August 02, 2022

 Prashant Dubey

CLM contracts Consulting business rationale mapping contracts lifecycle management

Over the past 15 years, the two of us have worked in-depth with over a hundred companies to establish foundational elements of their contracts management programs. These have ranged from single source-of-truth contracts repositories, Level 1 and Level 2 CLM maintenance and support services to rapid implementations of CLM systems.

Our experience has highlighted the importance of ensuring that all initiatives, strategies, and tactics map to an overarching raison d’etre. Everyone involved should have a clear and shared understanding of how those components will impact a specific business goal or metric. We call the process of clarifying and socialising that understanding ‘Business Rationale Mapping’ (BRM).

A few examples help show how it works:

Metadata and Creating a Single Source-of-Truth Contracts Repository

When a company begins to create a repository of all its executed material contracts, the standard practice is to extract metadata from the contracts. But often, it is unclear just what metadata to extract. To clarify the issue, usually the next step is asking stakeholders what metadata they believe is useful and then aggregating those answers. The result is an exhaustive list – usually with many redundant metadata fields and ones that do not map to a good (or any) business rationale.

Sometimes, the business rationale of metadata is obvious. Consider a pharmaceutical company operating under a corporate integrity agreement (CIA) that resulted from allegations that the company inappropriately incentivised physicians to prescribe medication. The CIA might specify that every quarter, officials from the Department of Health and Human Services may inspect all contracts with physicians for speaking engagements. Exacting metadata containing the fees paid to speakers maps directly to the business goal of complying with the CIA.

Other times, the metadata in question is poorly suited for achieving a business objective. In one case, a stakeholder asserted the importance of extracting information on product pricing from the contract for the business goal of maximizing revenue through pricing analysis. At first blush, this seemed reasonable. But we challenged our customer to consider whether a more reliable (and already existing) source for this information was the company’s Accounts Receivable system that generated invoices based on product pricing. Extracting pricing data from contracts was duplicative.

CLM Template Configuration

When configuring the contracts templates that form the starting point for a CLM system’s workflow, the configuration should embody an optimal approach to achieving business goals. For example, we recently worked with a company that sought to shorten the time to revenue. Accomplishing this business goal translated into accelerating cycle times for sales contracts.

When we analysed the company’s existing template configuration, we identified a bottleneck. The templates required the businessperson requesting the contract to manually enter significant amounts of information, but much of that information was not easily available to the requester. To get that information, requesters would typically go to the finance department.

However, it was possible to obtain much of that information (e.g., the legal entity of the counterparty) directly by integrating the finance customer master into the contract template. By automatically populating templates with information pulled from a finance database, we reduced the contracting cycle time by two days compared to requiring the requester to furnish that information. The approach of drawing on an existing data source and reconfiguring templates mapped directly to the business goal of accelerating revenue.

Business Rationale Mapping’s True Value

Our 15 years of experience have taught us much more about successful BRM than we could ever cover in a single blog post. We hope the three examples above provide a glimpse into how to conduct Business Rationale Mapping. More than that, we hope they illustrate how BRM helps ensure that every aspect of a CLM maps to a business goal. When that happens, BRM helps companies make business decisions properly, efficiently, and with complete information.