A few years ago I published an article about the five key elements that are necessary for any business process...but I still can't find it in the archives. Fortunately, the three elements that are necessary for me to remember those five elements are still working. Oh, the three elements? The hippocampus, the neocortex, and the amygdala...
The Five Elements of A Business Process
- Who is executing the work (People)?
- How are they doing it (Process)?
- What tools are they using to help them (Technology)?
- How does one ensure quality and oversight of the process (Management Controls)?
- How can one identify opportunities to make the process better, faster, and less costly (Metrics)?
This article focuses on Element 5, specifically, metrics and their relationship to the Contract Management business process.
Metrics...They're all the Rage
Over just the past 90 days, I have had almost two dozen conversations with General Counsel or Commercial Contracting Leaders in corporate legal departments. Without exception, all of them lamented the lack of metrics (sometimes referred to as data or measures) to help them:
- gain visibility into what their teams are actually doing
- understand what volumes of different contract types are sent to and adjudicated by the legal department
- internalize the percentage of low, medium, and high-risk agreements...
- ...or the percentage of low, medium, or high complexity
- determine where process bottlenecks exist and how long the overall process takes from intake through execution
- and...much else.
So, It's Simple, Just Collect Metrics...
The natural reaction to not having the metrics above is...to just kick off a project to collect them. Collect often, collect as many as possible, then analyze...and then...
The challenge with this is that metrics can be overindulged. It is possible to over-measure. Not only can it cause organizational fatigue and anxiety, but it also can actually lead to misleading conclusions. What's a better approach?
Measures that Matter
There are many corporate management phrases bandied about when talking about measures or metrics:
- "You get what you measure" - If you measure something then the behaviour of people can be influenced to meet that measure
- "You can't manage what you don't measure" - If you don't measure a particular thing, you have no control over it and therefore it is not manageable
- "Measure what matters" - Measure those things that are truly meaningful and have a business impact. This is the one that should be considered when focusing on contract management.
In the spirit of Measuring what Matters, it may be helpful to think of the following common scenario: "Our lawyers are spending too much of their time on routine contracts and not enough time on strategic matters that can reduce risk to the company." The question becomes, How does this drive a measure that matters? That is, how can one ensure that the metrics used to try to solve this problem are actually meaningful?
Leading and Lagging
Measures can be leading or lagging. Leading measures are those that indicate there may be an issue; lagging measures can indicate the intensity of the issue.
In the scenario described above, a leading indicator of lawyers spending too much of their time on routine contracts may be "the percentage of time the same provisions are negotiated every time a contract is executed." If the percentage is high this may mean that lawyers are just reviewing the same provisions over and over and just mechanically completing work, versus applying legal judgment.
A lagging indicator could be "the percent of the total contract population made up of these routine contracts."
In combination these two measures enable a law department leader to empirically confirm their hypothesis that lawyers are spending too much of their time "not lawyering," and then be able to determine how severe the problem is based on the percent of contracts that fall into this routine, non-bespoke category.
There's another benefit to using these particular measures: they can be gathered without disrupting the organization. A project can be chartered to compare executed contracts against a starting-point template as a way to collect the leading indicator and then simply aggregate the total contracts executed, by type, over the past few months to determine the lagging indicator.
So, what's the message here? Don't overmeasure. Measure what Matters. If your measures don't map UP to a business objective such as revealing how to make a process better (lower risk), faster (accelerate cycle time),or cheaper (lower operating costs), then their utility should be questioned.
Don't overmeasure. If your measures don't map UP to a business objective such as revealing how to make a process better, faster, or cheaper, then their utility should be questioned.