Opinion

Mickey Mouse contract management costs money

6 min read

10 March 2016

George Haddaway of content management specialists EASY Software UK ponders why contract management styles are still stuck in the past.

It’s 1939 in sunny California, and Bill Hewlett and Dave Packard are about to set up a tiny electronics company in a small 12×18 foot garage. The team’s first successful product is an audio oscillator bought by Walt Disney for the music player he wanted for a new film, “Fantasia”.

That garage, we now know, is the birthplace of Silicon Valley, and the film went on to become a foundational classic of animation and special effects film-making, with its success at the time being in no small part down to Bill and Dave’s audio invention.

I’m telling you this story to make an important point: while the firm Hewlett and Packard is now far removed from that first device, and Disney with its computer animations along with the film industry is, as well, the way the original deal was recorded – in wet ink, on to paper, hasn’t altered. And that’s just as bizarre as the moving mops of the film, when you think about it!

Contracts have been digital for a while, and you didn’t notice

This matters because contracts are important, complex documents that require much re-visiting and re-negotiation. Rarely drawn up by a single person, a number of different people within an organisation will have input on them, commanding a need for big team collaboration. A huge number of different versions will be created, edited, re-edited and moved around until the final version is agreed. 

The majority of contracts these days will be created in Microsoft Word, unlike in Hewlett, Packard and Disney’s day – but there are still a surprisingly large number of people who will still print out paper copies, believing that a wet signature is best. But that’s a myth. The Electronic Communications Act 2000 has for nearly 20 years said company contracts can be concluded by electronic means, underwriting the admissibility of electronic signatures in legal proceedings where the authenticity or integrity of that electronic communication is in question (Section 7(1)).

In other words, you can validly “sign” a document without the need to retrieve a fountain pen. This may cause some to feel anxious, but consider when was the last time anyone agreed to this endlessly-updated iTunes terms and conditions with a pen?

Read more about terms and conditions:

The answer is, of course, “never” – and, quite rightly, it’s not something anyone would reasonable show any concern about.

Look to cut errors down by 90 per cent

All this makes that typical paper-based commercial contract development process seem a little more complicated than it really needs to be.

A document is created in Word, routed round the organisation in Outlook, version-controlled in Excel, so all digital – and then a paper copy is printed, signed, couriered over to a third party and filed away. Meanwhile, a final internal electronic version is stored on a shared drive somewhere, along with a scanned final version of the paper one that was delivered on the bike – and finally, in Outlook there is a reminder stored on when the contract is up for renewal.

While no doubt this all works, it’s undoubtedly inefficient, time consuming and many of the steps are unnecessary. We have the technology to work in a far smarter way, with modern, easy to use, electronic document management apps. So why aren’t we using them? After all, “Because that’s the way things have always been done here,” is not reason enough to carry on with this convoluted workflow, which is as prone to inefficiency as letting your Apprentice look after your Magic Shop?

Not only that, in a famous landmark report it published in 2001, “Time To Manage Those Contracts!“, Goldman Sachs found that with an electronic contract management solution the cost of processing a contract can be reduced by as much as 30 per cent, the negotiation cycle can be shortened by half – and erroneous payments reduced by up to an astonishing 90 per cent.

A good contract management solution doesn’t have to be complicated, or require a huge upset to the current workflow processes. It should be an out-of-the-box solution that can be managed and configured at the heart of the contract process, by the people in the business responsible for contract management. Let’s be smart and use one application for one purpose!

Since 1939, HP has gone on to become one of the largest IT companies in the world.

But its “Mickey Mouse” days are over, and I very much doubt it still manages its contracts in Excel. So why are you?

‘Learn from your mistakes and move on’ is a great business mantra, but as such depends on two crucial things: recognising and acknowledging the mistake and being able to move on. It’s also applicable when it comes to your terms and conditions.

Content management specialists EASY Software UK‘s George Haddaway.