Who Should Sign the Contract?

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    Tim Cummins, who heads up the IACCM, an association for contract managers, recently ran an essay in one of his thoughtful email missives about contract signing — who should do it?

    According to his organization’s research, most companies follow one of two approaches in deciding signing authority for contracts:

    • Putting authority into the hands of a small group of experts or executives.
    • Following a “process-based” approach.

    Mr. Cummins believes the first approach can cause the most damage.

    First, over 90% of respondents following this approach report increased cycle times, which is rarely a good thing in today's competitive environment. Second, it requires detailed final review by someone who has potentially had no involvement in the deal's structure or negotiation – and we all know how long that can take and how many issues may have to be re-opened. Third, as with any bottleneck, the theory of 'control' is often lacking in practice. Respondents to our survey report that people throughout the organization are seeking ways around the system – informal agreements, unsigned amendments, weakened change controls.

    The process-based approach requires a greater level of business analysis, more reviews and “increased documentation and recording.” Also, he points out, it can leave “junior employees personally exposed,” if they’re not included on corporate liability insurance policies.

    However, the process-based approach also can lead to the easier use of automation, “in terms of document creation, approved terms, monitoring compliance, storage and retrieval, work flow management, contract exchange, negotiation and drafting – right the way through to electronic signatures.”

    Mr. Cummins invites questions on the topic at [email protected].

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