Published: November 28, 2019
Updated: August 7, 2024
In this digital age, the importance of contract management cannot be overstated. After all, contracts are the bedrock of most business transactions and serve as a wealth of information about a business enterprise's overall health. This article will provide a comprehensive guide on essential contract manager skills.
Contract management involves the creation, administration, and oversight of contracts. It encompasses vigilant monitoring of the contract lifecycle to ensure compliance with the terms and conditions. The primary objective of contract management is to optimize operational and financial performance while serving as a powerful risk mitigation tool.
According to McKinsey and Company, most industries have a substantial majority of their spending locked in contracts. Utilities, food manufacturing, aerospace, and defense can have 90% or more of their annual revenues in contracts with suppliers and vendors.
Effective contract management has a distinct impact on organizational success. Examples of the importance include:
By increasing the efficiency of the contracting process, businesses can see increased financial performance and improved cash flow. Contract managers are a crucial part of improving the contracting process.
Contract managers (CMs) oversee the process of managing the creation, execution, and analysis of contracts to amplify operational and financial performance while reducing risks. A CM handles the entire lifecycle of a contract, which includes:
Just as contract managers must effectively wear many hats, they also go by many names. Indeed lists CM-related job titles as:
Contract managers oversee the entire lifecycle of contracts, from creation to any analysis of the final results. CMs ensure that contracts adhere to legal and industry requirements and remain aligned with company objectives. Additionally, they are often responsible for:
CMs generally assume responsibility for communicating agreements to all parties and extrapolating data from contracts to help further business goals.
Today’s corporations average over 500 contracts per month. In the digital age, effective contract management is increasingly important. Having the right tools for contract lifecycle management is crucial to remain competitive, and in many organizations, a contract manager (CM) is necessary to keep the contract process flowing smoothly.
In this comprehensive guide to contract manager skills, we’ll explore the seven essential skills a contract manager needs. Each skill is vital for effectively managing the contract lifecycle, mitigating risks, and ensuring successful outcomes for all involved parties.
Collaboration is at the top of the list because contract managers should be superstar team players with excellent negotiation abilities combined with strong communication and interpersonal skills.
Contract or agreement managers work with a wide array of groups and individuals, both within and outside of an organization. Contracts touch all areas of business, and effective communication and collaboration are crucial to fostering internal communication and building relationships with external contacts.
CMs often work with subject matter experts to understand specific details and ensure that the contract contains all key details and remains sharply focused on the subject matter.
A skilled contract manager will have in-depth knowledge of their organization’s business and a broad contact base within the organization so they know who to call for functional or area expertise. To effectively keep their finger on the pulse of the organization, an effective CM will:
CMs also need a deep understanding of contract law and utilize continuing education (CE) or professional development (PD) courses to remain up to date on relevant changes in contract law and legal terminology. CE courses typically refer to learning opportunities offered by higher education institutions, while professional development encompasses skill enhancement and career growth opportunities such as workshops, conferences, and certifications.
In addition, CMs should acquire and maintain:
In the not-too-distant past, contracts were stored in paper format in filing cabinets and tracked with manual spreadsheets. New technologies, such as contract lifecycle management (CLM) tools, have been a game changer.
These tools have made contract management far more efficient. CMs must understand the full scope of tools available on the CLM platform used by their organization. They should also remain abreast of emerging technologies and have an innovation mindset. The openness to new technology can improve speed, and the quality of a company’s agreements while reducing the amount of time spent on contract review.
Let’s explore some of the top contract management software.
Whatever CLM your organization uses, a CM’s role is to ensure that it’s used effectively by all involved parties.
Having a pulse on your agreements is a crucial skill. It’s not about knowing every detail of each contract but rather an understanding of the overall goals and how existing contracts are helping to meet those goals. Keeping a pulse on agreements is crucial for mitigating risks. For example, analytics provided by CLM software can give you insights into contract data such as averages, norms, peculiarities, and outliers. Implementing this information can help improve the consistency of contracts and agreements over time.
An effective CLM tool will also track regulatory and governance issues and monitor contracts for compliance. Skilled CMs will craft ways to implement this information to address issues before they arise.
Effective communication strategies are crucial in the CM role. Some tools and skills for communication in contract management include:
Utilize a project management methodology that works for you to track communication and the entire cycle of project management. Examples include:
It can often take experimentation to find the right methodology for you, and as technology continues to grow at the speed of light–new tools hit the market frequently. Remain flexible in finding the best methodology for you and your team.
Negotiation skills are critical for a contract manager who will be called on to participate in negotiating with various stakeholders, such as vendors, clients, or internal teams. The most crucial step in effective negotiating is identifying each party’s needs and interests. Then, find common ground and strive to create win-win solutions.
Clear communication is essential as negotiations are a high-stakes environment for misunderstandings. Be prepared for objections and conflicts that may arise and have contingencies in place for tweaks and adjustments that will need to take place to reach a favorable agreement. Utilize flexibility and pre-plan alternatives when possible to strengthen your position in negotiations.
The good news is that even the most skilled negotiators can continue to hone and improve their skills through practice, feedback and studying the best practices and techniques used by others. Each negotiation should be a learning experience where you walk away better prepared for the next negotiation.
While CLMs are powerful tools that take much of the tedious work out of contract creation and management, details still matter and no CLM is foolproof. The focus on details may be one of the most important skills for a CM.
Common pitfalls in contract management include:
To ensure effective and efficient contract management, contract managers proactively identify and address these pitfalls.
Resources to help improve attention to detail can include creating a system for tracking details, customizing your CLM software to send alerts, or investing in continuing education through conferences and classes offered through the World Commerce and Contracting (WCC).
Effective contract management is crucial in today’s digital age, with the rapidly increasing number of contracts handled by organizations. Contract managers need to possess a diverse set of skills, including collaboration and top-tier communication abilities, in-depth business knowledge and a proficiency in utilizing technology and innovation. Perhaps most importantly, they must maintain an unwavering attention to detail.
By improving these essential skills, CMs can ensure successful outcomes for all involved parties. By investing in ongoing skill development through forums, CEs, presentations, and online learning opportunities, companies foster excellence in their CMs.
Leah offers an end-to-end contract lifecycle management that streamlines the contracting process. For more information on getting started with your contract management journey, please visit our Fundamentals of Contract Management Guide.
