Collaborative contracting: How to eliminate ‘communication black holes’

Do you remember playing “Telephone”? The game involves whispering a phrase from one person to another to see how much it changes.

Do you remember playing “Telephone” as a child?

The game involves whispering a phrase or sentence from one person to another and seeing how much it changes by the time it reaches the last person in the group. By the end of the whisper-chain, “unique New York” might become “you need new shorts.”

Though a lighthearted example of a schoolyard game, breakdowns in communication can have serious consequences in contract management, such as process bottlenecks, missed obligations, lack of compliance, lost opportunities, and more.

If you’re worried about these potential consequences, you’re not alone. We recently surveyed a sampling of contracting professionals and found that more than a third of Contract Lifecycle Management (CLM) users identified process bottlenecks as a fundamental problem in their contracting process. A similar number (28%) identified lack of automation in the workflow as being a key contributor to ongoing challenges. 

Where do ‘communication black holes’ appear? 

Contract management relies heavily on collaboration, including everyone from the counterparty to potentially dozens of internal colleagues spread across legal, procurement, and perhaps even sales and IT.   

Given the sheer number of people involved in the contracting process, it’s easy to see where things can go awry. The average Fortune 1000 company handles up to 40,000 active contracts on a given day, which means that hundreds – if not thousands – of people could be involved in the contract’s lifecycle. 

Breakdowns in communication about contracts almost always occur when various stakeholders in the process are either unaware of the other parties’ actions or do not know that their input is necessary to keep the process moving. This is what we call a “communication black hole.” 

When negotiating a contract with multiple stakeholders over email, chances are high that someone is out of the loop. All it takes for one person not to be copied on a thread – or for a subset of the participants to engage in a side conversation. Chances are also high that this will cause unnecessary delays in the contracting process. When a critical participant is not aware of the need for their input, everyone else must wait, thereby creating a bottleneck. 

Fortunately, these communications black holes can be avoided with collaborative contracting and integrated CLM. 

What is collaborative contracting? 

Collaborative contracting refers to an operational approach that ensures all stakeholders involved in the negotiation and closing of a contract have the visibility, access, and agency they need to operate quickly and efficiently.  

“In the collaborative approach, parties work within the boundaries of traditional contracts—and their agreements rest on a fundamental belief that both owners and contractors want the best possible outcome and that each party brings unique strengths and capabilities to the table. Only if participants hold these beliefs—and implement a number of simple but important collaborative practices—can collaborative contracting lead to better project outcomes,” according to Mckinsey & Company

What are the potential implications of communication black holes?

When communications black holes appear, they can cause a variety of negative outcomes – and some are mistakes that your business can’t afford to make. 

Below are just a few consequences of communication black holes:

  • Bottlenecks: Breakdowns in communication create the very bottlenecks our survey respondents pointed out: the process grinds to a standstill until everyone is on the same page. Even when negotiations do reach a positive outcome, they are often decelerated in ways that can negatively impact everyone involved.
  • Missed obligations: Legal professionals know: One missed date could lead to a lawsuit. For example, if your company utilizes someone else’s intellectual property outside of a predefined duration, you could potentially face litigation.
  • Uncontrolled auto-renewals: We’ve all been there: an email appears in your inbox thanking you for renewing a contract you’d completely forgotten about. While this can be frustrating at home (hello, streaming service you were only going to use for a two-week international soccer championship!), it can be deeply problematic – and costly – in a professional environment. It can happen to anyone – just ask BISSELL.
  • Lack of compliance: Compliance is no small concern – it can lead to regulatory fines or may even put your business license in jeopardy in the event of a severe compliance breach.
  • Lost opportunities: Have you ever had a deal die on the vine due to delays in the contracting process? The longer it takes to approve the contract, the greater the chance the deal falls through. In fact, many deals even contain terms that expire if they aren’t executed in a specified time frame.
  • Weakened negotiations: Negotiating a contract requires the participation of no less than two parties. However, in today’s business world, there are generally many players who need to be included, from sales to procurement to legal and beyond – on both sides of the negotiation. Simply emailing Word documents with ever-increasing volumes of redlines back and forth is the opposite of collaborative contracting. Participants can never be sure they have visibility over the most current version, access to the right next person in the process, nor the agency to make substantial changes. 

Eliminating communication black holes with integrated CLM

Like a game of Telephone, despite every participant’s best effort, a contract’s lifecycle is prone to human error. With so many potentially negative outcomes, it’s no surprise if you’re looking for a solution that is properly designed to seamlessly work with other systems, address all the stakeholders’ business needs, and help avoid bottlenecks throughout the contract lifecycle.

The solution? A robust, flexible, and integrated Contract Lifecycle Management (CLM) system.   

CLM simplifies and enhances the contract management process by consolidating all contracts into a single point of reference. This means that everything you need for efficient workflow management is readily accessible from a unified dashboard – the epitome of collaborative contracting.  

Implementing a CLM helps reduce these human errors, resolve bottlenecks, and avoid the risk of different people looking at different versions of a contract buried deep inside someone’s inbox. That means you can get more done, the right way, the first time.

Learn more about how CLM can transform communication at your organization. Check out an on-demand demo of our product in action here.

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