5 Ways CLM Advances Digital Negotiation

Attorneys often refer to contracts as “paper.” As in: Whose “paper” are we using—the seller’s or the buyer’s? What does our legacy “paper” tell us about contractual language and the clauses we have employed? If we need to amend contracts because regulations changed, how will we “re-paper” everything?

There is an obvious reason for this shorthand. Until recently, most contracts were drafted, swapped and signed on actual paper exchanged between the parties. In the alternative, contracts lived in Microsoft Word files, e-mailed back and forth until the time came to print the final version and store it—on paper.

That is why cloud-based Contract Lifecycle Management (CLM) systems represent a paradigm shift. Contracts can now live entirely online, from assembly to completion. The counterparty can use the same user interface as you do, and signatures can now be affixed electronically. Metadata, statistics and compliance can now be tracked efficiently. The need for physical paper is eliminated.

Perhaps most importantly, digital negotiation takes place in CLM. What do you mean by “digital negotiation?” Here, software tools replace the pens and drafts in a folder on a desk and help overcome the often-aggravating necessity of transactional practice. It makes the process easier and more comfortable. Digital negotiation also introduces data management into the equation. It breaks down contracts into components to leverage insight. This can translate into a process of continuous improvement, both in work product quality in relationship management if done smartly.

The following are five elements of CLM-driven digital negotiation to consider:

Your system stores existing contracts, and accumulates new ones, for access, study and preparation.

At heart, a CLM system is a relational database enhanced by functional features that are designed specifically to manage the unique requirements of contracts. Not only do complete electronic contracts reside there, but your old contracts can be migrated into the database as well. This eliminates the prospect of misplacing or losing contracts and promotes better reference as negotiation begins.

Use metadata and search tools to retrieve and review existing contracts. Analyze clauses, previous cycle times, milestones, and compliance metrics by sifting through the library automatically. Create key performance indicators (KPIs) and set up easy-to-read dashboards based on what you discover. Then, prepare accordingly.

The modern cloud is built on security and enables flexibility.

How secure is this whole endeavor anyway?

A credible CLM system uses servers, either internally or in colocation centers, that are certified by organizations such as the International Organization for Standardization. These systems are also audited regularly, subjected to Statement on Standards for Attestation Engagements 16 (SSAE 16) and Service Organization Controls (SOC) processes. Technological credibility is also enhanced by encrypting data, whether at rest, in transit or both, and through the use of IT security that includes firewalls.

Work product stays in one system helping avoid it getting into the wrong hands. So does the record within the platform of collaboration and negotiation with counterparties.

Once security is ensured, configure the system to best resemble the way you work. Lean on workflow automation to move contract drafts along for review, redlining, input, and approval. Set up a homepage that provides you with information you view as most pertinent. Build out the navigation that directs you to the proper pages more quickly. This flexibility helps manage transparency and cycle times, among other aspects of negotiation.

Counterparties can access the same user interface, use the same document versions as you and sign the documents in the same system.

Collaboration is a current buzzword in the market for legal technology. But it is also a huge deal if that CLM solution provider builds collaboration with your counterparties, rather than just the internal team, into its feature set.

First, place a starter contract proposal into an interface to share with others. Next, shoot credentials over to the counterparty for them to access that same interface. Wait as that counterparty conducts its review, prepares its responses, memorializes its proposed changes and arguments, and volleys its updates. Now it is your turn. Keep going, and then enable both sides to e-sign the document, either with a built-in function or an integration to DocuSign or a similar offering.

The mystery of what you will get back, and any illegibility, is removed from the process.

The functionality built into the collaboration CLM interface helps memorialize everything in one location.

What edits have been performed? In which version did that change originate? What was the reasoning? Who approved what and when? How did the overall process take place?

A well-built collaboration interface records all information. Version control occurs as you go to follow the red lines and the formation of the signed contract. Comment strings foster communication and help eliminate confusion. Any objections or desired amendments can be made clear. Approving leaders can hit a button immediately to shake hands on a clause, something that can eliminate whole days, or weeks, of the contract’s cycle, compared to traditional negotiation methods.

The parties, at the end of the process, walk away with multiple opportunities. The collaboration can produce a level of satisfaction that will help streamline future negotiations. They provide a holistic reference point to improve future relations. If an alleged breach takes place, the record of the negotiation supports arguments and potentially limits exposure to liability. Collaboration, then, is as much about risk management as it is cooperation.

The continuous improvement of your contract processes is driven by data in a digital environment.

Do you fully understand what your contracts contain, how they are enforced and how they further your business objectives? CLM technology helps fix data problems, not just process problems. Analyzing and understanding your contract data begets strong digital negotiation.

This happens via several mechanisms. The capture of metadata helps evaluate past contractual relationships, terms, conditions and milestones. An analytics engine builds cross-reference tables and accompanying graphs, charts and other visual displays, which then inform KPIs to report to the C-suite, and strategies to improve negotiations. Dashboard functionality helps you track the current workflow and status of contracts to manage cycle times, stakeholder engagement, approvals, and other factors in real-time.

Data analytics triggers a granular deep dive into what you have and what you want. More advantageous and more enforceable contracts may result. This is another aspect of a CLM system to examine during the evaluation process.

Digital negotiation is likely going to become a norm and an expectation. Eventually, it will be a need-to-have, rather than a nice-to-have. Contracts serve as the lifeblood for many organizations and a digital platform helps make that dynamic more apparent. Draw on the considerations in this article and explore how digital negotiation can change the way business is done in your organization.