As busy in-house counsel know, managing contracts on behalf of an organization can be a daunting and overwhelming task. However, taking some purposeful steps to implement processes and procedures with respect to contract management can save a lot of time. Here are a few practical tips regarding strategies to adopt as you manage contracts management on behalf of your organization.
First, it is important to establish a written policy setting forth the process that should be followed when contracts are being negotiated on behalf of your organization. The most essential step in that process should be that Legal must review and sign off on every contract before it is signed. To the extent possible, you should try to ensure that stakeholders within your organization get Legal involved from the outset of any contract negotiation. We also recommend that your organization document and enforce disciplinary actions for failure to follow the requisite process.
Relatedly, your organization should develop and maintain a documented list of the individuals with authority to sign contracts on behalf of the organization. A best practice is to have a frequently updated list of authorized signatories stored in a location that is easily accessible to all employees, but locked for editing by only a select few (e.g., Legal).
Another important step to take is to create and maintain an organized database where your organization’s contracts are stored, preferably an electronic one. A good contract repository system would give the ability to upload and organize contracts by contract type, customer name, and other key markers. Ultimately, we recommend having some contract repository system in place that allows for easy searching and retrieval of contracts across the organization. Many organizations are moving toward cloud-based contract repository software, which provides some key benefits like ease of access, data security and privacy, and integration with your organization’s customer relations management and other internal systems. There are drawbacks of loss of custody and control of your contracts and loss of leverage with the cloud-based system provider for renewal pricing, but we have found that the benefits generally outweigh the drawbacks.
Whatever form of database your organization chooses to use, you should ensure that your organization utilizes consistent naming conventions for contracts, which will aid in searchability and retrieval. Our suggested naming convention is to include the name of the customer, the title of the contract, and then the effective date. These concepts should be incorporated into your training regarding the contract review and negotiation process with members of the sales team, account managers, or folks across your organization who have access to your organization’s contracts.
Finally, we would strongly encourage development of a solid base of contract templates on behalf of your organization. Anytime your organization can start a negotiation by presenting your template contract gives your organization a leg up in the negotiation.
While certainly non-exhaustive, we hope these simple, practical steps will aid your efforts to manage and maintain contracts on behalf of your organization.