Author: Derek Schueren
In the world of software, the frequent tension between sales and legal is well-known. Each side views the other suspiciously: sales will agree to any term or condition if it will close a deal, while legal exists solely to “kill revenue.” Why does this situation arise and how can it be fixed?
While there are many reasons why any particular sales and legal team may have a rocky relationship, the vast majority of such dysfunctional situations have their roots in one or more of the following:
Lack of empathy. Sales and legal often fundamentally don’t understand what the other does. Sales’ role is critical: without revenue, at some point all businesses will die. However, this obvious importance can – and often does – have the effect of making sales’ think the process ends when they get the customer to a verbal “yes.” It does not. In fact, in some sales processes some of the most difficult steps remain after this point. Critically, sales is NOT tasked with managing contractual risk; this important role is legal’s job.
By contrast, legal is all too aware of the value sales can place on its role in a business, especially when sales develops a bad habit of dropping contracts on the legal desk last-minute with unrealistic expectations of how long legal’s work will take and a poor understanding of the potential issues to be encountered. It’s like the high school brainiac and jock eyeing each other suspiciously, knowing the other has zero understanding of them while whiffing on the irony of that fact. Think The Breakfast Club.
- Insufficient preparation. The best contractual processes are those which have been mapped, discussed and simplied beforehand. Unfortunately, this happens relatively rarely, which is a real shame as the more legwork done by sales and legal prior to the contract negotiation stage the quicker and smoother it will go – by a wide margin. Really good salespeople begin the contract review and negotiation process early on, as part of the sales process rather than its own, separate stage. By the same token, really good lawyers don’t look at a contract as the Magna Carta, some sacred, monolithic and static holy grail of legalese. Contracts serve a purpose, which can be fluid depending on the situation. And they can ALWAYS be simplified.
- Poor risk management. A failure to understand, identify and quantify risk, by sales to some degree but for certain by legal departments, is a major struggle for many companies. “Risk management” is not required curriculum in law schools (although it should be), and oddly contracts classes for 1Ls – which are required – focus predominently on the rationale behind contracts as a discipline of the law. While important, this can leave lawyers in the driver’s seat of a race car knowing the history of race cars in minute detail but having no clue how to actually drive one.
Once these core issues are indetified, fixing them becomes much more straightforward. To develop empathy, companies can start by educating each group on why the other exists, what the other does for their jobs, how they are measured in doing their jobs and ways in which the two groups can collaborate (e.g. can sales introduce contracts earlier in the process so they can start being socialized ahead of time? And can legal have pre-approved fallback positions for particularly challenging sections, ready to go if and when needed?).
With respect to preparation, my colleague Kingsley Martin has written extensively about this topic over his 30 years in the business. As he has frequently pointed out, the vast majority of contracts can, should and must be simplified, no question. They should also be revisited frequently to see how they can be improved, something many legal departments fail to do. But sales also can and should incorporate the contractual step into the sales process itself, making the customer aware of what is coming in advance. And finally, contractual risk simply must be understood better by legal departments and communicated to their sales counterparts as well as management. Contract clauses and edits to them should be flagged and “scored” based on the risk they pose to the organization, which allows the company to make an informed business decision on their impact. This makes the contract negotiation and review process FAR more efficient and less risky.
The great news in all of this? Technology can drastically improve and expedite resolution of all of the aforementioned issues, namely AI-driven deal acceleration software which automatically scores all edits to a contract based on how risky they are (or aren’t), for legal and sales both to see. It can also suggest pre-approved, substitute language which can be used when and where needed. Sound too good to be true? Try it and see for yourself. At Akorda we believe sales and legal can work as a team, closing revenue faster while reducing the overall risk to get there.