Prashant Dubey, Agiloft’s Chief Strategy Officer and Research Chair, shares 5 strategies procurement can employ to productively incorporate the converging roles of procurement and legal into daily practice, and how procurement professionals can create a new, more collaborative, and productive relationship dynamic with their peers in the legal department.
The need for more strategic, collaborative, and partnership-oriented interaction between procurement and legal departments in the enterprise has never been more important. Traditionally, procurement is expected to drive business value, not just through better pricing from vendors, but through strategic ‘category management.’ Layer onto this the fact that as unexpected and unpredictable events such as a global pandemic, the invasion of Ukraine, sanctions on Russia, and resulting deep and broad supply chain disruptions, occurred, procurement is also expected to be a steward of organizational risk.
At the same time, risk management has always been the traditional driver for the legal department. However, General Counsel and their legal ops leaders are more and more expected to be strategic business enablers. Legal and Sourcing, traditionally “adversarial” groups, are now motivated by the same converging business drivers, procurement has internalized the importance of contract management as an enterprise business process, and therefore a vehicle to enable a more proactive and productive relationship between procurement and legal. Despite this, due to inherent inefficiencies in contracting processes, procurement category managers are often forced to focus on tactical tasks vs. business strategy which creates an often-adversarial relationship between procurement and legal. To regain control, procurement is creating Contracting Centers of Excellence enabled by Contract Lifecycle Management and directly acquiring contract lifecycle management software.
5 strategies procurement can employ to create a new, more collaborative, and productive relationship dynamic with their peers in the legal department.
Here are five strategies to turn your relationship with legal from ‘deal preventor’ into a ‘business enabler’, which I believe will help to create a partnership between procurement and legal that has the potential to become the foundation of enterprise risk management, cost management, and managing volatility, such as supply chain disruptions caused by pandemics and macro-economic conditions:
1. Collaboratively create an intake protocol for procurement contract requests from the business. This is the point in the contracting process, if done well, will cascade efficiency throughout the contracting lifecycle.
2. Collaboratively create an intake protocol for legal support requests from procurement. It is at this juncture where a crisp, clear process can enable fluid triage by legal and more efficient consumption of valuable lawyer time.
3. Create a negotiation playbook with common fallback provisions. Not only will this enable a more structured approach to risk management but also create the foundation for more self-serve contracting.
4. Develop a contract repository that serves as a single source of truth. A repository is the foundation of any contract management program since it enables access to agreements at the point of need and contains detailed data about contracts that can enable an empirical approach to standardization of contracting templates and playbooks.
5. Analyze and modify starting point templates to reduce negotiation intensity. Since most companies suffer from “template creep,” an exercise to harmonize templates, reduce the number of starting points, and bring ending provisions to the front will reduce the intensity of negotiations between parties, which accelerates contracting cycle time and enables lawyers to practice more law.
The core procurement/legal relationship is no longer about smooth transaction processing, but rather about creating a more productive relationship that allows procurement to take control of their contracting destiny and accelerate contracting cycle times. This also enables lawyers to practice more law and generate a more uniform application of risk thresholds. The more closely procurement and legal work together, the better they understand each other’s priorities, identify areas for improvement, and develop more effective strategies to drive and grow the business.
Last, but certainly not least, both legal and procurement are tortured by the same basic needs. Too much work relative to available resources and an often-frustrating focus on non-bespoke, routine, business as usual “tasks” that do not fully leverage each group’s true intellectual and strategic capabilities. If this new relationship dynamic enables procurement and legal professionals to spend more quality time with family and friends, lower daily stress and achieve new strategic objectives, I foresee the beginning of a long, happy inter-disciplinary marriage.