Implementing a Contract Management Maturity Model

Do you think your organization can perform better if a mature system exists for contract management and compliance? Implementing a better model depends on evaluating the existing strategy and finding room for improvement. The contract management maturity model (CMMM) can help you develop your contract management strategy to analyze the existing one and move further through the model.

What is a Contract Management Maturity Model (CMMM)?

The contract management maturity model assesses an organization’s existing contract management strategy and provides a proper roadmap to move to the next stage. With the implementation of this model, you can make the entire contract handling and implementation process more aligned.

Also, with this model, you’ll have a benchmark to compare your performance with the best practices in the industry. Additionally, you can track your performance over time.

Finding the Maturity of the Contract Management Strategy

CLM Maturity Assessment conducted via CMMM Model has different stages. Comparing your organization’s existing practices with those laid out in the model can tell you your organization’s current stage. Also, it provides you with a list of activities you can implement in your organization to move to the next stage of the model, ensuring a better overall management outlook for your organization.

With regular assessment, you’ll not only be aiming at continuous organizational improvement, but also be able to identify the contract risks that wouldn’t be visible otherwise.

Outcomes of CLM Maturity Assessment

Below are the primary outcomes of the CLM Maturity Assessment:

• Lets you collect real-time information about your contract management system
• Covers multiple aspects of contract management
• Assess the maturity level of each element of managing the contract
• Provides you with an organization-wide maturity level
• Highlights the essential problems in the existing processes
• Comparing assessment results at different times can allow you to analyze
  organizational progress
• Offers you the reason for the lack of improvement between the two assessments
• Provides you with a draft plan for the improvement

How to Use a Contract Management Maturity Model

The Contract Management Maturity Model works through a survey form, which covers multiple focus areas of a contract management environment. These include the following:

• Governance environment
• Change management
• Risk management
• Performance management
• Contract disengagement
• Financial management
• Dispute management
• CLM staff, technologies, and assurance management

The survey provides an ideal scenario that will make a perfect organization. The respondents’ answers about existing practices in the organization will highlight the divergence. Analyzing this deviation can help you place your organization in one of the levels discussed in the section below.

Activities of a CLM Maturity Assessment

Here are the levels highlighted by the CLM Maturity Assessment and the activities included in each stage. You can use it as a reference to analyze your standing:

Level 1 – Initial, Undefined and Unpredictable

At this level, there are no processes or formal documentation in place. The contracts might or might not be formally signed. The compliance with the terms highlighted and the organizational functions aren’t evaluated. Manual working is encouraged and used in such organizations.

Level 2 – Locally Managed (Repeatable)

The next level in the CLM Maturity Assessment are the locally managed organizations. Such organizations have temporary processes in place, but following them is not mandatory. Besides, no dedicated team members are performing these duties, which makes the entire process highly reliant on informal practices.

Level 3 – Defined and Decisive

In Level 3, the process is well-defined, with mandatory processes in place. Senior management is also involved at this stage, which makes the entire process accountable. Also, the team dedicated to contract management is trained and fully aware of the duties they need
to carry out.

Level 4 – Managed, Proactive and Profitable

Contract CMM inspection at this stage ensures that the processes are fully aligned with the business process of the organization. A step-by-step procedure is laid out for compliance and metrics are set to evaluate the performance. Regular evaluations of the internal systems are Regular evaluations of the internal systems are conducted to analyze progress.

Level 5 – Systematically Optimized, Continuously Improved

This is the highest maturity level in the CMMM Model. The processes are streamlined organization-wide, providing the utmost ease to all the stakeholders. Additionally, the contract obligations are well met and continuously analyzed for improvements. Creation, execution, compliance and analysis — all contract stages are fully optimized.

How to Determine your CLM Maturity Level

With the CLM Maturity survey form available online, you can involve the senior management to answer the questions. The answers will provide insight into which practices your organization currently follows, so you can categorize according to that maturity level. So, you can categorize your organization according to that maturity level.

By setting and repeating the following assessment, you improve gradually. Regular analysis of your organization’s maturity can help level up its condition over time.

Tips for Using CLM Maturity Assessment Results for Organizational Benefits

The results from the CLM Maturity Model can help improve your organization. Here are a few tips that might help you get better:

• Conduct an Unbiased Analysis – While answering questions about contract management at your organization, you must assess with an unbiased approach. Only then can you get your organization’s current standing and maturity level.
• Implement the Formal Change Management Process – When moving to the next maturity level, it is vital to implement standard change management, which involves unlearning, learning and reinforcing.
• Carry Out Regular Audits – With regular audits of the existing practices in your organization, you’ll determine the improvements implemented from one assessment to the next. It will give you a better idea of the improvement level and your deficiencies.

Summing Up

CLM Maturity Assessment Model is built to help organizations analyze their processes and compliance with the contract management processes. By assessing your organization through the Contract Management Maturity Model, you can determine the current maturity level and the activities you must include in your business to move to the next level.

As the CLM Maturity Model allows for regular assessments, you can easily measure the improvement in the policies and processes over time.

Olga Mack is VP at LexisNexis and CEO of Parley Pro.