How to Evaluate the Results of Contract Management Planning: Tips for Measuring KPIs
If you have followed our four-step Contract Management Planning (CMP) process up this point, you and your law department colleagues have now begun the work of assembling a team that will help you make your contracting vision for the organization a reality. At this point, we know need to face the reality that all your CMP work may be for naught without appropriate, laser-focused ways to measure its successes.
Thus, the fourth and final CMP step finds you developing Key Performance Indicators (KPIs). We know people can feel stressed measuring and looking at data, but view these building tools for identifying your zones for improvement. Changing this perspective will help you and your team concentrate on achieving better results, whether they’re quantitative or qualitative.
To start with, define the KPIs that most appropriately will track your progress and inform decisions. At the start, you won’t know if the team’s work is effective or not—faith and confidence are what you have now. How will you know it’s all working? Tracking improvements or regressions and making adjustments is the best way to accomplish that.
We suggest organizing your KPIs into the following three meaningful categories
One such process metric is known as order value variance (OVV), which measures the difference between the contract’s value and its actual resultant cost tied to process errors and compliance oversights in approving contracts. OVV helps you determine how much and how harmful the variance may be.
What contract enforcement issues is your company experiencing? How many milestones are being missed? How many contracts are expiring or being terminated? These are the types of KPIs used in this category.
An example of a performance metric is Annualized Contract Value (ACV), which normalizes a long-term contractual relationship to compare its average annual value to other similar contracts to give companies a sense of its relative worth.
There is no universal answer or recipe for success for KPIs. And this is great news because every business has its own unique DNA. You know what metrics can tell your contracting story best. Support the CMP narrative you spin masterfully.
Embrace Parley Pro’s four-step CMP process and download our new white paper on CMP today. And don’t forget to enhance your knowledge by watching Parley Pro CEO Olga Mack’s presentation on CMP KPIs here.