in Figure 9, Contract Trading Partner Volume Map. Such KPIs help
greatly with understanding the performance of contracts as they pertain to business growth and value drivers, and into understanding
what might be going well and why so that you can predict or forecast sales with particular types of contracts or partners, or amend
contracts that may be struggling and achieving lower volumes.
Figure 9: Contract Trading Partner Volume Map
KPI
4
Contract Volumes per Customer,
Partner, Program Type, and Geo
KPI
5
Qualitative Contract Value
Assessments and Scoring
KPI
6
Historical Trends Performance Analysis
KPI
7
Contract Obligation Performance
Management and Monitoring
10. www.revitasinc.com | 10
KPI 5: Qualitative Contract Value
Assessments and Scoring
It is not only enough to measure contracts by their quantity and
quantitative results performance metrics, but also to gauge
qualitative metrics. As organizations grow and their contract
complexity increases, there are terms and conditions, clauses,
and amendments that are being negotiated or renewed on a
continuous basis. And as organizations scale multi-divisionally
and multi-geographically, where autonomy must exist between
regions, there simultaneously needs to be a method of control
in managing and evaluating contracts, ensuring that terms are
enabling business in the most effective manner, and minimizing
concessions against terms. A method in which to do this is to
track contract terms based on their attributes, monitor performance, and assess and score contracts based on overall effectiveness or
compliance to the terms and conditions over time, as illustrated in Figure 10. Additional reports and details can then quickly and easily
be accessed and analyzed such as contract type, and details and amendments within each contract type directly from the chart. This
helps in understanding a level of value achievement from the terms and conditions within contracts that are being executed, such as
making sure that indemnifications, pricing clauses, service level terms, etc. are living up to their value expectations so that contract
design can realize continuous improvements.
KPI 6: Historical Trends Performance Analysis
It is essential to be
able to monitor the
performance of your
contracts over time.
Historical trends analysis
enables you to achieve
enhanced analytics
and gain actionable
intelligence based
on tangible facts to
effectively plan and
visualize future outcomes
based on historical
data of results of your
contracts. Historical trends should be measured on results post execution to ensure that they are meeting the goals and objectives
of your business. One example is to track the revenue performance per partner in the channel, based on contract type over time as
illustrated in Figure 11. Findings can include understanding which contracts are driving the desired outcomes for your business, what
are some commonalities among your highest-performing contracts, who are your best partners, and so forth.
Figure 10: Contract Qualitative Performance Scoring
Figure 11: Channel Revenue Performance by Contract
11. www.revitasinc.com | 11
KPI 7: Contract Obligation Performance Management and Monitoring
Once contracts are executed, it is vital to have the ability
to monitor the meeting of performance obligations, such as
milestones, or pricing tiers and performance parameters
that are defined within the contracts and measure such
parameters against performance. Missing milestones
contained within contracts can be costly and could even
incur a penalty or severe fines if missed, such as a payment
deadline. Missing contract obligations, such as changes
to thresholds of pricing tiers based on volumes in excess
or minimums that were sold within specific timeframes,
can be extremely costly if the business results are not
measured or rationalized against the terms contained within
the contracts and obtained in real time. Overpayments
and mistakes can easily be made in the payout of
claims unknown without such transactional level detail of
validation. Additional milestones such as contract renewals
being set to “automatic” can be costly if the renewal date
was unknown and services were automatically renewed that
you were not intending to renew.
Comprehensive obligation management is possible with a robust CLM system that offers alerts and insights to actual performance
against contracts once they are executed and post signature. As we stated earlier in the paper, the journey of the contract is actually
just beginning once it is signed. It is imperative to be able to monitor its performance against the obligations and milestones contained
within the contracts. An example of effective performance management and obligation milestones is depicted in Figure 12: Contract
Completion Performance, whereby it is easily visible to track the life of the contract once executed and its performance status. More
advanced and sophisticated visualizations and reports are customizable as well pertaining to the specific needs of customers, such as
pricing tiers against actuals of claims from distributors and validation of terms contained within contracts.
Tactical KPIs Business Value Summary:
Figure 12: Contract Completion Performance
For Legal Counsel
• Instant access to a contract or agreement in its actual state
• Quickly identify status of contract and monitor its progress
• Drill down quickly and easily to identify details of any anomalies found in
contract terms
12. For Financial, Sales, and Business Executives
• Close deals and accelerate revenue faster
• Understand impact contract processes and bottlenecks are having on
overall business performance
• Meet quarterly deadlines and contract approvals more efficiently
For Contract Administrators
• Monitor how long it is taking to execute a contract
• Set performance improvement metrics for improving time to complete
contract execution
• Identify what contract/which partner may need assistance to complete to
signatures
A global manufacturer implemented an
enterprise CLM solution from Revitas to
streamline their contracting and obligation
management processes and to incorporate
performance obligation enforcement before
commitment to auto-renewals—providing the
company with an annual savings of millions of
dollars in “unenforced auto renewals of
contracts.”
Voice of the Customer
RISK AND COMPLIANCE KPI MEASUREMENTS
Maintaining compliance of contracts and minimizing risk
are fundamental for every aspect of CLM, and are the
root of all contract management concerns. Monitoring for
tactical and performance based KPIs are additional factors
and improve the value of your contracts, but operating
any form of contract management with a blind eye to the
risks associated with being in non-compliance trumps
all. Risk can be monitored in areas of contract creation,
terms contained within contracts, contract execution, and
adjudication with channel partners and customers, and
financial risk. Risk and compliance also pertain to being
audit-ready and to have a system and process in place to
support 100% auditability of entire CLM processes both pre
and post execution.
KPI 8: Deviation of Contract Terms from Standard Clauses
When managing hundreds to tens of thousands of contracts that might span divisions and geos, it is vital to ensure that all parties with
which you are engaging into contracts are complying with the terms and clauses contained within those contracts. If there isn’t such a
system in place to monitor performance, then you organization is placed at risk of rogue contracting and not maintaining compliance.
Such risks can be costly in the terms of managing the terms in contracts that were not approved in legal, as well as an inability to
www.revitasinc.com | 12
KPI
8
Deviation of Contract Terms from
Standard Clauses
KPI
9
Percent of Agreements Expiring without
Effective Renewals
KPI
10
Inappropriate Authorization and
Signature Approvals
13. forecast performance expectations for future business, as
well as exposure to fines from deviation of clauses.
An example is illustrated in Figure 13, where a CLM
system can monitor and alert contract administrators
if deviations are being made or changes to standard
clauses, and also estimate the impact of changing or
revising standard clauses is having to overall business
performance. In order to do this, contract administrators
and legal teams need to understand how many contracts,
and what types of contracts that each clause touches.
KPI 9: Percent of Agreements Expiring
without Effective Renewals
As contracts are expiring, it is necessary to know the next step to
take with regards to the contract and to ensure that contracts are
not being auto-renewed if they are expected to be terminated. Once
an auto-renewal is activated, that contract is legally effective for the
terms contained within the contract. In order to minimize risk, it is
vital to be vigilant about every contract’s renewal or end date and
to build in enough time in advance to plan for the action expected
to be taken – whether to be negotiations to terms, amendments for
augmented business, or contract termination. Figure 14 illustrates
how contract administrators can monitor the number of days
when contracts are expected to expire or auto-renew so that the
appropriate action can be taken well in advance. This is particularly important for organizations managing contracts in the upwards of
thousands and that contain numerous amendments to master agreements. Tracking the percentage of agreements that are being auto
renewed without the appropriate approval or measures in place allows you to reduce or minimize that percentage in order to maximize
the value of your contracts.
KPI 10: Inappropriate Authorization and Signature Approvals
As contracts move along their approval workflows, it is
imperative to know if there was an anomaly or security
breach that occurred with an authorization or signature
approval along the workflow. Authorization is necessary to
maintain compliance within your organization’s governance
and the ability to have an audit trail, whether the signature
was digital or signed in ink and scanned, is critical to ensure
that the approval was accurate and that the structure is
enforced. Risks to such mistakes include security breaches
that could result in lost intellectual property, lawsuits, and a
negative reputation with partners. It is also imperative to be
able to support automated and digital workflows with clear
escalation paths and delegated authorization hierarchies with workflow approvals, as well as support for e-Signature platforms and
mobile devices which scale multi-divisionally and globally, as depicted in Figure 15.
Figure 13: Contract Clause Report
Figure 14: Contract Expiration Report
Figure 15: Automated Authorization Workflow Approval with e-Signature
www.revitasinc.com | 13
14. Tactical KPIs Business Value Summary:
For Legal Counsel
• Ensure constituents remain in compliance of contract terms
• Minimize risk to deviation from contract terms and clauses
• Eliminate rogue contracting
• Maintain in compliance and governance with 100% auditability
• Safeguard CLM by remaining secure, that scales nationally,
multi-divisionally, and globally
For Financial, Sales, and Business Executives
• Minimize financial risk and security breaches
• Enable peace-of-mind when closing deals with terms that are pre-
approved and within compliance
• Scale business more easily to new markets and geos
For Contract Administrators
• Achieve consistency and remain in compliance when utilizing a system
that contains standard terms,clauses,and a library
• Collaborate effectively across divisions and geographies
A global manufacturer of aircraft engines
implemented Revitas Contract Manager
solution to manage contracts of maximum
complexity in a highly regulated environment.
Contracts must maintain highly-structured
audit controls for sell-side RFP contracts
and scale globally containing foreign clause
libraries, and must maintain in compliance
with 100% auditability.
The Revitas system ensured
compliance and elimination of risk
resulting in efficiency gains with returns
in the millions.
Voice of the Customer
www.revitasinc.com | 14
15. Organizations working with contracts across the enterprise
can benefit greatly from utilization of Key Performance
Indicators that provide insight to improve the overall
contracting process, outcomes, and ability to maintain
compliance. Organizations lacking the ability to track the KPIs
outlined in this paper are at risk for a number of unfortunate
outcomes such as:
• Rogue contracting
• Loss of time and money
• Financial penalties from non-compliance or other factors
• Ineffective relationships with customers and channel
partners
• Inability to adjust to competitive and market demands, or
changing pressure
• Missed opportunities during quarterly end rushes or from
other factors
In addition to the top 10 outlined in this paper, there are
hundreds of KPIs that organizations can consider, and many
of which are unique to your own organizations. Some tips to
remember when defining your own measurement criteria and
to ensure your contracts are SMART as they extend across
the enterprise include:
• Define contract lifecycle stages and understand the
process in measurable steps for each agreement type
• Set-up your KPIs and metadata elements within a CLM
system that allow for ease of reporting and robust
analytics
• Ensure metadata elements contained within legal
documents are rationalized and integrated with both
CRM/CPQ systems for expedited quote-to-cash cycles,
and ERP systems to enforce performance obligations
• Take an approach of governance with contracts to
ensure compliance so that all stakeholders understand
responsibility with regards to contract risk and
performance
• Remember that the contract’s journey begins after
the signature. Be sure to track milestones, contract
performance, and financial elements and outcomes
contained within contracts
www.revitasinc.com | 15
Conclusion
