I’m fond of saying that the first step in overhauling your contract process is analyzing the costs and risks of your current process. But what should such an analysis consist of?
That question came to mind after my Inside Counsel SuperConference session last week. I was standing next to another of the presenters, Rees Morrison (he of the Law Department Management blog), when someone came up and asked us a very sensible question: What metrics can a law department use to assess how its personnel are handling their contract drafting?
Nothing very helpful came to mind, but I decided to revisit the issue—hence this post. Here are some stray thoughts:
What would you want to assess? I assume content (divided into substance and clarity, one shading into the other) and process.
You can forget about metrics to measure directly how suitable your contract substance is, as the consequences of contract substance are too subtle and uncertain. As for measuring clarity, readability tests can provide a rough guide to relative clarity, as discussed in this 2006 post on the AdamsDrafting blog, but I wouldn’t give them much weight. Perhaps the best way to measure content is indirectly, by measuring process—it’s likely that a bloated or convoluted template would contribute to a more protracted contract process.
And how do you measure your contract process? Coming up with a number of transactions handled would seem of little use by itself—what you’d want to know is how efficiently those transactions were handled. Presumably you could track some or all them, from whatever started the ball rolling through signature and archiving. (Obviously, contract creating constitutes only part of that process.) You could figure out who was involved, in what capacity, and log their communications. This monitoring could take place in real time, or could be reconstructed after the fact. And if you know your employee costs, you could figure out how much your contract process costs.
Once you’ve measured your current process, you can figure out how you can streamline it. And comparing your current process to your revised process, whether actual or projected, would allow you to determine your savings. That’s presumably how Cisco Systems was able to determine a few years ago that overhauling its NDA process allowed it to save $75 per NDA signed.
That’s the extent of my thinking on this subject. Is this anything you’ve had experience with?
Measurements relates to variables and variables relate to the goals you are seeking to acheive. Thus, if you are seeking to reduce the time or money necessary to obtain an agreement your metrics would relate to variables (the independent variables) which you think impact time or money (dependent variables). However, if you are seeking to measure the substance of the contract, I think you should be able to develop this type of metrics for agreements that you repeat often. For instance, you could develop metrics to “audit” the boilerplate in firm or in-house contracts. The question is whether developing this type off metrics and taking the time to do the audits would be lead to improvements in agreements that would be worth the time and effort.
Liz: Regarding the distinction you draw, I recently saw the two alternatives referred to as “process metrics” and “outcome metrics.”
It would be possible to put together a souped-up spellchecker that flags usages that aren’t MSCD-compliant. But in terms of auditing boilerplate, a simpler alternative to vetting existing prose would be for people to use a Koncision template to create state-of-the-art boilerplate. (You can use the confidentiality-agreement template to do that, although you have to pay a $500 license fee to reuse any language in your own templates.)
Ken