A useful analogy can be drawn between the negotiation and execution of a contract, where the output is an executed contract, and the manufacture of an object, such as a car, where the output is a finished product. In a contract negotiation, the other party stands in the place of the customer for the finished product. While many customers are willing to accept standardised, mass-produced goods, others require varying degrees of customisation, which is also the case with contracts. Looking at the evolution of manufacturing provides a useful insight into the way that the contract review process has developed, where playbooks fit in, what other changes we can expect, and how to respond.
The way in which legal services are delivered is changing rapidly and both the volume and complexity of contracts have increased exponentially. The same pressures of economic efficiency that previously revolutionised agriculture, manufacturing and non-professional services are now being felt in legal services. Just as skilled craftsmen responding to individual requests have largely been displaced by assembly line manufacturing, so the world of an individual lawyer custom-building a contract is shrinking.
Parallels between the evolution of manufacturing and developments in contract review
Theme one: division of labour and specialisation
There are now an increasing number of non-lawyers involved in the contract assembly and negotiation process. Procurement specialists, subject matter experts, paralegals, outsourced service providers and support staff within the legal team are all using their knowledge as part of the negotiation process.
Theme two: use of interchangeable parts
There is an increased use of templates and standard language lists, and an improved ability to structure and separate constant and variable portions of the contract, which enables effective reuse.
Theme three: assembly lines
Process workflows and contract lifecycle management applications are being used to track and drive the pace of contract creation.
Theme four: automation
There is a growing use of data merge and contract assembly software.
Laying the groundwork for the next stage of development
Walter Flanders worked at the Ford Motor Company in the early part of the 20th century and his decision to rearrange the layout of machine tools in the plant in an orderly sequence of operations laid the ground for the development of the modern assembly line. How an individual craftsman chooses to arrange his tools is uncontroversial but when the same tools are intended to be used by a team, their arrangement has an enormous impact on not only efficiency but also quality, assurance and safety.
Similarly, when a team of lawyers and non-lawyers are working together colloboratively, the underlying knowledge that they use needs to be organised effectively to help the company achieve its commercial objectives and avoid any reputational damage. Although we can expect an increased use of technology in contract review and creation in the future, it will still need to be powered by analysis and organisation of the underlying information.
You can have any colour, so long as it’s black
The trouble with early assembly lines was that they were relatively inflexible. “You can have any color, so long as it’s black” (a quote famously attributed to Henry Ford in the early days of automation) reflects a negotiating posture that that many lawyers would love to adopt in relation to their standard contracts, but find increasingly hard to maintain as a uniform practice. Some contracts need a little modification along predictable lines, others a lot more, while a small number must still be custom-built (assuming the stakes and outcome are worth the effort).
Contract lawyers need a negotiation strategy, akin to a market segmentation strategy for a product, which allows them to allocate appropriate levels of effort and resource to contracts, while balancing both quality and cost considerations. Well-designed contract playbooks can support the contract review process and be integrated with a training plan that paves the way towards flexible automation. In this case, the executed contracts will vary only within pre-planned parameters of acceptable risk and effort.
Collective effort trumps individuality
Individual craftsman used to pass on their trade secrets to a select group of skilled apprentices who could follow in their footsteps. In contrast, an assembly line requires the collaborative effort of many stakeholders with varying skills and strengths, and is underpinned by the free flow of knowledge and a common plan. Engineers, skilled and unskilled workers, supervisors, management and sales teams each focus on their specialism, which produces far better results (in terms of quantity and quality) than any individual could achieve independently.
A playbook provides a dynamic record of key information that each participant in the process needs to use on a repetitive basis, in accordance with the agreed strategy. It provides a structure for a sustained collaborative effort and can be adapted to make changes in strategy based on consistent messages from the other contracting party.
What next? AI, data, and playbooks
As the world evolves, do playbooks continue to be relevant? Two significant recent drivers of change are the widespread availability and use of data, and the emergence and increased role of artificial Intelligence (AI). In relation to contracts, playbooks enable companies to identify and define the metrics and data they need for:
- Workflow tracking.
- Service level analysis for each of the participants in the process.
- Contract analytics for business outcomes and legal risk management.
AI is assuming greater importance in contract analytics, contract review and negotiation support, and as AI terminology reveals, its increasing use hinges on learning: machine learning, deep learning and neural networks. Although AI can learn directly from human behavior without the need for extensive intermediate coding steps it requires a large quantity of high quality data to feed on. In most organisations it is difficult and costly for a small group of lawyers to generate that data or train the technology themselves. Playbooks can provide the means to empower other stakeholders to do this without diluting legal standards and also continuing to adhere to company policies.