How to Identify and Correct Poor Contracting StrategiesBy Guest Author | Print
Three crucial steps toward better contracting strategies are asking tough questions, analyzing channel processes by department and building better contracting processes.
By Joe Alphonse
As more organizations realize the benefits of high-performing channel partners, companies are seeking new ways to extract the most from their partner relationships. For many companies, channel contracts remain a premier tool for business growth.
Partner agreements drive sales and boost revenue, making them a strategic piece of corporate success. As organizations continue to add partners to extend their market reach and develop creative incentives and promotions to encourage greater partner performance, having a solid contracting strategy becomes more important.
While channel activity can boost overall sales performance, the growing number and increasing complexity of partner contracts can be a source of numerous problems, crippling ineffective contract management processes.
Companies often spend months developing and negotiating what they believe to be high-performing contracts, then store them in a dusty drawer or unopened computer folder until it's time for renewals (and sometimes not even then). This causes companies to forgo valuable insights from contract data that can help improve their business operations in the long run.
If your organization is lacking formal processes, or doesn't evaluate and periodically amend your processes, you're not alone. In fact, many companies fall victim to poor contract lifecycle management (CLM), whether relying on the set-it-and-forget-it approach of ending the contract lifecycle when the contract is signed or simply running contracts through an underperforming contract management solution.
According to the International Association for Contract and Commercial Management, companies, on average, lose 9.2 percent of their annual revenue due to poor contracting. That's just unacceptable.
Identifying Bad Contracting
Fortunately, these massive losses can be prevented. The first step is identifying the signs of a bad contracting process. Here are some of the most common symptoms.
Slow contract cycles. We've all been there. After crafting a channel contract, we wait weeks, even months, as it circles through a web of approvals until it eventually gets buried somewhere in the process, only to be seen again after it is too late. Slow contract cycles are a key indicator that you have poor contract processes. Usually sluggish approvals are due to an improper workflow, which can cause contracts to be overlooked, lost in overflowing inboxes, filed incorrectly or just forgotten entirely. This is the bane of any contracting professional's existence, as delays cause companies to miss out on valuable revenue streams.
Inconsistent legal terms. When contracts finally make it to the legal department, multiple teams and employees have touched them, often with every member adding his or her own sets of terms and conditions. Without a centralized system for authoring, negotiating, redlining and signing contracts, poor tracking and overlooked language errors can put companies at significant legal and financial risk.
Lack of visibility. With channel partners functioning as huge revenue drivers for many organizations, it's easy to assume that every impacted department has a keen understanding of how each partner is performing, yet this is not the case. Companies often lack visibility into partner performance, preventing them from distinguishing the stellar relationships from the faltering unions. Without this visibility, companies are forced to consider all partners as equals (and we know they aren't). This approach can cost you significant revenue in the long run. If your company can't answer the question "what's the value of each of your channel partners?" there's a serious issue within your contracting process.