HR contract management and why it is important for your business

Many companies admit that they could do a better job when it comes to contract management.  However, those companies that do consider contract management solutions, usually only consider operational contract processes, like procurement or sales contracting.

HR often gets left out in the cold.  It is fair to say that some business executives still view a contract as a  tactical ‘insurance’ policy for when things get difficult.  World class organisations who look at contract management from a business critical and strategic perspective, view contracts as the outline of the business relationship between themselves and a third party – with terms and conditions, that if effectively managed, can be exploited to maximise commerical gain or minimise risk exposure.

So why should a business care about its HR contracts?  There are several areas where deploying a contract management solution to automate the HR contract process can provide significant benefits.

First and foremost is staff turnover.   Average staff turnover for US organisations is 15% (closer to 100% in the fast food industry), according to a recent report by Nextera.  This can produce a significant burden on HR functions and business managers looking to contract with new permanent or temporary staff.  Contract drafting for most companies is a slow and manual process that involves duplication of effort and multiple stakeholders. 

Self-service contract authoring
Self-service contract authoring solutions, available in contract mangement solutions like Dolphin Contract Manager, allow business managers to create tailored and compliant contracts by answering questions provided in online wizard-driven questionnaires.  Contract Managemnet solutions with self-service contract authoring will automatically save contracts created in a central repository and can instigate internal approval workflows.  These solutions also make contract amendments, when employees change role, a simple and rapid possibility.

Implementing organisational change
Senior business executives who are looking to restructure their businesses have a need to have accurate and timely information about their human resource pool in order to assess how rapidly and smoothly they can instigate organisational change.  Information like length of service, termination terms, remuneration and notice periods are all required, but it many cases, current and accurate data relating to HR contracts is not easily accessible.  When employment agreements are lost in the myriad of corporate file systems, it can be even harder to efficiently gain access to contract-related information.  Contract Discovery solutions, like Dolphin AutoCapture, aim to make locating lost or hard to find contracts a thing of the past.  Dolphin AutoCapture locates lost contract documents in Windows file shares and computer desktops, automatically extracts key contract milestone data and uploads the contracts and data seamlessly in to the Dolphin Contract Manager system for proactive tracking and management.

Managing HR contract related litigation
Digruntled employees who sue their employers is a common cause of contract related litigation and costs businesses millions in disruption to business, expenditure on external legal and audit and discovery services, particularly when the current version of the employment contract cannot be readily located or where the contract has not been updated to reflect changes to the employees role or employment status.

Human Capital Management
A growing number of companies have begun to look at managing their people and talent as resources that have a financial value to their business.  Human Capital Management and the on-going requirement to enhance the training and qualifications of employees to enhance their asset value, requires micro-management of contract related terms and conditions to extract the greatest value and potential.

Managing outsourced service providers
For those businesses who have outsourced their Human Resources function, will be be aware of the need to manage contract milestones, performance targets and obligations closely in order to maximise the value and savings expected when key business functions are contracted out to third parties.  Contract Management software is key to allowing HR and key business stakeholders with the right management information to manage these relationships effectively.

In short, contracts are central to Human Resources and HR executives who are looking to improve efficiencies and erradicate unnecessary cost and risk in HR contracting should consider deploying a contract management solution.  Dolphin Software holds regular free to attend web seminars.  Visit: www.dolphin-software.com/events.htm for more information.

Internal Controls audits and Contract Management

Infraco, the South African government-owned Broadband and long distance telecommunications provider, has been cited in a recent Deloitte audit report for a failure in internal control processes in the company’s procurement and contract management environments.

“Although there are set policies, procedures, guidelines and processes to effectively effect the contract management process, we noted in many instances that these are not complied with, unintentionally or otherwise”, stated the Deloitte report.

An increasing number of companies all over the world are failing internal controls assessments conducted by independent auditors as auditors become increasingly concerned over the lack of visibility and control that many companies have over existing contracted commitments and overall contract management procedures.

The majority of companies put most of their effort in to the negotiation of contract terms and conditions, but do not dedicate the same level of attention and oversight post contract award.   This is largely because legal and business executives still do not consider contracts to be mission critical or strategic to their businesses.  For many, a contract is viewed as an insurance policy for when things go wrong.  Clearly auditors and industry observers, like the IACCM, see this as an outdated view and one that will only lead to increased scrutiny by auditors and regulators.

Contracts are strategic documents that outline how two parties are to collaborate with each other and the terms and conditions that govern that collaborative relationship.  For those companies that are able to manage and control their contracting processes efficiently, greater competitive advantage can be achieved through cost savings in the pre-award contracting process and better exploitation of contract terms, conditions and obligations in the post award process.

Dolphin Software would argue that the most effective way to bring about total control of the contract management process and ensure that contract obligations are properly complied with is to follow clearly defined contract management procedures, to appoint a senior executive to oversee contract management from a strategic position and to automate inefficient manual processes and control contract milestones and commitments more effectively with technology.

CFOs will rapidly understand the strategic importance of effecive contract management if their auditors refuse to sign off their accounts.

**24 February 2011 – update**

Broadband Infraco CEO and Non-Executive Director resign

Dave Smith, CEO of Broadband Infraco, the South African state owned entity tasked with bringing down the cost of broadband, and Non-Executive Director Tumi Magasa have resigned with immediate effect as a result of their recent contract management woes.

In October last year audit firm Deloitte was commissioned to conduct an urgent internal audit “to review the controls in relation to the contract management function, evaluate the adequacy and effectiveness of key operational and financial controls, and test compliance with the applicable legislation, policies and procedures”.

Dolphin webinar: Using Microsoft SharePoint for Contract Lifecycle Management

Contracts govern the way that companies conduct business relationships with each other. As business becomes more international, contracts and agreements become more complex – with terms, conditions, milestones and obligations to keep track of and manage. Unfortunately, for many companies, the contracting process leaves a lot to be desired, increasing the chance of missed commercial opportunities, costly penalties for non-performance or missed obligations. Try answering some of these questions for example:

• Do you know where the latest versions of your key contract templates are?
• Have you ever cut and pasted terminology from previously authored contracts?
• Do you use email as the mechanism to review draft contracts with colleagues?
• Do you save all contract documents in a secure, version controlled repository?
• Do you receive alerts and reports when key milestones and obligations are due?
• Are you able to guarantee that all contract milestones and tasks have been complied with?

Dolphin Contract Manager is the world’s leading Contract Management solution for Microsoft SharePoint environments.

This SharePoint-based solution means that your IT team can use the same SharePoint infrastructure to provide enterprise-wide contract management capabilities. Because Dolphin Contract Manager is SharePoint-based, your business users will also find its user interface and menu systems instantly attractive and familiar, reducing the need for end user training.

Register here for this complimentary web seminar to learn more about how Dolphin Software can help you make the most of your investment in Microsoft SharePoint and automate and control your contracting processes. Register now or contact us for a personal demonstration.

Can legal do a better job at supporting sales contract management?

The International Association of Contract and Commercial Managers (IACCM) are currently polling legal and contracting professionals to record their thoughts and opinions on how contract management is handled in the companies that they work for.  One of the early conclusions of the survey (which can be accessed here:  https://www.surveymonkey.com/s/StateofSalesContractManagement), is that many sales and commercially focused staff still view Legal as being too risk averse and a cause of inertia in the commercial or sales process.

Perhaps, Legal would argue, that if they are not going to be risk averse and cautious, who else in the organization is going to be?  On the other hand, with quarterly sales targets to meet, it is faster (but thorough) contracting that is required to facilitate risk managed, but commercially optimized deals.

Contract Management software solutions, like Dolphin Contract Manager do have a key role to play here.  The contracting process for many companies can be manual and inefficient.  Technology based solutions that support the contracting process can reduce contract cycle times and allow key stakeholders, like Legal, to add value in the right places and at the right time, instead of having to become involved in all transactions that tie up limited legal resources.

Self-service contract authoring, where non-legal users, like sales teams, are able to create tailored contracts and agreements by completing intelligent questionnaires is a major development in corporate contract management systems.  Previously technology that was used by law firms to automate the creation of standardized contracts, is now available to free up legal resources so that they can focus on the exceptions and non-standard contracts.

Legal clause libraries that allow legal language to be formatted in to reusable objects and then used to speed up new contract drafting or to be inserted in third-party contracts during contract negotiations, also play a significant part in empowering key business stakeholders in the contracting process, while legal maintain an oversight role.

Providing a central electronic repository for contract documents with version control and security profiling would seem obvious, but it is surprising to see how many companies exercise little or no control over where contract documents are stored.  Without strict control mechanisms in place, an organization will soon lose control over contracts and commitments contained within them.

Post-award contract milestone and obligations management is typically lax in many organizations, and it has been suggested that perhaps legal advisors take an overly conservative and risk averse stance when the focus of the contract is on its worth as an insurance document in preparation for when there are breeches, rather than as an outline document detailing the commercial relationship between the two parties.   After all, over 60% of commercial litigation matters now relate to contract disputes.

If legal resources can be freed up to focus on non-standard and exceptions and if there is an efficient and effective way to proactively manage contracted milestones and obligations, then perhaps we will be able to see the legal team being able to spend more time overseeing the contracting process and adding value where it is most needed.

Dolphin Software has recently published a new white paper entitled Why contract management should be a strategic imperative for your business, which can be downloaded here: http://www.dolphin-software.com/lp_cm_whitepaper.htm

Are contracts the icebergs of your company?

An estimated 80% of business-to-business transactions are underpinned by legally binding contracts and agreements. Though many of these contracts contain clauses, terms, conditions, commitments and milestones that need to be tracked and managed over the contract’s life to maximize business benefits and minimize associated costs or risks, most organizations never actively manage their contracts during the agreement period. Contracts are archived away in departmental filing cabinets never to be reviewed again until a problem arises or the contract has already expired.

Research firm, Faulkener Information Services estimates that as many as 10% of contract documents are lost each year.

Some of the world’s most respected companies have contract management practices that leave much to be desired.  Many companies do not simply have control over contracted commitments, milestones or obligations because key business stakeholders are not able to readily access relevant or timely information about what is contained within contracts because the contract documents are either lost or hard to find.

It is common for General Counsels and other contracting professionals to express frustration that they do not know how many contracts their organisation has or what commercial terms and commitments are contained within them.  Contract Management software systems play a significant role in gaining control over the contracting process, but they largely ignore the issue of capturing existing or legacy contract contracts and data.

Dolphin AutoCapture is a unique Contract Discovery solution that makes use of advanced search and artificial intelligence-based technologies to conduct an instant and automated audit of your contract landscape.

Starting at as little as $15,000, Dolphin AutoCapture will automatically locate lost or hard to find contracts in Windows File Shares and computer desktops, identify duplicate documents and tell you exactly how many contract documents (and by type) you have throughout your organisation.  Dolphin AutoCapture also extracts key contract milestone data from recovered contracts (like start/termination/renewal dates, contract parties, locations, values, currencies, right to assign, etc) and presents this data instantly for Legal, Finance and other contracting professionals to analyse and interrogate.

To find out more about Dolphin AutoCapture, visit http://www.dolphin-software.com/autocapture.htm and navigate around your contract icebergs.

Post-award contract management becoming more adversarial

In a recent blog post by Tim Cummins of the IACCM, he observes that members of the international body of Contract and Commercial Managers that the IACCM represents, have noted that contract negotiations are becoming more adversarial and relationships between customer and supplier, increasingly one-sided.

This is despite efforts in recent years by the IACCM and others to promote win-win based collaborative commercial relationships.  It would seem that when economic times get tough, buyers of goods and services will revert back to old practices of pushing for the lowest cost for the highest quality.  Contracts that were negotiated before the recession, with long term goals in mind, are now being amended and changed to incorporate changes in payment terms, early terminatation clauses and other buyer-centric conditions.

Recent research by US law firm Fulbright & Jarowski would appear to back this observation up, as new research published by the firm, now indicates that over 60% of corporate litigtation is related to contract disputes.

Technology cannot change human behaviour, but contract management software solutions can have an important part to play in the development of long term win-win relationships between customers and vendors.  Contract Management systems provide key business stakeholders on both sides of the commercial relationship with the right data and information to make sure that contracted commitments and obligations are adhered to; and if they are not, how to go manage amendments to contracted terms in the least disruptive way.

Visit www.dolphin-software.com to read more about how best-in-class contract management software can improve the management and productivity of relationships with your key customers and suppliers.

Download a free whitepaper on why Contract Management should be a strategic imperative for your business here: http://dolphin-software.com/lp_cm_whitepaper.htm

Contract Management becomes top priority for the White House

Daniel Gordon, procurement policy administrator at the Office of Management and Budget

Dan Gordon, administrator of the Office of Federal Procurement Policy, has announced a range of initiatives to improve contract management practices between suppliers to the US Government and the way that Government Agencies administer and manage contract performance and obligations.

“Contract Management is front and center in our focus”, Gordon declared at a recent meeting on procurement reform.  Gordon and the Obama administration intend to root out negligent behavior in government acquisition by having agencies better manage the contracts they award.

“A company will no longer get a contract and then never again hear from the agency about the work”, Gordon said.  “Further the government won’t turn a blind eye toward schemes or well-known shady business partnerships”.

There are many examples of poor contract management practices in Government and organizations like the Project on Government Oversight (www.pogo.org) have made a significant impact in raising awareness of the need to not just negotiate contracts with third party suppliers, but also to track performance and monitor compliance to contracted obligations once the contract has been signed.

As contracting becomes more complex and more litigious (a recent study by Fulbright and Jaworski showed that the majority of corporate litigation matters now arise from contract-related disputes), it is crucial to keep track of what has been committed to in a contract.

The old world of throwing more resources at the problem of  contract oversight will not work anymore.  Qualified contract management resources are hard to find and manual tracking of contract milestones and obligations was too error-prone anyway.  What is required is a balance of technology solutions that support the contracting process and human oversight to enforce contracted terms and conditions.

Choosing the right technology solution is critical. Many Finance or ERP based contract database solutions fail to realise that government contracting demands automation and control at every stage of the contracting process from the creation of the contract, through to the tracking of obligations and the tracking of vendor performance. 

Some contract management software solutions, like Dolphin Contract Manager, automatically integrate with the Federal Acquisition Regulations (FAR/DFAR) list and allow government procurement managers to efficiently create contracts and ensure that commitments and obligations are effectively managed once the contract has been executed.

We believe that true transparency in government contracting can only be really achieved when you have total control over your contracts and obligations.  It is time for government agencies to embrace technology solutions to help them to achieve this.

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Top 7 most contentious contract terms

Each year, the International Association of Contract and Commercial Management (IACCM) publishes a highly popular annual list of the most commonly negotiated contract terms.  The 2011 list is being compiled at the moment and legal and contracting professionals are invited to provide their input by following this link:  https://www.surveymonkey.com/s/2011TopTenTerms

A list of leading contentious contract terms that have a higher propensity to lead to conflict and litigation is an interesting alternative deliverable to come out of the submissions received so far from this year’s Commonly Negotiated Terms survey.  In the latest Fulbright & Jaworski Litigation Trends survey, it is suggested that over 50% of corporate litigation arises from contract disputes.

If General Counsels are to try to reduce the cost of litigation, then they may be advised to take note of the following list of IACCM contentious terms:

1. Delivery/Acceptance (cited by 43% )
2. Price/charges (38%)
3. Change management (33%)
4. Invoice/late payment (29%)
5. Performance guarantees/undertakings (28%)
6. Service levels (27%)
7. Scope/goals (23%)

It is interesting to note here that the most popular IACCM contract clauses (confidentiality, IP rights and IT security) do not appear to be invoked in corporate litigations.

It can be argued that with more effective contract management, most or all of the contentious clauses listed here, could be managed and addressed before they become an issue.  Dolphin Contract Manager’s contract obligations management functionality, where key commitments and obligations can be identified and distributed to key business stakeholders, play a key role in ensuring 100% compliance to contracted terms and conditions.

Before last weekend, did you consider printer cartridges to be a risk?

No, nor did we.  It is surprising to discover what other unknown risks you may have hidden in your organisation.  Take contracts, for example.  Do you have full visibility and control over your executed commercial and procurement contracts?  Are there inherent risks in your contracts that you do not have ready access to, or that your business is not managing effectively?  Do you base your business plans on contracted obligations and commitments that you do not have control over?

As Andy Kyte at Gartner says, ‘contracts are the lifeblood of an organization and if you are not in control of your contracts, you are not in control of your business’.

So, what should you do about hidden or hard to find legacy contracts that are not being managed effectively?  Typically, you will normally have two choices:

• Ignore the problem and leave your legacy contracts as they are (but run the risk of contracted obligations and commitments not being managed)
• Hire resources to locate, scan (if in paper format) and manually profile legacy contracts and milestone data. (For many organisations, this is too costly and too complex to consider).

Dolphin AutoCapture – the world’s first discovery engine for legacy contracts
Dolphin AutoCapture is a solution that has been designed specifically to address the issue of locating lost or hard to find legacy contracts hidden in Windows file shares and user desktops.

For many organisations, legal, procurement and commercial teams spend significant energy and resources negotiating and fine-tuning the terms and conditions of contracts, only to disguard the contract document once it has been signed and executed.  An average procurement or commercial contract will contain a mixture of critical dates that need to be tracked, as well as obligations or commitments that need to be managed effectively in order to maximise the value from the business relationship.

Dolphin AutoCapture is the first solution that will:

• Discover and identify list or hidden contracts in Windows file shares and computer desktops
• Automatically extract key contract milestone data from contract documents
• Provide a management dashboard with instant visibility into contract milestones and key terms

If you are planning for your next financial year at the moment and you are formulating plans on your understanding of what you have committed to in procurement and commercial contracts, but you feel that you do not have complete control or visibility of your contracts, consider deploying Dolphin AutoCapture to provide instant visibility and control over your contracts and commitments.

For more information, visit: http://www.dolphin-software.com/autocapture.htm

Managing contract terms and commitments will be critical following the Government spending review

The United Kingdom, like many countries, is straddled with an unprecedented level of debt.  The UK’s debt currently stands at over £900 billion ($1.4 trillion), or £33,000 for every person in employment.  In an attempt to bring this national debt down to a manageable level, David Cameron’s government will publish the results of its long-awaited Spending Review on the 20^th of October.

The Spending Review will highlight areas where costs can be saved in central government departments and local authorities.  The United Kingdom will join counties like France and Ireland and introduce draconian austerity policies to reduce the national debt.

Much has been reported about Government quangos being abolished, defence cuts that will deliver new aircraft carriers, but with no aircraft and a winter of discontent with public sector workers planning widespread strikes in a move to resist the cuts.

Sir Philip Green’s report that was published last week provides an insight in to some of the areas of government where significant cost can be saved, namely more effective procurement and supplier contract management.

There is no doubt that if you are a department head or a manager in a central government department, local authority, university or hospital, you will be under more pressure than ever before to reduce costs and expenditure.  It is likely that spending cuts will lead to more services being outsourced, which will only lead to greater pressure to manage external service providers even more closely.

Contract Management software solutions should be able to offer significant value here.  Not only do Contract Lifecycle Management solutions help to streamline and control the contracting process with external suppliers, they also provide invaluable tools to make contract oversight and performance something that can be controlled and measured. 

If an outsourcing agreement includes complex obligations and service level agreements (SLAs), these can often be missed or poorly managed.  Solutions, like Dolphin Contract Manager, have been designed to make contract obligations and commitments more visible and better controlled.  A National Audit Office report last year highlighted over £300 million in savings in central government IT contracts alone, through better contract management. 

The British government should absolutely look to cut unnecessary cost from budgets, but it should also look to use technology in a smart way to improve the efficiency and effectiveness of government procurement at the same time.