Five Stages of the Contract Management Process

An important part of analyzing contract workflows is breaking that lifecycle down into recognizable steps. To identify broad trends, the entire process needs to be separated into definitive stages, starting with contract generation and following a distinct progression of activities to completion. Once those steps have been distinguished, they can be broken down and studied individually to look for potential improvement.

Docusign recently conducted a broad survey of contracting professionals to collect data for the Contract Management Trends 2022 report. One of the key takeaways from that research is a concrete understanding of the five crucial stages in a contract’s lifecycle, including the people, processes and tools involved. In this post, we’ll go through each of the five stages of the contract management process and look at the most recent data on how contracts are managed today and how technology can streamline contracts in the future.

1. Generation

To start a contract’s lifecycle, the first draft of the document has to be created. Almost no organizations are starting new contracts from scratch, but this can still be a lengthy process. While 48% of respondents have evolved to utilize a dedicated contract lifecycle management tool, the most common methods for contract generation are still standalone tools like Microsoft Word (68%) and Google Docs (50%).

It’s encouraging that there’s some growth to reduce the number of tools involved in contract generation, but it also seems clear that adoption to the next generation of tools is only partial. Our survey showed that plenty of today’s organizations are using more than one tool to create new agreements. Reluctance to move away from traditional, disconnected technology often results in a lengthy contract generation process and additional room for error.

2. Negotiation

After a contract is generated, all parties involved need to negotiate back and forth until final terms are agreed to. For respondents in our survey, this stage in the process is the most time-intensive. Nearly half of respondents say that standard steps such as collecting signatures, catching mistakes, and legal approval are the biggest obstacles to faster negotiation. These delays result in at least three new versions of a document before it is completed.

One of the main causes of these hurdles is the lack of a platform to share contracts and collaborate on revisions. The existence of multiple versions of the same contract makes it easier to make mistakes or lose track of progress made elsewhere. Keeping the negotiation and process centralized through online collaboration tools reduces the possibility of human error and ensures all parties have access to the most recent version of the contract. 

3. Routing

Our research shows that contracting professionals are using a wide range of tools to share contracts internally and externally. While the most popular routing tools are email (73%) and cloud storage systems (64%), a significant number of today’s contracting workers are still relying on outdated systems like postal mail (29%) and fax (20%). All of these contract sharing methods have the same primary flaw: they take the contract and the users out of the CLM system.

When contract routing relies on more than one solution, it opens the door for several new problems, like reduced visibility or lost documents. It also makes it easy to accidentally share the contract with the wrong party, which 26% of our respondents have done. 

4. Approval/signature

When it’s time to finalize a contract by collecting signatures, today’s contracting professionals have largely matured to utilize modern tools. Around two-thirds of our respondents use e-signature software or a CLM tool for collecting signatures.

However, nearly one-third of respondents are still sending contracts for approval via email attachment or hard copy. These manual processes run into serious problems at scale. With around a quarter of teams reporting that approximately 5 unique people are involved in the contract approval process, the delays and inefficiencies of these exchanges can add up quickly.

When it comes to workflow obstacles, a range of different departmental approvals (legal, pricing, procurement) and signature collection delay around 30-40% of organizations. These approvals are the biggest hurdles for today’s contracting workflows. The more disjointed approvals are from a central CLM platform, the more likely it is for delays and errors to occur.

5. Storage

Once a contract is finalized, cloud storage is popular with modern organizations. Around two-thirds of respondents use cloud storage to manage completed contracts, either exclusively or in conjunction with on-premises servers. Only 10% of organizations in our survey reported relying on paper file cabinets to store agreements. However, even with a majority of organizations storing contracts in the cloud, 46% of respondents report being unable to locate a stored contract.

Making these contracts easy to find is also critical to management workflows since more than two-thirds of respondents need to locate archived contracts on a daily or weekly basis. And when they do need to access a contract, it takes an average of 45 minutes to locate the correct file and nearly 90 minutes to find specific terms within that document. 

A CLM tool is an ideal way to facilitate unified storage and naming conventions. This will speed up the process of finding the right document and locating the relevant clauses within that document. Once the CLM is established, additional insights can be gained through AI and other advanced analytics tools. 

Improve the contract management process with modern tools

Overall, the average organization in our survey required 30.8 hours of staff time to generate, negotiate and locate a contract. At the scale of 500 contracts in a year, that works out to roughly 7 full-time employees worth of labor. It’s easy to see how improvement at any stage would result in significant efficiency gains when the contract process is repeated that frequently.

If you want to learn more about how modern CLM tools can take advantage of new technology to improve each of these five steps, download the Guide to Contract Lifecycle Management.

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Austin Miller
CLM Expert