Understanding Contract Operations: The Intersection of Legal and All Other Business Functions

Business contracts are necessary to define parties' relationships, obligations, and expectations. However, managing contracts effectively goes beyond just the legal function. It involves cross-functional teams, processes, and technology, collectively known as contract operations.

What is Contract Operations?

Contract operations involve a contract's entire lifecycle, from initiation and drafting to execution and renewal or termination. Unlike traditional legal operations, which focus primarily on legal processes and compliance, contract operations involve a broader perspective. It includes things like workflows, technologies, and organizational roles required to handle contracts efficiently across various organizational departments.

Effective contract operations is a necessity because contracts are not static. They are dynamic, documents that move through different stages and impact several aspects of an organization. Recognizing this, forward-thinking companies are beginning to view contracts not just as legal documents but as assets that require ongoing management and oversight.

The Intersection of Legal and Operations

Contract operations serves as a bridge between legal and operational functions within an organization. It requires an understanding of legal principles to ensure that contracts are drafted and executed correctly. Additionally, operational expertise is needed to manage the capacity, processes, and workflows that support contract execution and administration.

For example, while a legal team might focus on ensuring that a contract complies with relevant laws and regulations, a contract operations team might be concerned with how the contract impacts supply chain management or sales revenue. This perspective is crucial for ensuring that contracts serve their intended purpose and support the organization's broader goals.

The Role of Technology in Contract Operations

Technology plays an important role in supporting contract operations. Technology such as Contract Lifecycle Management (CLM) software helps automate various aspects of contract management, from drafting and approval workflows to storage and compliance monitoring. Advanced technologies, including artificial intelligence (AI), can assist in analyzing contracts, identifying risks, and ensuring compliance with contractual terms.

However, technology alone is not enough. Effective contract operations require a combination of technology, expertise, and people to manage the entire lifecycle of a contract. At LegalSifter, we consider negotiation playbooks, document and data management, CLM administration, and change management to be the four cornerstones to successful contract operations. None of these cornerstones can be performed with technology alone. This human-in-the-loop approach ensures that contracts are not only legally sound but also operationally effective.

“Contracts on their own don't exist without the entire combination of the people and the processes and the technologies and the rules within which they operate” --Lucy Bassli, founder of Innolaw Group, Author, and Legal Industry Expert.

Why Contract Operations Deserve Dedicated Resources

Given the complexity and importance of contract management, it is smart to allocate dedicated resources to contract operations. This involves investing in people with expertise, tools, and processes to manage contracts effectively. Unlike legal operations, which primarily focus on compliance and risk management, contract operations provide tools, visibility, and guidance to improve operational efficiency and ensure strategic alignment within legal and other business functions.

Dedicated contract operations resources help organizations manage contracts more effectively, reduce risks, and improve overall operational efficiency. By viewing contracts as dynamic, living documents that require ongoing management, organizations can unlock value and ensure that contracts support their broader business objectives.

The Importance of Contract Operations

Contract operations represent a critical intersection of legal and business functions. It involves a strategic approach to managing contracts throughout their lifecycle, integrating legal expertise with operational efficiency. By adopting a proactive, centralized approach to contract operations, organizations can ensure that their contracts are managed effectively, reducing risks and maximizing value.

To learn more about contract operations, watch our latest webinar “An Insider’s Guide to Navigating AI and the CLM Market.”