If you’re in a department that handles contracts, you’re probably aware of the importance of “contract management,” but how many of you generally understand the importance of “document management,” including contracts? I wonder how many companies are aware of the importance of “document management” by their managers.
As a member of the legal department, I would like to take up the topic of document management, which is an even bigger theme than “contract management”, based on my experience of recognizing the challenges of document management throughout the company in the course of “contract management”.
If we think of a company’s business as a pyramid, the top of the pyramid is “knowledge work” (decision-making, planning, analysis of information, etc., which requires higher-level judgment and thinking skills), “communication work” (reporting, coordination, consultation, meetings, negotiations with outside parties, etc.) which supports the knowledge work, and “document work” (creation of documents, collection of information, sharing of information) which prepares for smooth communication. Considering this, “document management” can be said to be the foundation of business, and it can be said to be the most basic of the basics that cannot be avoided in order to proceed with business.
One could rephrase “document management” as “management of information”. If we consider that the work of collecting, processing, sharing, and communicating “information” occupies most of the work up to the top of the pyramid, then the management of “documents” (regardless of whether they are electronic records or printed paper), which are mounds of “information,” is the basis and foundation of all work. In other words, if this “foundation” is not solid, the work that lies on top of it will be wobbly. If the “foundation” of the house is not solid, it will collapse in the slightest natural disaster. If your company doesn’t have good document management, even the slightest change or mistake can be fatal.
“Document management” starts with the “Organization of documents”.
What is necessary and important to promote document management is the Organization of documents, which are mounds of information. This is just my personal opinion, not doing “tidying” is a great loss in the business of the company.
The basis of our work is to do something seemingly unremarkable, such as “tidying”, in other words, to “do the ordinary things as a matter of course”.
Work efficiency improvement, reduction of overtime, new systems, excellent human resources, and AI are all great at first glance, but even if you only follow these fads, if the underlying foundation is not solid, your company will not be able to make the most of the state-of-the-art systems, AI technology, excellent human resources, or valuable working hours, and nothing will be improved. A company that is able to do what it takes for granted as a matter of course will be able to make the best use of these resources.
The relationship between AI and document management
The keyword “AI” was mentioned above, I would like to explain a little about the relationship between AI and document management.
If you think that introducing AI will make your business more efficient, you are mistaken. AI is not a magical mechanism that automatically answers any question you ask. It is a system that uses a specific model and algorithm to calculate the answer based on what is taught by humans. AI can’t give accurate answers unless the input of the data and the desired output are considered by the human side. Without an understanding of these characteristics, it is impossible to envision the tasks that can be realized with AI. Even if AI is introduced without data to be learned, the goal of improving business efficiency will not be achieved.
It will not be possible to introduce AI successfully unless the company and departments are well organized about what kind of work to leave to AI or not, and what kind of “information” is needed for AI to learn.
What is effective contract management?
As a member of the legal department, I would like to touch on “contract management” as well.
One of the most important aspects of “tidying” in a legal department is, of course, “contract management”. The following is a review based on personal experience with each keyword.
Digitization of contracts
There will still not be many cases where contracts are executed electronically from start to finish. Even today, many contracts are executed on a paper basis. With the history of the company, the number of contracts that have been signed is huge. Paper-based filing alone is too inefficient to ensure that these contracts can be viewed at any time. Scanning and digitizing contracts and storing them electronically is probably what most companies do today. Digitization of contracts is the first step in contract management. However, it is more important to manage the data once it has been digitized than just digitizing it.
There are many things to consider further, such as how to name electronic files, how to divide them into categories, and how to set access rights.
There are many cases where a system is introduced for contract management. What I want to note here is that just because it’s being used by another company doesn’t mean it’s an immediate fit for us. Each company is different in terms of its size, industry, type of business, type of contract, information required for business, business flow, etc. It may be necessary to have a system that includes not only contract management but also workflow and management of legal consultation cases. The introduction of the system also requires that the operations of the legal department and the decision-making process between the legal department and each department be tidiness.
The problems with system implementation are not limited to contract management. It is common to hear from the implementers that the system was installed, but it did not make them more efficient, or that the installation of the system made it more troublesome. As I said, AI is not magic, but so is the system. If you don’t think about what you want to make more efficient and what you want from the system, it won’t work if you just implement the system. Isn’t it necessary to do “tidying” on a regular basis?
Model of the contract
Maintaining a template of contracts is another challenge for legal departments. You have to keep it organized so that you don’t make too many skeletons and lose track of them, or you don’t know which is the latest version. It should also be revised as appropriate in response to changes in the internal and external environment. It is desirable to manage and share the model within the legal department in a way that is “easy to understand for everyone”, although there will be problems with how far the model should be developed, how often the model should be revised, and how the history should be managed. In addition, depending on the degree of risk, it may be possible to improve business efficiency by eliminating the need for judgments by the legal department, but in such cases, it may be necessary to firmly establish standards and rules, such as the method of releasing templates and the process of reaching judgments by business units.