Benchmarking involves comparing your organisation's contract management performance against industry standards or best practices. It provides valuable insights into how your contract management efforts team is performing relative to peers and identifies areas for improvement. Below the image, you find some effective benchmarking strategies.
Internal benchmarking involves comparing the performance of your contract management process over time or across different departments within your organisation. By analysing historical data, legal counsels, contract managers and other professionals who actively work with contracts can identify trends, set realistic Key Performance Indicators (KPIs), and ensure continuous improvement. For example, comparing contract cycle times across various business units can reveal inefficiencies in specific areas that need attention.
“Are we moving in the right direction?” is a more important question than “Are we doing better or worse than the competition?”.
External benchmarking compares your organisation's contract management performance with that of other companies in the same industry. This approach helps people understand how their practices stack up against industry leaders and identify best practices that can be adopted to improve performance. Industry reports, events, and professional networks are valuable resources for gathering external benchmarking data.
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Process benchmarking focuses on comparing specific contract management processes, such as contract drafting, negotiation, or compliance monitoring, against best practices. This type of benchmarking helps identify gaps in processes and implement improvements that lead to greater efficiency and effectiveness. For instance, if your contract negotiation process takes significantly longer than the industry average, it may be worth exploring alternative negotiation strategies or tools.
Performance benchmarking involves measuring the outcomes of your contract management efforts against established KPIs and comparing them to industry standards. This type of benchmarking provides a clear picture of how well your contract management (and your legal team) is performing and highlights areas where improvements can be made. Regularly reviewing KPIs like contract renewal rates, compliance rates, and cycle times ensures that your team is on track to meet its goals.
KPIs and benchmarking aren't just corporate buzzwords; they’re here to help you make sure your legal team is not just surviving, but thriving (e.i. creating value for the company). So, if you're still managing contracts the old-fashioned way (read: frantically searching for them in a sea of spreadsheets), it’s time to rethink your strategy.
Remember, measuring success in contract management is essential for legal counsels who want to enhance the efficiency, compliance, and overall effectiveness of their contract processes. By focusing on key KPIs such as contract cycle time, renewal rate, compliance rate.. coupled with benchmarking strategies, legal teams can gain valuable insights into their performance, prove their value to the company and drive better business outcomes.
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