A Cost-Effective Contracts Solution
By Jennifer J. Salopek
Rafik Bawa has headed up the Legal Commercial Team for eBay North America since 2012. The legal department got a new leader around the same time, who gave Bawa one mandate: to find a better way to manage the volume of work flowing into the team.
"The number of contracts our team was being asked to review was growing dramatically and we simply did not have sufficient internal resources to staff the requests within acceptable service levels for the business," Bawa says. Further, the chief financial officer had declared that headcount could not grow at the same rate as the business. The team had turned to temporary staff and consultants—"extremely expensive resources"—and were still finding themselves working late many nights. Bawa devised a three-pronged approach:
- Leverage cost-effective jurisdictions
- Adopt processes empowered by technology
- Take calculated risks
This wasn't eBay's first foray into other, more cost-effective jurisdictions. The company had had a Center of Contracts Excellence in India for a number of years, but time zone and cultural barriers sometimes made communication difficult and produced mixed results for the client. "It works very well for many of our contracts, but it wasn't scalable for what we were trying to do next," says Bawa.
Leveraging existing real estate holdings in a community known for its strong talent base, Bawa established a new Center of Contracts Excellence in Salt Lake City, Utah. Contract analysts there—two at first, now five, and growing—were able to take on a large number of vendor contracts. "They exceeded our expectations, and helped to decrease our reliance on outside counsel," says Bawa, who notes that one of the outcomes was overall costs for contract review and processing that were lower by 50 percent.
Next, Bawa realized that he needed a good contract management system that would permit the adoption of processes empowered by technology. A new CMS had been planned for quite some time, and was finally rolled out in 2012. It greatly enhanced assignment speed, collaboration, electronic signature collection, and contract retention and retrieval.
"We also realized that our CMS could help us create self-service tools," says Bawa, who notes that contract requestors now move through four to five screens to input key contract data. "The business units do all the legwork via the standard forms we created.
"Next, a contract administrator assigns the contract to a contract analyst for processing; requestors can check the status as it moves through the system on the company intranet. Once negotiated and reviewed, the contract is routed through the CMS for electronic signatures, distributed to stakeholders and filed. Bawa estimates that the adoption of this technology has cut turnaround time for lower-risk contracts by half.
Lower-risk? Oh yes. As the third prong, the Commercial Team resolved to take more risk. Why? "We were seeing huge cost savings and excellent quality of work, but the volume kept increasing," says Bawa.
Using the CMS, the team identified contracts under a specified dollar threshold for Expedited Legal Review. "Beginning with that threshold weeded out almost 50 percent of the vendor contracts," notes Bawa. These contracts were sorted into categories and filters were applied: Among other things, is the contract customer-facing? Does it involve privacy, data protection, indemnification?
Each day, one analyst is assigned the role of evaluating these lower-value contracts against the filter criteria to see if they would qualify for expedited service; fully two-thirds do, Bawa says. These are then sent to the Center of Contracts Excellence in India, which processes them for signature while the United States sleeps.
"By the next morning, the business requestor of that contract is able to see in the dashboard that the contract is out for signature—a step change in the user experience," says Bawa; he estimates a 37 percent reduction in the number of contracts that require full legal review by analysts. In the first quarter of 2013, 53 percent of all incoming contracts were negotiated or processed in India.
Involving team members in the design of the initiative was crucial, Bawa says. "This was not a top-down approach. Team members were on the ground looking at this stuff every day." He estimates that each team member has realized a 15 to 20 percent reduction in workload.
Aside from greater work–life balance, team members feel a sense of ownership of the solution and have moved up the value chain to do more complex, strategic work. The business units are delighted too: "They see a noticeable impact on both turnaround times and quality of service, because analysts are able to spend more time focused on the most significant, business-critical contracts."
What's next? "Our metrics help us determine what is getting caught by the filters, allowing us to refine them over time," Bawa says. And what about that risk? "Getting the buy-in from the most senior levels of the organization to take the risk was crucial," he says. "It's possible that something could fall through the cracks, but it is a business-focused and calculated risk with limited exposure."
Bawa reports that the team continues to enhance the functionality of the contracts management system's self-service aspects, and that he is investigating whether the cost-effective jurisdiction approach can be replicated internationally.