Contract managers are under increased pressure to deliver value with reduced contract risks, decreased contract costs, and improved contract performance. When you regularly measure progress and the success of contracts against contract management key performance indicators (KPIs), you can proactively readjust your contract strategy to ensure goal alignment drives critical and positive organisational impact. Read on to learn how contract management software can help maximise three important contract management KPIs for success.
What are contract management KPIs?
Contract management KPIs (key performance indicators) are high-level performance measurements within an agreement between multiple parties. Contract management KPIs are a specific, real, time-based, attainable, measurable, strategic goals within an agreement that details the success of its components and how they relate to the overall contract objective. Contract management KPIs are the measurements for evaluating pre-signature and post-signature contract management processes.
Top three contract management KPIs
Contract management KPIs should be specific, measurable, attainable, relevant, and timely. Industries, processes, and contracts are unique, so KPIs for effective contract management will vary. Still, it’s imperative to review your contract lifecycle management process and develop success metrics aligned with organisational objectives accordingly.
To manage the success of any contract strategy, you should measure results and contract database data points regularly. A KPI for contract management should encompass qualitative and quantitative information around contract value, incidents, contract review, contract tracking and contract renewal.
Consequently, the three most common KPIs used to measure contract management success are contract efficiency, contract effectiveness, and contract risk management. Under each contract management KPI example are specific areas that you should use to measure your contract management ROI.
KPI 1 – Contract efficiency
Contract efficiency performance metrics – the first of the contract management KPIs – may include contract lifecycle time, time to close deals, customer, vendor, or geographic trends, contract value assessments, and whether or not milestones are met.
KPI 2 – Contract efficacy
Contract efficacy performance metrics – the second of the contract management KPIs – may include the number of agreements by type of contracts (program, customer, or vendor) in one’s contract repository, annualised contract value, the remaining value of a terminated contract, order value variance and historical legacy contract trends.
KPI 3 – Contract risk
Contract risk performance metrics – the final of the contract management KPIs – may include standard clause variance, amount of agreements expiring without renewal dates, missed contractual obligations, number of improper electronic signature approvals or vendor authorisations, number of delayed contract approval processes, task completion for terminated contracts and contract terms disputes resolved. Leading contract lifecycle management software can provide you with a risk assessment matrix to visually assess risk within a centralised location.
Leverage contract management KPIs for increased ROI
While you can face the challenge of overseeing the contract lifecycle from requests through contract obligations and contract renewals and struggle to demonstrate this value to stakeholders, defining and maximising the above-mentioned KPIs with the right contract management tools can help you demonstrate the value of contract management software for increased ROI.
Now that you know how to define and leverage contract management KPIs, the ball is in your court. We’ve defined why the proper contract management system can help with meeting and exceeding contract management KPIs while getting contracts signed, executed and analysed in a record amount of time with the best tools in the market. Now, it’s time to choose the right CLM solution to help track progress, measure performance, and so much more. The leading solution for your needs is Contract Insight®.
Contract Insight is an award-winning, widely trusted contract lifecycle management software solution, which has helped thousands of organisations from a vast array of industries within both the public and private sectors to optimise the contract process, boost revenue, promote productivity, centralise CLM processes, and reap the most value from contracts.
To learn how to more easily draft contracts, get contracts reviewed, collaborate on negotiations, and much more to improve contract management processes, book a free demo of Contract Insight® contract management and eProcurement software today!
Contact John O’Brien, CEO at Four Business Solutions – global business consultants and software integrators specialising in business process improvement.
