How to Manage Your Contractual Obligations for Improved Customer Retention & Satisfaction

If you are into the services or consulting business, your customer contracts run into scores of pages and specify hundreds of deliverables and service level agreements (SLAs) that span over multiple financial years and control multi-million-dollar revenues on an annually recurring basis.

It is humanely impractical to manually track these commitments on an everyday basis, especially when midterm amendments and renegotiations take place frequently. As is often the case with businesses struggling to wrap their heads around it, oversight turns out to be too costly, leading to penalties (in the form of service credits or penalty payments), strained customer relationships, and in the worst-case scenario, the customer exits.

Nobody wants to be in this situation. And it is incredibly discouraging for your sales teams and delivery teams, for they end up losing a hard-earned customer to poor obligation management.

So, how do you manage your contract obligations better, for improved customer retention and higher customer satisfaction? Let’s look at the 4 Ds of successful customer obligation management.

The 4 Ds of a best-in-class customer obligation management culture:

The following four best practices in post-award customer contract management help ensure the fulfilment of committed deliverables and sustain a long-term positive customer relationship:

(1) Digging out all the obligations from every customer contract,
(2) Defining tolerances and priorities for every obligation
(3)
Delegating clear ownership for obligation fulfilment
(4) Deadlining
the actionable


We will also share how our contract management solution helps you adopt these best practices.

1. Digging out an updated list of obligations from customer contracts

Why This Best Practice:
Most B2B businesses operate in a very customer-centric environment. Even a single customer can sometimes contribute a large portion to your monthly or annual revenues. As customers multiply, your team pretty much stays the same size; that’s how it should be. But spreading yourself thin across all the customers means setting yourself up for disaster – bad word-of-mouth, poor analyst ratings, and decreased share of the market. It necessitates a dedicated obligation management exercise that culls out all the committed service levels and actionable from your Statements of Work (SoWs), contract copy, and other related documents.

Knowing what your obligations are is the first step to doing something more about it, but manually reading your contracts is far from what we are recommending here.

Use of AI & Automation:
Today, we have Artificial Intelligence and Natural Language Processing capabilities that can simplify the job of extracting contract-level obligations and key service levels from associated SOWs in a matter of seconds. Compared to the time that a business user or a customer success manager would take in doing so, this is a huge money saver. With such technologies at your hand, you can let your customer relationship managers and customer delivery teams focus on their job instead of playing hide and seek with your ever-dynamic contract fine print.

2. Defining tolerances and priorities for every obligation

Why This Best Practice:
Even when your team knows what their obligations are, they will naturally need a clear margin around which to work toward achieving those obligations. It is exceptionally critical to remove ambiguities and to bring focus and alignment across your organization. Your team must be able to “measure” the level of commitment expected of them (say a response time of 24 hours for every customer issue or ‘response’ being #1 priority while ‘resolution of issue’ being #2). In the absence of such clarity, your team may unintentionally end up defaulting on your promised SLAs (Service Level Agreements) or, on the other extreme, may work under undue pressure – both of which are undesirable.

Your team must not only know what is expected of them, but also how much, how often, how early, and how critically.

Use of AI & Automation:
Technology plays its role in large scale and complicated obligation management by replacing scattered, inconsistent, and unreliable excel sheets with a centralized, cloud-based platform where precise tolerances and priorities exist for every obligation, across every contract. These integrate with your ITSM and Project Management Systems in real-time to compare the actual performance data with the specific service levels agreed upon in the contracts. Based on the variances, your customer account management teams can take proactive steps to rectify the performance issues. It erases doubts and imbibes confidence and purposefulness in meeting customer obligations.

3. Delegating clear ownership for obligation fulfilment

Why This Best Practice:
With every customer contract, lots of money is at stake, and so is business reputation. Once the contract is signed, the commitments therein are sealed and formalized. The customer gets onboarded, account managers get assigned, customer relationship management kicks in, and a whole lot of work gets started. Somewhere down the line, the excitement fizzles out, and the daily rut sets in. Stakeholders travel, go on leaves, or switch jobs. And during these vulnerable phases, customers are lost – not to lousy service but low accountability.

For your customer, it doesn’t matter who is fulfilling their obligations, as long as it gets fulfilled. But you must know at any given point of time, for any given customer, who’s neck is on the line.

Use of AI & Automation:
Delegation is a critical feature in every technology-enabled obligation management solution. It helps in officially assigning stakeholders to deliverables, integrates with user-level emails and calendars for alerts and notifications, and creates a personal dashboard of to-dos, arranged chronologically. Thus, every concerned person knows who is responsible for what, and nothing is left to guesswork or assumptions. It also, by the way, helps in an equitable distribution of workload, as the managers can visually see how different team members share the obligations.

4. Deadlining the actionable

Why This Best Practice:
Human beings need a certain level of determination and drive to achieve their objectives. Deadlines create this impetus. To smoothly manage complex deliverables across the contract term for every customer, you must break them up into short term timelines that are realistic yet challenging enough. Deadlines also imply that there is a consequence of not achieving them and that someone is tracking it.

The mantra is to escalate before your customers have to and pre-empt it.

Use of AI & Automation:
An artificially intelligent contract management solution tells you exactly how you have been performing on a given customer contract. The system estimates which contractual obligations are likely to get delayed or missed, depending on past trends and the average time it takes for similar obligations to get fulfilled. In cases where you have been falling behind the contracted expectations, the system helps in estimating the associated financial liability. Combined with timely alerts, escalations, and follow-ups, such technology can eliminate missed obligations from your customer management processes.

Conclusion

Digging out all the obligations from every customer contract, defining tolerances and priorities for every commitment, delegating clear ownership for obligation fulfilment, and Deadlining the actionable are the four Ds of a best-in-class obligation management culture. Putting them into practice may require you to leverage technology such as Artificial Intelligence if you are growing at a fast pace, and your customer contracts are getting more complex and multi-fold.

What are some of your obligation management challenges? Do you feel these best practices will help you address them? Please share your thoughts and experiences with us!

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