Contract managers in every organization are under constant pressure to design strategies that drive significant impact and deliver value in terms of cutting down on costs, time, and risks, thereby, improving overall performance. The optimal KPIs for contract management are built around “SMART” goals, which means the deliverables are specific, measurable, achievable, result-oriented, and time-constrained. Contract Efficiency, Contract Effectiveness, Contract Value, and Contract Risk are the contract KPIs that require active monitoring.
KPI #1 – Contract Efficiency: Executing KPIs that measure the length of your contracting cycles, and identify significant trends will give you insights into understanding whether your contract management process is efficient or not. Contract lifecycle time, vendor, customer, geographic trends, and contract value assessments are some prominent metrics to be monitored.
KPI #2 – Contract Effectiveness: Metrics may include the number of contracts per type, customer, program, vendor, annual contract value, order value variance, remaining value of terminated contracts, and historical contract trends.
KPI #3 – Contract Risk: Performance metrics may include standardized clause variance, number of agreements expiring without renewals, number of improper e-signature approvals, vendor authorizations, amount of delayed contract approvals, and disputes resolved.
KPI #3 – Contract Value: Using KPIs to identify and track the value of your contracts is a critical element to your organization’s success because it will significantly measure its financial health.
Utilize Contract Management KPIs for Increased ROI
Contract managers often face the challenge of managing the contract lifecycle right from contract request initiation to contract renewals while battling to make stakeholders see the importance of an overlooked process. The objectives of decreasing contract risk, improving productivity, and enhancing visibility are at the core of successful contract management strategies that any contract manager would comprehend but can find it difficult to achieve without articulating clear KPIs to improve their organization’s contract management process. Therefore, you need to leverage the above-mentioned KPIs to successfully demonstrate the remarkable value any sophisticated contract management software like Volody can bring to the table.
The bottom line here is that KPIs offer powerful tools to achieve contract success and are effective when designed keeping in mind clear goals. One approach is to create specific categories of key objectives, similar to the ones listed above, and then build performance metrics around those categories.