Contract management maturity: how sophisticated is your contract process?

Is your contract process fit for use? Find out in this guide to contract management maturity in 2024.

What is contract management maturity?

Contract management maturity describes how sophisticated a business’ contract management practices and processes are. It measures the organization's ability to create, negotiate, execute, monitor, and close contracts while minimizing risks and maximizing value. 

Contract management maturity is often assessed on a scale that reflects the organization's evolution in managing contracts, from basic and ad-hoc approaches to more advanced and strategic practices.

The contract management maturity model allows businesses to measure how robust their current processes are, and more importantly, which improvements they should make as their company scales and strives for operational excellence.

Why does contract management maturity matter?

Your approach to contract management should scale and develop with your business. Yet, too often, organizations continue to rely on dated and fragmented contract processes - and it costs them.

In fact, the IACCM estimates that companies lose up to 9% of their bottom line as a result of poor contract management.

Yet, contract management statistics also reveal that:

• 40 per cent of organizations don't have clarity on who is responsible for which stage of the contract lifecycle
• 99 per cent of businesses report difficulties managing current contract volumes
• 40 per cent of contract value leakage can be attributed to poor contract management processes

Businesses can't afford to be held back by unsophisticated contract processes in 2024. They need to work smarter, not harder. More mature contract processes empower them to do just that.

Let's explore what this contract management maturity (or lack of) looks like for businesses, and what they can do to climb the ranks.

How is contract management maturity measured?

There are numerous factors to consider when measuring contract management maturity in your organization. These include:

• Process standardization: are your processes and templates standardized enough to make processes repeatable and compliant?
• Risk management: do you mitigate contractual risks effectively enough with your current process?
• Efficiency of workflows: are you automating and streamlining workflows to make them more efficient?
• Use of technology: which tools are you using, and they improving or hindering your process?
• Compliance and governance: do your current processes comply with relevant regulations and best practices?
• Visibility and tracking capabilities: do you have visibility into your contracts and their data? 
• Contract storage and security: how are your contracts stored right now, and are they secure enough?
• Counterparty experience: what does the contracting experience look like from the perspective of your counterparty?

It's common for organizations to have varied levels of maturity across these different criteria, with some adopting more sophisticated processes post-signature, for example. This means that businesses should carefully consider how they perform against each criteria in the contract management maturity framework, rather than benchmarking themselves based on one.

Want to discover the pitfalls in your current contract management process, and how you can improve it? Hit the button below to speak to one of our contract specialists.

The contract management maturity model (CMM)

Early stage

Businesses in the early stages of the contract management maturity model rarely have a repeatable process in place for creating contracts. This inconsistency and lack of standardization is typical of smaller businesses without a contract management framework in place. It often means that contracts are created freely by teams without any oversight from legal, resulting in high-risk and poorly drafted contract terms.

However, it isn't just smaller and younger businesses that experience this problem. Larger businesses often fall victim to a lack of standardization in the contract creation process, too. In fact, research by EY reveals that 69 per cent of businesses don't follow a playbook or guidance document when creating contracts.

It's also common for businesses at this stage to have a fragmented (or non-existent) approach to contract storage and tracking. They tend to keep their contracts stored in email threads, or separate local drives. This makes it difficult to locate and access contracts, with no visibility into where contracts are in their lifecycle, or the data within them.

According to the ACC, early stage contract management processes rarely include contract tools like eSignature solutions or contract management solutions. This means that most contract-related work is completed manually instead.

Businesses can only afford to operate in this way when they manage a handful of contracts, or when they are just starting out. Before long, the risk associated with this fragmented approach will catch up with them.

To progress to the next stage, businesses can:

• Consider introducing contract templates that teams can amend and update
• Set up a shared drive for contracts to be uploaded to and stored in
• Clearly assign roles so stakeholders know which stage of the contract lifecycle they are responsible for
• Capture and codify processes where possible

Intermediate

Businesses at this stage of the contract management maturity model have usually formalized some processes but struggle to make sure these are adopted across the business.

Usually, a company in this phase will have a collection of contract templates in Microsoft Word for routine contracts that the wider team can self-serve using. However, there's rarely visibility into how these are used and which terms get changed.

Contracts may be stored in a shared drive, rather than scattered across local drives. This makes it easier to find and access contracts owned by other stakeholders. Some businesses will track contract data in a spreadsheet of some sort, but most won't have recognized the value of tracking contract data yet.

Organizations at this stage may even have adopted an eSigning solution like DocuSign or AdobeSign, allowing them to sign contracts electronically rather than via wet ink signatures.

They tend to have workflows set up and in place, but these aren't integrated or running effectively, leaving legal teams buried in low-value work.

To progress to the next stage, businesses can:

• Adopt an all-in-one contract management solution like Juro to streamline contracting
• Find opportunities to connect their contract workflows with other business tools, like a CRM or ATS
• Implement safeguards throughout the contract process to ensure contracting remains low risk
• Find opportunities to automate routine contract admin tasks, freeing up legal's time for higher value work

Sophisticated

A sophisticated approach to contract management is one that's fully integrated and enables legal teams to safely automate routine contract admin. It empowers them to agree contracts faster and more efficiently, freeing up time for higher-value work.

Businesses that use an intelligent contract automation solution like Juro can generate contracts using pre-approved contract templates with rules and conditions that act as safeguards.

They also manage their contracts end-to-end in one unified workspace, meaning they don't have to switch back and forth between tools, or worry about losing data in the process. They can create, negotiate, approve, sign, store and monitor contracts in one platform, with minimal admin required.

These businesses also take a proactive approach to improving their contract process, using contract metadata and analytics to identify and fix bottlenecks. This is made possible by with a fully-searchable contract repository and intuitive contract dashboards.

It's also common for businesses at this stage of the contract management maturity model to integrate their contract management system with other platforms, like Salesforce, HubSpot, Pipedrive and Greenhouse. This enables them to streamline their workflows and reduce routine contract admin further.

Next steps

It's important to remember that different businesses will have unique needs and processes, regardless of their size and age.

If you want to the businesses already using Juro to level up their contract workflow and agree contracts 10x faster, fill in the form below. To find out more about how you can improve your existing processes, check out this guide to contract management best practices in 2024.