Community Perspectives: What is your contract approval process?

The sole in-house counsel at a legal technology company inquires about the contract approval process in similarly sized legal departments.

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Community Perspectives: What is your contract approval process?

As a legal department scales, contract management and approval processes often reach their limits, and need to be adapted to keep up with the pace of growth of the organization.

A sole in-house counsel at a legal technology in the In-House Fishbowl asked:

"What is your contract approval process? I am the only attorney at my [software] company. I review and redline everything that needs to be signed [...]. Everything needs to be reviewed by head of finance then approved by CEO and COO. It is a very inefficient process and takes weeks to get things approved."

One managing counsel responded:

  • We are a large company and have a computer workflow that sends the document to around 5-6 approvers. It depends on the size and type of matter as to how high it goes.
  • Hardly anything goes to the CEO. I’d suggest some limits on what they need to see. Note that their time is clearly too valuable to look at a $1000 contract.
  • Beyond that put together a list of issues where you need approval so that the finance person doesn’t screw things up. Include a summary of the issue, risks and recommendation.

A VP, Business and Legal Affairs chimed in:

  • I’m in a mid-size financial services company (~450 employees) with a relatively small legal department (2 attorneys, one admin), and we try to make the process as repeatable and efficient as possible.
  • Consistent submission mechanism, conversation with stakeholders regarding context for the agreement, obtaining contacts for redline exchanges and execution.
  • I would definitely advise making sure you can be present for the discussion about the specific legal issues as part of the process, it will save a lot of time on the backend.

Another In-house counsel added:

  • I've been in almost this exact situation. Are they open to improvement and implementing a more efficient process? No amount of good ideas will change anything if they don't want to change.
  • I would at least start with insisting you are in the meetings about the agreements. If they can't even do that, I would update your resume and start looking for another role.
  • If they are open to that, eventually, you'll want to discuss signing authority, which can broken down into areas of the business (IT ops vs sales) and spend based on seniority (new analyst has up to $10k vs senior analyst who I had 100k and anything over 100K the CEO must sign).
  • Obviously, you'll want to break down these categories to your business. A contract management system should also be implemented for the business person requesting the services to make the request in there.
  • In a more mature process, the business person making the request should always be responsible for the agreement, not legal. Good luck. This is not an easy thing to do.