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Smart document automation and CLM How does it work in the real world

About Charles Drayson

Charles is a UK lawyer who has used document automation for 20 years. He has worked for large law firms, corporate legal teams, and has automated legal and non-legal documents. He writes for Legito to share his passion for using automation to get work done. “I get a kick out of creating good content and seeing it used repeatedly and reliably by colleagues without fuss and bother”.

Smart document automation and CLM How does it work in the real world

About Charles Drayson

Charles is a UK lawyer who has used document automation for 20 years. He has worked for large law firms, corporate legal teams, and has automated legal and non-legal documents. He writes for Legito to share his passion for using automation to get work done. “I get a kick out of creating good content and seeing it used repeatedly and reliably by colleagues without fuss and bother”.

Charles Drayson

Feb 10 · 6 min read

Charles Drayson

Feb 10 · 6 min read

Some organisations have a market position that allows them to standardise and automate their end-to-end sales, HR or just about any other business process. Some operate at volumes that make it impractical to work in any other way. If you want to put apps on your iPhone, there’s only one route. You probably accept the Microsoft routes to subscriptions if you use Microsoft office applications.

At the other extreme, some organisations trade without any focus on contracts or business processes. Either they don’t care, or their customers don’t care, or such matters are practically irrelevant. In some industries, especially B2C (business-to-consumer, as opposed to B2B, business-to-business), laws or professional bodies regulate goods and services, so contracts do less work.

For everybody else

Lawyers invented the phrase ‘battle of the forms’ to describe the tussle of two organisations trying to impose their contract terms on each other. In sectors with protracted sales cycles, watch the players dance while navigating procurement processes, compliance requirements, and contract procedures. It’s easy to see why organisations want to use their standard documents and processes. But, your standard contract is my need for a custom legal review. Your standard process is my non-compliance.

How do we make it work If we can’t all have the expedience of customers and vendors playing by our rules and paperwork? If flexibility is required, can we work with bespoke arrangements? How do you manage a contract process in an uncooperative world?

Let’s start with the (apparently) binary question: do we contract on your terms or mine?

Let’s start with the (apparently) binary question: do we contract on your terms or mine?

The organisation with the most negotiating power could win. Alternatively, you could trigger a discussion about which contract describes the transaction better. The weakness of many standard contracts is that they are standard – I mean ‘standard’ rather than tailored. A standard contract isn’t much more than a collection of legal boilerplate drafted to be pro-customer or pro-supplier, depending on who issues the document, invariably stuffed with irrelevant sections. You could read a standard contract and learn almost nothing about the specific deal. There might be placeholders for price, dates, and the like, but it probably won’t capture the deal parameters discussed during pre-contract dialogue.

A better alternative

Tailored contracts are more compelling than standard contracts. They capture deal parameters that matter. They describe the deal – they don’t merely set the scene for litigation. Creating a tailored contract forces the players to ask and answer questions, engage in the process, and have a stake in the outcome. A tailored contract can be a better document for both parties. A tailored contract is less likely to overlook critical details. A tailored contract is the better alternative to being forced to submit to a standard contract.

Document automation uses templates that build text (in this case, contract text) using a series of questions. It doesn’t take many questions to shift from standard to tailored. However, if there are many questions to be asked, document automation tools create dynamic questioning: each answer dictates the flow of the following question – to filter out irrelevant questions. The questions can include validation checks to avoid errors like incompatible responses.

The choice between two sets of competing contract documents does not have to be binary. There’s a trend towards contracts built from modular sections with subject matter split into schedules and attached to a document (such as an order form) to bind them together. If you adopt a modular approach to contract obligations, text can be re-purposed to attach to contracts originating from a counterparty. This hybrid approach is usually acceptable to organisations who otherwise insist on using their own ‘paper’ as the basis for deals. All is not then lost. A document automation solution favours a modular approach.

Keep the process moving and build predictable variants

After agreeing the starting point for contract documents, there’s a process to follow before they are signed. In any sales process, it’s inevitable that at least the seller team will want insight to keep the process moving. Any system that assumes transactions step neatly through a predictable path will frustrate everyone. The buyer doesn’t care about your sales process. The buyer might want to do the steps in a different order, and you might need to repeat some steps. Documents get negotiated, and deal parameters get changed. At the stage when deals start to follow their course, the opportunities for errors and avoidance loom large. A good contract process must provide visibility to stakeholders and equip the team to iterate new versions of documents if required. 

In some industries, it’s possible to predict the variations in deals. Build predictable variants into template libraries to facilitate negotiated changes without losing speed or consistency and reducing human error associated with manually amending documents. Simple mistakes at this stage have a habit of causing problems later. Some changes need to be made in more than one document, with a risk of ambiguous contracts if you make the change in only one place.

Some contracts use the (unwise) format of specifying price in digits and text, e.g. Price US$100,000 (one hundred thousand dollars). If you amend the price, you risk errors like this: Price US$120,000 (one hundred thousand dollars).

Good document automation systems integrate document production with workflow. Templates catering for deal changes can flow down the changes to the workflow. For example, price negotiations might necessitate a refresh of your approval process.

Unplanned paths

Sometimes, a document begins as a template but gets negotiated to the stage where you make amendments using manual tracked changes. Sometimes, deals include documents that were not automated, or originated from another organisation. At that stage, document automation stops, but contract management can continue. Legito contract lifecycle management (CLM) also works with bespoke documents – the emphasis moves from document creation to document management. Even when deals follow unplanned paths or use unfamiliar documents, track them and store them using one solution. If a solution doesn’t allow for such things, teams will abandon it  – you will lose control and oversight.

Before and after signing contracts, customers might ask for collateral materials such as insurance certificates, evidence of accreditations, information security assessments, or expenses policies. Some of those materials need to be updated annually. Store them in Legito, so authoritative versions are in one place. After signing, customers might request changes or place additional orders. Suppliers might have to generate reports, deal with renewals, or notify price changes. Some events will be date-driven, and you must not overlook them. Some require generating new documents, but recycle data already known to the CLM database. 

CLM extends document automation to manage the messy business of change. Without a system to support change and ad hoc events, colleagues will treat such items just like any other task arriving in their inbox. The outcome might be evidenced in email folders and their network folders. Managing by email and network folders is short-term. Team members leave. Contracts endure longer than one person’s recollection of where they stored business information. Multiple copies of documents are stored in different places, creating version control problems.

Nobody wants big IT projects

Commentators talk about organisations being agile, able to work at pace, responsive to change. Nobody wants big IT projects. Do not try to configure a document automation and CLM system with rules too rigid to survive first contact with the real world. Use workflows, but don’t use them as a tool to micro-manage people. Capture high-level stages and approvals. Extract critical information from documents, but use the document management tools to make it easy for people to find documents they need to read. The objective is to augment your human workforce and leave them to do what humans do best.

I finish with a plea that will help your quest to make CLM work in the real world: when you build document templates, avoid the temptation to draft contracts that are overtly one-sided or inconsistent with reasonable norms. 

If you want the many benefits of automation and process management, don’t use the tools as a way to foist unreasonable documents on your trading partners. One-sided documents make lawyers reach for a red pen, or they might reject your documents wholesale in favour of their ‘standard’ documents. 

A good contract management system is your chance to shine. 

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