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In sales in particular, contracts are an important component for concluding sales. If contracts represent the lifeblood of a company, then it must also be important to allow contracts to circulate quickly and regularly. Higher circulation is therefore also synonymous with a higher vitality of the company. So what can be done to optimize contracts so that sales efficiency increases in general?
In order to enable a higher turnover rate of contracts, it is first necessary to solve the blockages that stand in the way of a higher flow rate. The following key factors are immediately obvious:
- contracts are read by people;
- contracts are usually written by lawyers for lawyers;
- Unnecessary complexity of contracts makes readability difficult;
- Readers of contracts usually have to look at contracts as a whole to find the points that are important to them.
As a rule, these factors do not stand alone, but occur regularly in various combinations. This is how an inconvenient impassability, which can perhaps be overcome with a little extra effort, becomes a bigger bottleneck that can bring the entire process to a standstill. The company is dying or vegetating.
If what was written was an article in a specialist journal, the reader would continue to leaf through or put the magazine aside. The consequences would be simple and manageable. In the case of contracts, the meaning of this sentence is much more important: When reviewing a contract for negotiation, flipping on is not an appropriate action, as individual words can often have a significant economic impact on the profitability of a company. In many cases, all that remains is the assistance of a lawyer, who in most cases extends the time until signature involves considerable costs.
So how do you remedy this? Here are 6 specific steps you can take to optimize your contracts for better sales efficiency.
1. Structure and simplify your contracts
Mind at Ease Puts a Smile on the Face: Psychophysiological Evidence that Processing Facilitation Increases Positive Affect
If you first assume that the product offered in the contract solves an actual problem of a clearly defined target group (in other words, there is a so-called product-market fit), and that there are also enough buyers for the product, then it is usually a good idea to make this existing process as simple as possible.
Although this principle comes from neuroscience, it doesn't take a mental marathon to come to the conclusion that simpler messages can be processed faster.
However, the principle of processing liquid goes one step further. Processing fluid initially describes the degree of ease with which the brain processes information. However, the processing liquid also has a significant influence on the formation of judgement. In this way, perceptual fluency helps a person feel familiar with an incentive and that easy-to-read statements are considered true.
In practice, the principle for drafting contracts is worth its weight in gold as soon as you pursue the goal of concluding several contracts more quickly. If the contract is perceived as easy and understandable, then the statements contained therein are also more likely to be perceived as correct. Contracting parties are therefore more willing to sign the contract.
Our recommendation is therefore to structure contracts well so that they make sense for the reader. If possible, use additional explanations directly in the contract and avoid unnecessarily complex terms that must first be explained in a comprehensive appendix. Supplementary headings for paragraphs and inserts can provide additional information.
2. Use playbook solutions
Experience shows that companies that rely on playbook solutions come to an agreement with their customers more quickly. Playbook solutions can present the experience gained from previous negotiations as an alternative clause or alternative text sections. This allows negotiators outside the legal department to fall back more quickly on coordinated and approved clauses without going through another lengthy and complex coordination process.
The prerequisite for the functionality of playbooks at this stage is that clauses agreed with the legal department are in place and that their unequivocal application by the specialist department is ensured. In this respect, it is worthwhile to use advanced software that goes beyond a conventional word processing system. It is also necessary that the legal department, together with the specialist department, develop a catalogue of alternative clauses and that these are regularly updated with the experience gained from the negotiation.
3. Recycle key parameters via software
If you regularly work with contracts, you will notice that a lot of information that plays an important role for the user is buried in the text. It is not uncommon for these passages of text to be found in the middle of the document.
In conclusion, as a user, this means that you are more often confronted with the task of searching for key details in the contract. For simple contracts with just a few pages, this is still a feasible task. If contracts become more complicated, you are faced with a more complex challenge, which also often requires the concentrated reading of many passages of text.
Companies often spend hundreds of hours on this task. A task that software can actually help with these days. Contract programs can easily extract essential details automatically in seconds and present them clearly to the searcher.
In conjunction with contract negotiations with the other party, a tabular overview of the agreed key parameters is even more important. In accordance with the above-mentioned principle of processing liquid, the processed key information makes the contract text appear significantly simpler. This is therefore easier for those responsible for the other side to grasp. In addition, the contracts are often the same, which gives the search for the desired paragraph even more the look of Sisyphean work.
In the working world, there are countless examples of angry decision makers who, despite a thorough review of the contract, are unable to find the desired positions in the contract and therefore refuse to sign it for now.
4. Write your contracts for non-lawyers
Contracts are usually written by lawyers for lawyers. This is an anachronistic practice that dates back to before the Internet age, when legal texts, commentaries, interpretations and templates were not (freely) accessible to everyone via the Internet, but were reserved for a caste of selected scholars — lawyers. This often required expensive and extensive libraries to encrypt and decrypt what was written. These resources were usually not available to a simple layperson.
In this way, contracts were passed on without delay to those who could decipher them. As a result, lawyers also held key positions in companies. This image has severely eroded in recent years. Lawyers can still be found in the control centers of companies, but their presence at the top has been significantly reduced.
The language has also improved significantly. Nevertheless, there is still wording in contracts that suggests that lawyers often forget what contracts are actually written for. Lawyers must bear in mind that legal documents are frightening for many people, which they actually don't have to be. Laymen in law often don't look at a long, complicated contract and shy away from working on it. For this reason, complicated contracts simply take longer until they are finally accepted and concluded.
5. Don't automate inefficient processes
There is no such thing as a free lunch. If you are unable to simplify your contracts, you will only be able to partially automate the contract process. In many cases, you increase the problem at the same time.
Before you start automating, we recommend that you carry out benchmarking: compare your contracts with others and familiarise yourself with the basics of clear language and readability. By introducing playbooks, you can also evaluate the comprehensibility and negotiation time of individual contract clauses via A/B testing. Enforce simple and clearly understandable clauses as standard. In addition, you should add explanations if necessary so that complicated clauses are easily accepted.
When you then start scaling contract drafting, you can be sure that the efficiency gains you've uncovered will scale with them. Automating sales processes should not only be a means of reducing costs, but also contribute to improving the quality of contracts and thus the customer experience.
6. Ask for more from your legal department
An efficient and unfortunately rarely used lever to speed up the conclusion of contracts is to contact the legal department directly with this concern. Everyone is talking about legal design, and many lawyers are familiar with it these days. The redrafting of contracts is also an intellectual challenge that good lawyers should be happy to face. Continuous engagement with the issue of contract preparation can remove many obstacles to contract circulation and thus have a positive economic impact on the entire sales process.
