Efficiency and strategic thinking can help take Legal from cost-center to profit-center. Here are the specific revenue levers to pull for Legal.
The world is shrinking.
This shift in the business landscape has resulted in a butterfly effect throughout the organization. For Legal, this means a new role as a strategic business function, shifting from cost-centers to profit-centers. This shift has transformed the overall value legal provides—moving well beyond risk management and cost savings—increasing the pressure on legal teams to become a source of revenue for their organization.
What does it take to be a profit center? For Legal, the key to success is efficiency. And here’s how you achieve it.
The 3 Revenue Levers for Legal
Internal Relationships – Talent: Create a strategic team of talent—who in your organization is a critical thinker? Hire people who are willing to take calculated risks, think outside the box, not afraid to get their hands dirty. One key role to include in your org to increase the efficiency of legal is Legal Ops. Tasked specifically with streamlining processes, simplifying change management, and managing technology, Legal Ops is critical to a high-performing legal team.
Identify where bottlenecks occur—are the biggest ones where Sales and Legal meet? Review the entire contract process by workflow, type of contract, etc. to see where processes can be integrated and streamlined. Increasing the efficiency and effectiveness of contract management will lead to automation, core to achieving greater scalability, flawless compliance, and growth.
Organizations face the daunting task of analyzing key business, customer and employee behaviors, both for business strategy and to provide risk-based compliance insight. Well-designed metrics can empower business, compliance, and risk leaders to execute their responsibilities more soundly; present appropriate information to management and the board; evaluate alignment of compliance efforts with business goals and strategies; and further the organization’s overall compliance risk management. Well-developed compliance metrics also enable organizations to improve their ability to prevent, detect, and respond effectively and efficiently. Harnessing the power of data through contracts is key to organizational success.
Leveraging Your Contracts: Metadata
What is Metadata? Metadata is essentially data about data. Think of it like layers of an onion. Metadata includes authors, creation dates, access and edit histories, access attempts, and more. Advanced metadata can include change of control clauses, counterparty credit risk, and corporate group affiliation of the counterparty, among other things.
Metadata is key for accurate searching, reporting, and building a workflow. In essence, metadata proves value. Not only can metadata prove invaluable in assessing overall contract exposure and risk (e.g., evaluating aggregate risk in a potential acquisition target based on contract and related contract information), but also in helping identify opportunities for improving the actual contracting and supplier engagement process.
Why Metadata Matters
Metadata is how Legal tracks and reports on key metrics—it’s how Legal proves its values to the overall business, and especially to the C-suite. Metadata can:
- Make it easier to see pre-canned reports based on contract aging or expiration and renewal dates, or create your own output based on stored metadata
- Give administrators reports that enable them to view history, compare details, review specific contract details, see general status overviews, and review expiration dates without toggling between various applications
- Optimize processes
- Make for more powerful reporting if you can search not only by contract title or type or vendor name, but also through any metadata in your contracts. Metadata is key for accurate searching, reporting and building a workflow around your contract management process. Finding a specific contract and its supporting documents shouldn’t take more than a few seconds and a couple of keywords.
More advanced metadata includes change of control clauses, counterparty credit risk, corporate group affiliation of the counterparty, and classification under both accounting and regulatory classification schema—data points that are far harder to automate and require experienced human assessment.
How to Use Metadata
- While reviewing processes or when creating templates set fields that are key to your business processes—technology can streamline this process—and use them for reporting to have an at-a-glance access to your entire contract portfolio most important metrics
- Ensure you have comprehensive analytics and dashboards available to get a high-level view of those key metrics, making them easy to track and manage. Being able to export these types of reports will give you more flexibility in manipulating the data as well, giving you greater control and visibility into the contract corpus.
Metadata can prove invaluable not only in assessing overall contract exposure and risk (e.g., evaluating aggregate risk in a potential acquisition target based on contract and related contract information), but also in helping identify opportunities for improving the actual contracting and supplier engagement process.
3 KPI Categories and Metrics to Track for Each
When it comes to efficiency metrics, contract cycle length is the core element. The following are some key metrics to consider when assessing metadata tags to track:
- Time from document creation to approval request
- Time between stages
- Time/days in negotiation or documents in negotiation and tracked over time
- Number of unique documents by function, such as Operations, HR, Marketing, etc.
- Value realized from suppliers and partners, including meeting delivery times, payment terms, etc.
When it comes to optimizing processes, consider clauses that are edited the most, what templates are used most, or what templates require the most back-and-forth before they are finalized. Maybe it’s time to revisit those clauses or templates and make edits to increase time-to-approval.
2. Revenue & Cost Effectiveness
- Cost to revenue ratio
- Resource allocation
- Litigation matters handled within budget
- Payment terms
- TCV on average
3. Risk & Compliance
- Number of incidents
- Categories driving up risk
- Disposition of cases
- Assess and identify gaps
- Create a standardized methodology for evaluation and reporting (a point system)
- Expiration and renewal dates
Ask yourself: Am I being as efficient as I can be?
Your contract data is the key to increasing the impact and effectiveness of your contract processes and moving from a cost center to a profit center. While initially there may be some up-front work—deciding the appropriate types of metadata tags to track, implementing them across your contract corpus—there are ways to simplify and streamline even this initial process. At Concord, we’d love to show you how. Click below to request a demo.