Performance KPI’s — Four KPI’s for Measuring Contract Value
Sometimes, it’s not what you know…but what you don’t know that can cost you!
In our previous post, we focused on the tactical aspects of measuring contract management effectiveness of the processes involved up until signature. How closely are you monitoring speed and efficiency of contracts along their creation, negotiation, review and approval lifecycles? In this next installment, we focus on the next four KPI’s and aspects of measuring contracts for performance and value post-signature.
Often times we find that companies today mainly focus on the first set of KPI’s – the tactical aspects, of ensuring contracts get signed on time and that deals are quickly closed. This is surely important! However many companies may not realize the incredible insights and value that the terms contained within the contracts have to affecting the overall business. After signature, a contracts journey is actually just beginning, and executives, legal teams and other stakeholders need a methodology to truly understand a contract’s value to the organization. Are the contract’s obligations being enforced? Are there any concessions or deviations being made from the contract terms? Having the ability to track top level as well as customized elements that correlate to the unique terms and conditions of your business enable you to truly monitor the value of your contracts.
- Contract Volumes per Customer, Partner, Program Type, and Geography. Having the visibility to see overall contract volumes by partner, type and location gives you the opportunity to monitor overall contract progress and performance. You can then easily drill down into a specific contract type or partner to have visibility into specific details than can help affect business outcomes. You can see how the contract is serving the organization overall, and if it’s bringing in the returns that you were hoping to get from your customers and channel partners. You can also quickly and easily investigate reasons for any anomaly, such as poor contract volume in a particular geography or lack of renewals with a certain partner that you are expecting higher returns from.
- Qualitative Contract Value Assessments and Scoring. It’s not enough just to measure contracts by their quantity or volumes alone. It is also a best practice to understand qualitatively how your contracts are working for your business. Assessing contracts based on overall effectiveness milestone achievements, or adherence to compliance to the terms and conditions over time allows you to put qualitative measures into place for continuous business improvement best practices.
- Historical Trends Performance Analysis. Historical trend analysis enables you to achieve enhanced analytics and gain actionable intelligence based on tangible facts to effectively plan and visualize future outcomes based on the historical data of results of your contracts. Historical trends should be measured on results post execution to ensure that they are meeting the goals and objectives of your business. By reviewing performance against current contracts as well as past, you can make assumptions as to how they will perform in the future within certain parameters, and take proactive steps during the contract creating and negotiation process –as the contract is being prepared. This type of insight will enable you to be smarter about establishing the right terms and conditions for future contracts and/or make adjustments to in-progress contracts to ensure that vendors and customers are performing against expectations.
- Contract Obligation Performance Management and Monitoring. It is vital to have the ability to monitor the meeting of performance obligations once contracts are executed. Having best-practice procedures and KPI’s that can be linked to contract obligations makes obligation management very possible.
Performance KPI’s provide profound insight and the results are specific, measurable and sustainable. In our latest whitepaper, “Actionable Analytics: The IT Factor for SMART Contract Lifecycle Management” we explore how you should monitor the contract lifecycle in order to make the most business impact and ROI.
Stay tuned for the third and final post of this series focusing on risk-based KPI measurements.