Contract Management Playbook For Modern Organizations

What is a Contract Playbook?

A contract playbook is a manual for contract review which sets out the important terms, processes, and exception definitions per contract type for a company. It usually has pre-formulated standard contract clauses and references to the person or department responsible for specific issues.

Key elements of a Contract Playbook
  • Sample language and context - omission and commission
  • Preferred position / Acceptable position / Fallback position / Not Acceptable position
  • Deal Breakers
  • Must Haves
  • Approval authority/escalation matrix
  • Jurisdiction-specific clauses (sample language) and their subsequent risk-approved deviations
  • Checklist to ensure a final sanity check

Why are Contract Playbooks important for managing risk?
  • It is a manual for contract review and negotiation and sets out the important terms, processes, exception definitions per contract type for a company.
  • It defines the scope of action per contract topic and thus provides the target audience with the “must haves” and “deal breakers”. There is clear guidance on risk thresholds acceptable for each area.
  • Organizations can also add explanations for each clause, which serve as argumentation in contract negotiations.
  • It usually has reference tothe person / department responsible for certain issues.
  • Pre-formulated standard contract clauses round off a contract playbook.

What is a Contract Negotiation Playbook?
  • A negotiation playbook defines the scope of action per contract topic and thus provides the target audience with the “must haves” and “deal breakers”.
  • There is clear guidance on risk thresholds acceptable for each area.
  • Organizations typically add explanations for each clause, which serve as argumentation in contract negotiations.

Who uses Contract Playbooks?

Multiple teams within an organization use contract playbooks. Typically, roles-based access is applied to the content and rules / checklists / logic within the playbooks.

Primary Contract playbook users are:

  • Legal – Internal and external teams reviewing and approving contracts are primary users of contract playbooks. A well-organized and readily accessible playbook greatly reduces the 'dead time' in which contracts sit in people's mailboxes, waiting for approvals or clarifications on minor issues.
  • Contract Management / Administration
  • Sales Operations / Project Management
  • Sourcing / Procurement
  • Compliance

Are contract review checklists and Digital Playbooks same?
  • No, review checklists are a subset of playbooks. Just depending on checklists can be a dangerous practice, as contract review and negotiations needs a lot of context and understanding of subject matters.
  • Converting the playbook principles to a set of questions usually results in a checklist

How do Digital Playbooks work?
  • Adding playbook templates, rules, exceptions and other details to a system which is connected with contract review, negotiations and management platform - is the process of digitizing your playbooks.
  • An online system to host your playbook is very useful to keep it updated as various parts of the org learn new experiences everyday

What are the main benefits of using Contract Playbooks?

1. Distribute authority across departments

Without a contract playbook, sales and procurement teams are frequently forced to seek answers from the legal department during the negotiation process. Unfortunately, the legal department is usually overburdened with other matters, so it may take them a few days to respond to a seemingly simple question.

The contract playbook establishes a framework that allows sales and procurement employees to make agreement decisions during the negotiation process without consulting the legal team at all.

They can simply find a replacement clause in the playbook, insert it into the contract, and continue negotiations knowing that this amendment has already been pre-approved by company standards.

2. Save time and money

With contract responsibilities distributed more evenly across departments as a result of the empowerment of your contract playbook, the legal team can devote more time to more pressing matters. Less time spent on minor tasks allows employees to concentrate their efforts and work toward larger-picture goals, such as further improving the contract management process to increase efficiency. Not to mention a reduction in resources spent on hiring outside counsel and training new employees. Your in-house team should be able to handle more tasks that outside counsel would normally handle, and new hires can refer to the contract playbook for guidance as they learn how to negotiate your company's unique contract cycle.

3. Faster contracting cycles i.e. higher speed to signature

Spending less time negotiating leads to greater efficiency in your overall contract process. Whereas sales and procurement employees used to need the legal team's approval for nearly every minor negotiation, they now review and approve revisions themselves, greatly reducing the amount of time the other party is waiting to hear back about their suggestions. This greatly accelerates the negotiation and revision process, allowing sales to close more deals in less time. By processing more agreements faster, you will increase revenue for the company while also improving your business or customer experience.

How to get started with designing and implementing your contract playbooks?

To start with the process, you need to perform some preliminary research. This involves more

one-on-one conversations and group discussions with relevant stakeholders around:

  • What has caused problems in your organization's experience?
  • What is the current process of managing contracts, clause language and negotiation points currently?
    - What clauses require legal intervention?
    - What clauses require business approval only?
    - What are the tipping points for all the stakeholders like risk, finance, IT, HR, procurement, etc., to sign off?
  • What contracts do you want to include in the playbook? Several choices exist:
    - Above a certain $ threshold
    - Particular type pf transactions (deemed high risk)
    - Sales vs Purchase
    - Third party paper vs your own template
  • Is this the first step in this direction or a significant upgrade?
  • What contract are the terms most contentious?
  • What industry examples can you draw from?

Then, it is advisable to conduct an internal roadshow, to speak about business needs, common issues and potential benefits of such a system for the company.

How to set up Contract Playbook (step by step process)?

Setting up such a comprehensive document may appear to be a daunting task, but the entire process consists of only a few stages: reviewing contracts, establishing terms, and generating potential replacements. Let's take a moment to go over each phase in greater depth.

  • Investigate Contracts
    Whether your company is brand new or has been in operation for some time, you most likely have a history of previously written and negotiated contracts. Some may have been successful, while others may have been unsuccessful, but each represents an important piece of your contract puzzle. Sifting through the data contained within previous contracts can shed light on how your company conducts business. How long does it usually take to close a deal? What are your stumbling blocks? Are there any high-priority risks? Which contract clauses are negotiable, and which must be strictly adhered to? Find out the answers to these and any other questions you have about your company's business experience. It's worth noting that using a contract lifecycle management (CLM) solution, which provides a secure online repository to house all past, current, and future contracts as well as AI tools to assist with the search for and extraction of relevant data, can make the examination process much easier.
  • Establish Terms
    You can then begin to establish a framework of standards that each new agreement must meet, based on the data from your previous contracts. This framework should be able to answer common questions that arise during negotiations. Are you willing to accept a change if the other party requests one? Is that a non-negotiable point? As we will see later, having these standards in place enables decisions to be made more quickly, increasing turnover while also assisting employees from departments other than legal in learning more about the contracts themselves.
  • Create Replacements
    Once you've established your contract and negotiation standards, you can begin generating replacement or fallback clauses. These clauses are to be used when the other party disputes the standard language in the agreement. For example, suppose the sales team frequently receives similar questions from different customers. In that case, they can look to the playbook for a replacement clause instead of going through the legal team for approval. All departments should contribute ideas during the creation of replacement clauses to ensure that the replacements meet the standards of the entire company. Easier said than done. Communication between departments is critical throughout the process.

How can ContractKen help you get started with playbooks?

Get Started with ContractKen
Step 1. Discovery and Assessment

  • Standard project methodology to assess the maturity level of contracting processes, templates and knowledge
  • Low touch (limited facetime, email interactions)
  • Standard questionnaires and case studies for the client are needed.

Step 2. Playbook Design

  • Design thinking approach to develop best-in-class processes for the customer
  • High touch - facetime with stakeholders
  • Leverage our templates, process recommendations, and interview findings
  • Contract experts, program coordinators to run the sessions, and process experts are needed

Step 3. Playbook Implementation using ContractKen

  • Engage with Legal, Procurement, Sales, and IT team to implement re-engineered processes and contract playbooks.
  • ContractKen product deployment
  • Ongoing advisory and product support