Why Optimising Your Contracting Function Makes Good Business Sense

Introduction

The contracting function is one of the most visible manifestations of the in-house legal team’s role; how it performs tends to correlate positively with perceptions of overall legal team performance.  

While it is well understood that in-house teams typically operate in resource-constrained environments, what is less well understood is the true cost to the “Business” of an underperforming contracting function. 

So, a few thoughts on this topic as most in-house teams we talk to, initially at least, feel that they are denied the headcount and budget (and don’t themselves have time) to address contracting function performance issues. 
 

What Language Is Your Legal Team Talking? 

Many in-house teams we speak to point to sluggish contracting functions featuring poor templates, inadequate support tools and weak process infrastructure - that takes up too much legal team time. Everyone wants better. 

On first meeting GLS, many in-house teams share that they feel that they have no prospect of accessing additional headcount or budget, or hours in the day, to address contracting function performance issues. 

Additionally, these teams point out that the whole business is feeling the pinch and as such, budgets are tight across the board – so there is no scope to secure extra budget to work on contracting function optimisation.  

This kind of thinking is common amongst legal teams who are not yet speaking the “language of business,” where decisions are made to ensure revenues exceed costs and deliver profit.  

A simple request for “extra legal budget” for new internal projects is mostly perceived as just another legal expense item on the Business’ overall budget. It is frequently rejected when times are tough.  

However, securing an “optimisation budget” is about making a “business proposal” that the Business considers worth listening to – one that steps out how legal can help drive “revenue growth” and “cost savings.”  

Spending $100 to save $1000s each year while increasing your business's ability to do business and reducing risk is “great” business, and this is the case in-house leaders must make for every productivity-based project. 

Now, more than ever, in-house teams must stop with “budget requests” and start generating “business proposals” that drive revenue growth and/or reduce costs – and a poorly performing contracting function is a great place to start.  

Contracting Costs Your Business Would Prefer Not To Be Paying: 

For any business with a large contracting requirement - an underperforming contracting function comes at a huge price, (which your Business would gladly not have to pay) including: 

◼️Wasted Legal Hours: typically, hundreds, if not thousands, of expensive legal hours per year 

◼️Wasted Manhours: hundreds, if not thousands of biz/tech team manhours  

◼️Business Closure Times: slow contract closure times and even lost revenue opportunities   

◼️Reduced Productivity: reduced staff productivity due to contracting process inefficiencies 

◼️Blunted Legal Focus: a reduced ability of the legal team to focus on strategic matters  

◼️Higher External Cost: when using law firms to support your inefficient contracting apparatus  

◼️Supply Chain Inefficiencies: failure to achieve supply chain efficiencies 

◼️Dispute Costs: increased contractual costs (litigation, disputes, costly compromises, etc) 

◼️Contract Value Seepage: failure to protect/preserve contract value (interest, LDs, etc) 

◼️Team Member Morale: business and/or legal team members frustrated with inefficient process and paper  

The above factors translate into substantial direct and indirect “real” costs that your Business would gladly not be paying – and the in-house team is in poll position to drive an initiative to reduce/eliminate these real costs.  

For companies that are managing thousands of contracts annually – the costs of inefficiency can be incredibly large. This is a unique opportunity for the legal team to submit a genuine “business proposal”.  
 

Make Your Business Case For Optimisation 

As a simple exercise, you can calculate your total indicative contracting manpower by populating the data in the table below: 



To arrive at a relatively reliable indicative manpower cost that is required to support your contracting function simply use the following formula:  



Now, if you can achieve a 35% saving on your labour cost due to a contract function optimisation, and that figure exceeds US$30,000 by 3 times or more – then you have just created a plan to save US500,000+ over 5 years. 

In the world of Business, any cost saving initiative, particularly one that drives perpetual cost savings, will be extremely welcomed. Your legal team is best placed to identify these “opportunities” for your Business.  

GLS can help articulate the true costs to your Business for leaving your contracting function unoptimized and help you make the case to get the resources you need through a sensible business case.  

For most companies we work with, an efficiency improvement of 35% to the manpower consumed by your existing contract processes typically recovers at least 10 times project costs in Year 1 alone.  

GLS can help you upgrade your contract function (usually within 100 days) in a minimally disruptive basis that engages and aligns all key stakeholders, and costs far less than what your team could do it for.  
 

Wrapping It Up 

In-house teams are under pressure to become more business minded – so hopefully these thoughts help our community with that process, and we are certainly here to help you however we can.  

Proposals from legal teams that drive revenue growth and/or reduce costs across the Business are always well received – particular when they are backed up by strong data.  

In an environment where “budgets are tight” legal teams will increasingly hear “request denied” if all they do is submit “requests for additional budget” as opposed to making legitimate “business proposals”.  

Tough trading times and budgetary restrictions should be seen as a “green light” for the legal teams to craft business proposals that will drive growth and cost savings across the Business – it will be appreciated. 

GLS can help most in-house legal teams perform a major contract function upgrade for less than US$30,000, and typically, within a 100 day period, for motivated in-house teams.  

In all cases our costs are repaid multiple times over in the first year alone – noting of course that an optimised contracting function (that is easy to maintain) creates enduring cost savings year after year.   

We can show you how. Please do reach out to us if you would like to discuss how you can start delivering real cost savings and enhanced business value to your Business via a contract function optimisation intervention.   

We have a free online contract function diagnostic tool that we would be happy to share with motivated legal teams who would like to explore formulating a cost saving and value driving business proposal for their Business. 

Feel free to reach out and talk to us by booking a consult with us below.