Few would disagree if we said that contract management is a complex area. After all, it involves numbers, jargon, legalities, and so much more. However, this function has immense strategic significance to businesses. Going wrong here is simply not an option.

Findings by World Commerce and Contracting reveal that inefficiencies in contract management can reduce the contract value by 9.2%. Given that these drafts shape key business relationships and impact business outcomes, it becomes crucial to manage them efficiently.

Let’s learn more about this crucial role and what makes an effective contract manager in modern organisations.

What Is a Contract Manager?

As the name suggests, a contract manager manages contracts. They’re responsible for administering and managing contracts, along with governing the entire process—from creation through execution and beyond.

It is the contract manager’s job to ensure automated contract management, and corporate compliance, thereby minimising risks and preventing revenue wastage resulting from poorly-designed contracts.

Once the contract has been executed, the contract manager stores it securely so that it can be accessed as and when needed for future reference for all stakeholders involved.

Contract managers also help with:

• Creating automated contract templates for future use

• Assessing contract workflow data to identify errors and obstacles

• Managing relationships with contractors and vendors

• Helping the organisation’s legal team with contract negotiation

• Revisiting and updating old contracts with business partners, suppliers, vendors, and customers to ensure the terms and conditions remain viable for the business

• Formulating new contracts without losing sight of the previous clauses to ensure consistency and legal soundness

As you can probably tell, successful contract managers need to possess a unique mix of technical and interpersonal skills. They should understand the critical role they play in the success of the organisation, and continue to refine them over time.

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7 Skills You Need to Become a Star Contract Manager

Contract managers must have certain essential skills and knowledge to stay competent in this role. Mentioned ahead are a few important ones.

1 - Understanding of Contracts

Responsible contract managers understand that the contents of the contract will have a direct impact on the organisation. More often than not, these contracts, whether for sales or legal functions, use standardised language. Some may also incorporate common phrases/principles in Latin.

A skilled contract manager will be familiar with these aspects. They will know about the clauses that could be involved along with their merits and demerits. Further, they will know when and where additional revisions are necessary.

Contract managers who manage global operations may need to have knowledge of and experience related to specific contractual language. Moreover, contract clauses may vary in different parts of the world depending on the regulatory environment. Hence, the manager should be aware of the commonly used terms and conditions in the contract.

To make this task easier, contract managers may use a proven CLM (Contract Lifecycle Management) tool. It can provide a host of contractual clauses that can be easily added to or removed from a document as and when required.

2 - Financial and Legal Knowledge

Running a business typically narrows down to one goal—making money. Or at least staying financially strong as it evolves. A good contract manager should know how their agreements will affect the organisation’s bottom line. They should consider crucial financial aspects such as contract value, cash flow, costs, profitability, compliance, and so on when drafting documents.

A contract manager must also understand the legalities involved, including the applicable contract laws, regulations, and dispute resolution methods. They should be clear about the rights and obligations of each party, the implications of breaches, and the latest guidelines for contract drafting and reviewing.

3 - Risk Mitigation

One of the most important tasks performed by contract managers is identifying loopholes in the company’s existing or proposed agreements. This can help mitigate a lot of potentially risky situations. For instance, the manager may include warranty, default, or allocation of risk clauses in the company’s legal documentation. While these steps will not eliminate risks entirely, they will help minimise potential adverse effects.

4 - Tech-Savvy

Like all fields, contract management has also received a boost due to advancing technologies. Today, managers can leverage contract tools for mission-critical tasks such as configuring price quotes, streamlining contract management, fast-tracking negotiations, managing billing and subscriptions, and more. Being well-versed in and implementing these tools will certainly add to any contract manager’s repertoire.

5 - Negotiation and Conflict Resolution

All contracts involve negotiation; there’s no way around it. It is important that all parties agree on each element of the contract, including the roles and responsibilities, the way ahead, and the performance parameters. Getting all this right typically takes a good understanding of human motivations in relation to business concerns.

Contract managers should be good at anticipating potential challenges during negotiations, while de-escalating issues and resolving conflicts. They should be able to strike a balance between mutual collaboration and acceptable concessions. Having strong communication skills and empathy can go a long way here.

Contract tools and software can also come in handy. They can provide a clear synopsis of past agreements, highlighting areas of previous disagreements. This can work as a great way to avoid them in the future.

6 - Stakeholder Management

Many a time, contract managers face the heat from internal stakeholders, who may consider the legal aspects as a thorn in their way to getting things done. In such situations, the contract manager must be able to use their communication skills to educate these stakeholders about the risks associated with violating legal contracts. The manager must stand their ground when it comes to following the terms and clauses that are in the company’s best interests.

7 - Relationship Building

Running a successful business is a lot about trust, which in turn, is about building healthy relationships with others. A well-drafted contract can provide a formal and legally binding framework to define these relationships. The agreement can prove highly useful in protecting a party’s interests in case other methods fail.

Contract managers should, therefore, know how to tread the fine line between doing what’s best for their own organisation and respecting the rights of the stakeholders. They should be skilled in the art of diplomacy, minimising friction, promoting collaboration, and instilling trust in the people they work with.

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Conclusion

The role of contract managers is gaining increasing prominence among organisations committed to improving their operational efficiencies and business relationships. This has boosted the need for detail-oriented professionals who can manage the growing volume of agreements. From creating contracts and negotiating to balancing stakeholders’ expectations and executing the terms, a skilled contract manager can ensure a smooth process throughout. Hopefully, the above information has shed adequate light on what a contract manager is, their role and responsibilities, and the vital skills needed to be successful in this field. Good luck!

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