Technology

alt.legal: Revisiting Contract And Commercial Management (A Conversation With IACCM, Part II)

IACCM is on a mission to improve the quality and integrity of trading relationships by simplifying contracts.

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Contract management can save lives.

That was the basic summary of one of the stories I heard this past week at Agiloft’s Customer Advisory meeting. One customer from a healthcare agency discussed contract management and centralization as the starting point for business transformation. The result, in their line of work, was that their mental health clients could get connected to care, rehabilitation, and recovery in minutes instead of days.

This was sometimes the difference between life and death.

You could tell this wasn’t a sales pitch — he said all of this without exaggeration or drama. This was someone who understands how contracts work in the context of the wider organization’s purpose.

Hearing some of these stories reminded me that I’m overdue to post the remainder of my conversation with Tim Cummins, Sally Hughes, and Peggy Chang Barber from the International Association for Contract and Commercial Management (IACCM). It’s worth skimming Part I as a refresher, but to summarize: IACCM is on a mission to improve the quality and integrity of trading relationships. A huge part of that is simplifying contracts to get value from their purpose as a guide for conducting business.

Here is part II of my (lightly edited) interview with Tim, Sally, and Peggy, leaders from IACCM.

Ed Sohn: What’s the role of a lawyer in all of this versus the role of contract professionals?

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Tim Cummins: I think perhaps part of the shift we’re talking about here, that you’re alluding to, relates to the history of in-house legal departments. Back in time, legal departments didn’t even exist. Why did they come into existence? Outside law firms were very expensive, but also because outside counsel didn’t touch business reality enough.  In-house legal departments emerged, but in my experience, they really behaved as if they were captive law firms.  They maintained barriers because of issues around legal privilege and privacy which made them special.  And so we’re still overcoming a lot of that historic attitude — how does legal really integrate effectively with the business?

Peggy Chang Barber: I agree with that. Today, it’s a misnomer to say that lawyers do x and non-lawyers do y, it’s not a single function. Within the team at HP that I managed, we all negotiated, a combination of lawyers and non-lawyers, depending on which issues came up. We hired based on skill set: is this someone who was commercially-minded? We had both lawyers and contract professionals negotiating deals.

We should stop talking about the role and look at the competencies that are necessary to do contracting well. Commercial knowledge and ability to communicate are the skill sets that may come regardless of whether your background is finance, HR, or something else.

TC: People in the business will think, well someone with some legal knowledge would be a real asset in this, which is true. But that person seems to be threatening the law department. Lawyers assume they have to have a control point every time the word “contract” comes up, but relatively few of them are questioning whether the contract they are producing is fit for purpose and driving the business outcomes that are their goal.

PCB: When I interview lawyers, they are focused on the legal provisions of the contract and not the business owned provisions. These days you really cannot afford to do that. Who owns the business success coming with the contract? If you get someone who just wants to look at the Ts and Cs (and that’s not just lawyers), you’re less likely to get someone that will help you with your business.

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ES: Tell me about simplification and standards, whether you’re seeing the movement heading that direction, and what that needs to look like.

Sally Hughes: Yes. We are absolutely seeing a move towards standards and a huge move towards simplification. Organizations that have taken significant simplification and visualization in their contracts.  Unilever, Shell, IBM, many more. We also know the public sector is working extensively towards improved standards and simplification.

In the legal community, and for contract drafters more generally, the role of wordsmithing is rapidly becoming outdated. Actually, that’s an understatement; obsolete is the word I’d use. Technology is also going to play a huge role in the standardization and simplification of agreements.  I know in the context of Shell, for example, they’ve taken their simplification and visualization of contracts and provisions alongside automation of the process.  We know that organizations like HP are exploring the concept of no-touch contracting.  You drive standards and technology to the point where you need no human interaction.

One other point around standards and templates — I think templates are EVIL. I think the focus needs to be towards clause libraries, providing individuals with the ability to create an appropriate fit for purpose contract using a decision tree approach that combines the right set of standard clauses that might have various options and term variants. That’s the future. We need to get away from templates, because so often what we find is that we’ve tried to retrofit a project and desired relationship into a template that is totally inappropriate and not fit for purpose.  So another shift away from that concept of pure templates is important.

TC: It’s an exciting time for lawyers because, as we touched on, they can stand in the way of this or embrace it and take ownership of it!  We see both, of course.  For those that really want to make it happen, they have to take this from the approach of the role of a contract and driving business outcomes.

ES: I really loved the notion of contract economics at the IACCM summit, quantifying business value affected by contract. Really, really interesting, and you’ve got some good data around it.

TC: As a topic, it’s been at the heart of everything. The shift is being enabled because of the growing tech. When I was doing global contracts at IBM, there was no data. I convinced people circumstantially, got some crowdsourced data. This meant I had better data than anyone else, but it was guesstimates. As we know, CFO’s are hard to convince on guestimates.

We are now beginning to get much more substantial data.  We’re going to have applications producing data in this area. We all understand pretty well where to be looking, and we’ve made a start in getting that data.  That piece we’re confident about.

Who do we then influence with this? The companies we’re working with are championing these ideas much more, and we’re getting compelling stories to tell.

SH: To build on it a little bit, we’ve been talking about contract economics in various forms for years and years. Obviously the reference to contracts as economic instruments first and foremost is something we’ve been promoting widely.  The research we’ve done not only on the cost of operating contract, but also the value leakage piece, the 9 percent of total revenue lost on average through poor contracting practices. There’s been extensive research on that and it’s been validated by a number of organizations that’ve tackled that question.

What we’ll be doing over the course of the next few months and years will be building on that research and really coining it as contract economics.

Peggy: Tim and Sally have talked a lot about helping orgs look at their cost and drive efficiencies with tech, but people who actually do contracting, getting education on what you’re looking for and negotiating… there’s no major for this.  Many people go into contracting, but there’s very little formal education to prepare you. What we bring to the table is a level of education for anybody.

ES: What do you all think about blockchain?

SH: Game changing.  It certainly fits into the world of today and the future world of contracting.  We’re already seeing organizations deploying blockchain tech with huge ramification and benefit.  We’re already seeing the use of smart contracts, working with an org currently to do a cost analysis on the difference between the cost of contracting using paper vs. the smart contract workflow.

ES: I am so impressed by the energy and the passion of the members in IACCM. The conference was buzzing with so much vivacity and life.

SH: It’s true that there is a tremendous atmosphere at our events.  We’ve always said we have this phenomenal community, a sharing one.  Our mission is to improve and integrity of trading relationships.  It’s a bold mission. We’ve talked about the ways we respond to that mission. One of the things that IACCM is not, in fact, is a professional association. We are not about the glorification of a single function.  What we are is a home for people who care about the quality and integrity of trading relationships.

TC: We end up providing a lot of advisory services, as well, but we have also been asked why we don’t just go and consult. We don’t want to do that, to become a for-profit business concerned with its own existence and with money.

SH: Also, the diversity of our membership is something I’m immensely proud of, something I’m determined to maintain and continue, representation from buy and sell, lawyers and contract and commercial and project management and sales professionals, as well as geographical diversity.

TC: For me, there are many people out there working in public and private sector, who are frustrated.  It’s too disjointed, too difficult to change.  IACCM offers a vision, but a practical one, of a different world, and a belief among our members that things truly can change.  We provide them with resources.

SH: It’s our job to inspire!  It’s our job to inspire, and continuously innovate.  It’s at the forefront of everything we do.

PCB: I just joined IACCM coming from industry. People who are in contracting are fixers, doers, innovative, and want to be inspired. We want to make things better and improve our ability to succeed in our trading relationships across the board.

Ed Sohn is VP, Product Management and Partnerships, for Thomson Reuters Legal Managed Services. After more than five years as a Biglaw litigation associate, Ed spent two years in New Delhi, India, overseeing and innovating legal process outsourcing services in litigation. Ed now focuses on delivering new e-discovery solutions with technology managed services. You can contact Ed about ediscovery, legal managed services, expat living in India, theology, chess, ST:TNG, or the Chicago Bulls at edward.sohn@thomsonreuters.com or via Twitter (@edsohn80). (The views expressed in his columns are his own and do not reflect those of his employer, Thomson Reuters.)

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