The average large and midsize enterprise has between 20,000 and 40,000 active contracts in effect at any given time. Given the fact that such agreements govern the relationships that businesses rely upon to survive and thrive, managing those contracts efficiently and effectively has a substantial impact on overall corporate performance.
To do that, organizations need the right people, processes, and technology. Contract managers play a pivotal role, requiring a unique mix of legal expertise, financial acumen, experience with negotiation, and interpersonal skills. In organizations that truly understand the value of the role, contract managers add strategic value by aggressively controlling risk, increasing operational efficiency, and maximizing the business value of the company’s contracts.
- Technical Skills
- Understanding of Contract Terms & Conditions
- Understanding Contract Law
- Risk Management
- Financial Analysis
- Interpersonal Skills
- Persuasion & Negotiation Tactics
- Conflict Resolution
- Managing Internal Stakeholders
- Relationship Management
Contract managers serve as a single point of contact for formal agreements, fostering strong relationships with vendors, customers, and strategic partners along the way. They’re responsible for monitoring performance, communicating regularly with stakeholders, and ensuring that all parties to an agreement remain in compliance. Contract managers must keep a constant eye out for risk, guarding the organization against potential pitfalls. Finally, they’re responsible for contract renewals and terminations, closing the loop on the contract lifecycle management process.
What does it take to be a great contract manager? It calls for just the right mix of technical expertise and strong interpersonal skills.
First and foremost, contract managers must have the requisite legal, financial, and business knowledge necessary to understand the role that formal agreements play in framing commercial relationships, mitigating risk, and contributing to the overall value that the company generates in the course of doing business.
Understanding of Contract Terms & Conditions
For starters, a good contract manager will understand the nature of the contracts that affect the organization they’re working for, potentially including buy-side and sell-side contracts, leases and rental agreements, lending and borrowing, or partnership contracts.
Most of these contract types will incorporate some elements of standardized language. Very often, contracts incorporate Latin phrases that serve as a kind of shorthand for broader legal principles, for example. A good contract manager will be familiar with such clauses, will understand their strengths and drawbacks, and will know when additional revisions may be warranted.
Contract managers who work for companies with global operations may require an additional measure of knowledge and experience with respect to contractual language. Contract law may vary widely among different countries, and the regulatory environment may dictate certain protections be incorporated into legal agreements as well. A thorough familiarity with commonly used terms and conditions is therefore essential.
The right technology enables contract managers to apply their knowledge more efficiently. A good contract lifecycle management (CLM) system provides a library of contractual clauses that can be added to a draft agreement quickly and efficiently when required.
Understanding Contract Law
A top-notch contract manager must have a firm grasp of the legal environment in which they are operating. As noted in the previous section, that may include knowledge of contract law across multiple jurisdictions, including case law and regulatory standards.
For contract managers who work for global organizations, this calls for an especially broad scope of knowledge, – but industry expertise is equally important, if not more so. Software companies that rely on intellectual property protections, for example, require contract managers who understand the nuances of IP law and know how to protect their organization’s most valuable assets. Contract managers at biotech companies must be familiar with the highly complex regulatory environment in which they operate. Those who work for defense contractors must understand the stringent federal standards and how those impact their supplier relationships.
Attention to detail matters a great deal, and that begins with a thorough understanding of contract law.
Contract managers must also be capable of identifying potential pitfalls in their company’s proposed agreements with contract risk mangement. After all, the best time to plan for contingencies is before a contract is signed. Contract managers can do a great deal to mitigate risk by incorporating warranty, default, or allocation of risk clauses into their company’s legal agreements.
As with any such exercise, the goal is not necessarily to reduce risk to zero – but rather to foresee potential pitfalls, understand their likelihood and impact, and add mechanisms to a contract that minimize losses should an adverse event come to pass.
Experience is a great teacher in this respect. Contract managers who thoroughly understand the industry or domain in which they operate will inevitably bring added value to the companies for which they work. Technology is giving contract managers a leg up in risk management as well, though. AI-powered contract intelligence software can spot potential concerns and alert contract managers to risks that may not have necessarily been apparent at first glance.
Ultimately, every company is in business to make money – or at the very least, to remain financially sound as they innovate and grow. A great contract manager should understand how their legal agreements impact the organization’s overall performance.
This is one of the attributes that make a great contract manager truly stand apart from the crowd. Where some might see the job as being primarily procedural – that is, the routine processing of standardized legal agreements – great contract managers, understand the impact they can have on business value.
Monitoring vendor performance relative to contractual agreements, for example, offers a means of improving operational outcomes in supply chain management, cost control, and risk. When contract managers understand the impact they can have on the business as a whole, they are taking on a role with truly strategic importance.
The technical skills encompassing contract language and contract law, risk management, and financial acumen are only half the battle. A great contract manager must also have powerful interpersonal skills and keen attention to detail.
Persuasion & Negotiation Tactics
Contracts almost invariably involve some degree of negotiation. Parties must agree on who will do what, when it will happen, and how performance will be measured. Typically, this requires a keen understanding of human nature, including the motivations and concerns that other parties are bringing to the table.
Negotiation often means balancing a willingness to collaborate with a clear understanding of what matters most versus which concessions may be acceptable. Contract managers must be adept at reading the nuanced signals that indicate where the other party stands with respect to key elements of the agreement. They must also have strong communication skills and a healthy dose of empathy.
Here again, AI-powered contract intelligence software offers a leg up by providing an accurate picture of previous agreements, including the general parameters of past contracts, and highlighting areas of potential disagreement.
Contracts should always be designed to protect the parties to the agreement from adverse events, which everyone hopes will never come to pass. When a problem does occur, though, litigation is virtually always a last resort. The ability to stand firm in resolving conflicts is, therefore, essential.
When problems inevitably crop up, a great contract manager will play a valuable role in de-escalating and resolving the conflict. Such situations call for a delicate balance between standing one’s ground on key issues and managing relationships such that adverse situations don’t take a turn for the worse. Once again, strong interpersonal skills are extraordinarily valuable.
Managing Internal Stakeholders
Inevitably, contract managers will face pushback from internal stakeholders who may regard legal concerns as a barrier to getting things done. In those kinds of situations, great contract managers will effectively communicate what is at stake, including the inherent risks associated with any proposed fast-track approach.
That requires informing and educating internal stakeholders about the ramifications of legal contracts and the importance of standing firm when it comes to key terms and conditions that protect the company’s interests.
All business is ultimately about relationships. Contracts provide the formal framework for defining and governing those relationships. Having said that, – most contracts ultimately serve as a fallback to protect the parties to the agreement in the event that fundamental relationship management techniques fail. That’s why a strong penchant for relationship management is such a powerful asset for a great contract manager.
Contract managers must strike a careful balance between assertively defending the interests of their own organizations and recognizing the realities in which their contractual stakeholders operate. They should be adept at minimizing friction, collaborating with others to solve problems, and instilling confidence in the people around them.
Ultimately, the difference between a good contract and a great one comes down to having a strong mix of these technical and interpersonal skills and understanding how to apply those strengths to add business value to the organization. When the talents of a top-notch contract manager are supported by well-defined processes and powerful contract intelligence technology, the organization stands to deliver higher levels of business value across all of its functions.
Great contract managers also know how to best leverage technology in contract lifecycle management. Contact Icertis today and discover how Icertis Contract Intelligence can change the way you manage contracts and leverage your contract data.