Contracting is an integral part of any business’s work. But it takes a significant portion of the legal, sales, and other departments’ time. In fact, employees spend about 16% of their time on drafting and another 13% on contract negotiations. These processes usually take so long due to clarifying, approving, or explaining the terms of contracts rather than demanding customers.
But what if we told you it’s possible to reduce back-and-forth emailing with repetitive questions and requests between colleagues? Using a contract playbook may be the solution you’re searching for.
What is a contract playbook?
A contract playbook is a document that breaks down and explains all the elements of the company’s standard contracts. It may include:
- contract types best fitted for specific scenarios
- explanation of legal terms
- description of clauses
- description of fallback clauses — alternative clauses that the company can accept if the client wants to negotiate
- reasons for a “walk away” — when refusing to sign a contract is a good idea due to financial or legal risks
- descriptions of the signing and approval processes
- checklist or guidelines for negotiations, including escalation points and rational statements
- samples of standard contracts
A contract playbook can take many forms and include all or part of these elements. Still, the more complete and consistent you make your playbook, the more efficient it will be for your employees.
Having the instructions, they can effectively negotiate with clients. They don’t need to wait for prompts from the legal department or senior managers but still can get the best conditions for your contracts. Especially if these instructions are in an easy-to-search digital form.
But this is not the only advantage of a contract playbook. Let’s discover what else it can offer you.
Benefits of using a contract playbook
A playbook has one main advantage — it can serve as a single source of truth for contracts or the negotiation process as lawyers and company stakeholders approve all the details beforehand. This is the foundation from which the other benefits of using a playbook arise.
Faster drafting and negotiating
Whether an experienced employee or a rookie is drafting and negotiating an agreement, they may have questions. And with a contract playbook, the answers are at their fingertips. They don’t need to make inquiries and wait for a response from colleagues, managers, or executives to decide what clause to include.
Contract signing, verifying, and approving are also much faster for the same reason. By looking at the playbook, every employee knows what to do next in different situations. So, a contract’s life cycle becomes much shorter.
Fewer conflicts between departments
If each department follows its own logic when drafting or negotiating a contract, it creates many reasons for conflict. For example, a sales agent can promise to add legally unrealistic or financially disadvantageous conditions to the customer’s contract.
The contract playbook eliminates most causes for conflict because all employees have recorded answers to hand. This means fewer mistakes and less distraction from their colleagues with queries. The result is less friction plus efficient workflows which equals happier employees.
Shorter training period for new staff
A playbook allows new employees to learn from comprehensive instructions rather than from their own mistakes. This way benefits everyone. Newcomers quickly get up to speed, senior colleagues aren’t distracted from work by endless questions, the company saves money on training, and customers don’t suffer from rookie mistakes.
Reduced risks
Experienced professionals can make mistakes as well as newcomers if they face unusual circumstances. But, if you take care to include fallback clauses and reasons for canceling the contract in the playbook, you cut the risks of such mistakes.
Also, you reduce the likelihood of missing out on more favorable contract terms if you’ve recorded escalation points and rational statements. So, the more details you include in your playbook, the less likely you will lose profits from your contracts.
Smoother automation
And last but not least, the playbook is a base for contract automation. Most management software requires you to break down all your processes and contract details to set up the system. For example, you need to create a clause library or clarify all the steps in a contract lifecycle to automate workflows. So, if you have a playbook, you can give it to contract management system integrators or vendors and significantly reduce the time spent on the setup.
Automation, in turn, gives you even more benefits in contract management. For example, it can reduce drafting time to a few seconds or enhance the entire contract management process with artificial intelligence features.
Additionally, by slightly adapting the contract playbook to include specific points on system exploitation, you’ll help your employees learn it faster. This way, the process of your contract management digital transformation will be as painless as possible if you start with creating a contract playbook.
But you and your team can enjoy all these benefits only if you have a perfect contract playbook. So, how do you create one?
How to create a contract playbook
Creating a contract playbook should be easy enough for you if you’re willing to put in enough time and effort to achieve outstanding results. Just follow the short instructions we’ve prepared.
1. Choose a playbook format
As already mentioned, the contract playbook can be of different formats and content, depending on your needs. For example, it’s best to create separate playbooks for different types of agreements. Although if these are standard agreements like NDAs, you don’t need to consider many details and can combine them in one playbook.
So, decide whether you mainly need a description of clauses and legal terms or a full-fledged negotiation guide to define the format and content.
You can review contract playbook templates for different industries online to form your understanding. For example, this playbook from HUB International should give a general idea of what it may look like.
2. Gather a team of professionals
One of the common misconceptions is that the legal department can create contract playbooks itself. People believe that understanding all legal nuances of the agreements is enough. But negotiations are usually carried out by the representatives of other departments, whether HR or sales. So, you need to include their perspective and combine it with legal nuances.
Moreover, only executives can make major decisions for the company, for example, fallback clauses. That’s why you must assemble a team of stakeholders from all departments involved in the contract negotiation process.
3. Analyze current and past agreements
To understand what details you need in a playbook, you should analyze what works and what doesn’t in current agreements. The information you are looking for may include definitions of legal terms, standard and fallback clauses that have worked, conditions that have reduced the contract performance, etc.
In the automated contract management systems, you can use the reports they provide. In other cases, this process may take some time but will give you a better understanding of your work.
4. Include all necessary information and structure it well
Now that you know what your employees need in the playbook, all that remains is to write down the details and structure them clearly. Remember to make a table of contents, divide everything with headings, and use bullet points to make the text easy to skim.
In addition, include keywords so employees can easily find the information they need by clicking “Find” in any text editor or browser. If you use a contract lifecycle management (CLM) system, this structuring is essential for your system’s efficient work or accurate AI-based suggestions.
5. Determine how you measure success
Of course, you want to know if your playbook works, so define the metrics you’ll be measuring before implementing it. You can track time spent on drafting, negotiating, and signing the contract, or your contract’s performance, for example. You can also survey employees to find out how helpful a playbook is for them and gather qualitative data.
6. Train your employees
To make the playbook useful for your colleagues, speed up their transition from the old “playbookless” system through training. Present the playbook, briefly describe each chapter, and show them how to use it when they have questions. This way, they adapt to “check in the playbook” instead of “ask someone” in no time.
If you do everything right, you’ll experience the benefits of using the playbook in just weeks.
Conclusion
A contract playbook is a handy way to align contract drafting and negotiating across departments. This document provides teams with instructions and increases confidence in their actions, which generally improves contract performance.
You can experience these benefits if you carefully study your contract management process, polish it, and record it comprehensively. This takes time but increases your CLM efficiency by simplifying automation and providing your employees with all the necessary information for excellent performance. And if you don’t have CLM yet, reach out to AXDRAFT to book a demo and explore all the benefits of automation and a playbook’s role in effective contract management.