Delegation of Authority Explained

Every contract manager and in-house legal professional knows the importance of swift contract approvals for the success of any organisation. However, achieving this speed is easier said than done, with traditional processes often bogging down approvals. Enter the solution: automating the organisation’s delegation of authority for quicker contract approvals.

Understanding Delegations of Authority

At its core, delegation of authority refers to the process of transferring decision-making powers from one person or group to another, allowing for a more distributed and efficient decision-making process.

The benefits of delegation in contract approval processes include:

• Reduced bottlenecks and decision delays: Decentralising decision-making helps avoid unnecessary delays.

• Empowerment of employees: Entrusting staff with responsibility increases their feelings of value.

• Streamlined workflow and accountability: With a clear delegation structure, processes become transparent and roles well-defined.

Challenges in Traditional Contract Approval

Historically, contract approvals have faced several challenges:

• Hierarchical decision-making: Lengthy hierarchical chains slow down the decision process.

• Over-reliance on key individuals: When a single individual becomes the sole point of approval, any absence or bottleneck can halt the process.

• Lack of clear accountability: Without clear guidelines, blame shifting and confusion can arise, causing delays.

Leveraging Delegation of Authority for Quicker Contract Approvals

For any organisation, speed and efficiency are paramount when it comes to contract approvals. The process, however, often becomes mired in bottlenecks and delays, impeding business progress. One of the most effective solutions to this problem is leveraging the power of delegation of authority.

1. Identify key contract approval decisions suitable for delegation

Every contract comprises multiple decisions – from terms and conditions to payment modalities. Not all these decisions need to be approved by top-tier management. Identifying which decisions can be safely delegated to subordinates is the first step towards streamlining the approval process.

For instance, while major financial decisions might require top-level authorisation, minor adjustments to contract terms could be handled by middle management.

2. Establish well-defined levels of authority

Clearly defining authority levels prevents confusion and overlaps in responsibilities.

This means drawing up a hierarchy or a matrix that precisely details who within the organisation has the authority to approve which aspects of a contract.

It's also essential to establish a clear escalation path, so employees know who to turn to in case of disagreements or uncertainties.

3. Empower employees through clear guidelines and training

Merely delegating isn't enough. Employees should be empowered with the right tools, knowledge, and confidence to take action and make decisions.

This entails offering regular training sessions, workshops, and providing access to resources, so they understand the implications of their decisions.

Encourage an open-door policy, where employees can seek clarifications when in doubt.

The Role of Legal Automation in Delegation

The integration of legal automation tools into the delegation process offers organisations an innovative approach to optimise contract approvals. By leveraging technology, companies can ensure a swifter, more precise, and less error-prone approval process.

How Legal Automation Enhances Contract Review and Approval

• Speed: Automation tools can quickly scan contracts for standard clauses and flag any deviations or anomalies. Instead of hours or even days spent reviewing a contract manually, an automated system can do the preliminary checks in mere minutes.

• Accuracy: These tools are designed to spot even minute discrepancies, reducing human oversight errors.

• Consistency: With automation, every contract undergoes the same rigorous review process, ensuring that no contract is treated differently, and every potential issue is flagged.

Generation of Standardised Approval Documentation

Automation tools can generate standardised approval templates based on the type and scope of the contract. This ensures every contract, regardless of its origin, adheres to a consistent format and standard. These templates can be customised to fit the organisation's needs, ensuring flexibility while maintaining uniformity.

Efficient Document Routing and Audit Trail

Routing: Automated systems can recognise which division or individual should review a contract based on its content. This intelligent routing eliminates the guesswork and manual routing, reducing the chances of contracts getting stalled or misplaced.

Audit Trail: Every modification, approval, or rejection is logged automatically, creating a comprehensive and tamper-proof record of the contract's journey. This is invaluable for accountability and future references.

Data-Driven Insights

By analysing the data from past contracts and their respective approval processes, automation tools can offer insights into recurring bottlenecks, common anomalies, and areas of improvement.

These insights empower organisations to refine their contract processes, leading to even faster approvals and reduced errors in the future.

Enhanced Collaboration

Legal automation tools often come with collaborative features, allowing multiple stakeholders to work on, comment, and review a contract simultaneously.

This inter-departmental or even inter-organisational collaboration ensures that every relevant party is on the same page, reducing misunderstandings and ensuring a cohesive approach to contract approvals.

Compliance Checks and Risk Assessment

Compliance with industry regulations and internal standards is crucial. Automation tools are updated with the latest regulations and can scan contracts to ensure they comply.

Risk assessment features evaluate the potential risks associated with contract terms, ensuring that organisations are aware of any potential pitfalls before approval.

Workflow Optimisation for Efficient Delegation

Efficient delegation, when coupled with a well-thought-out workflow, can dramatically reduce approval times, minimise administrative errors, and enhance cross-functional collaboration. This section delves into the key elements essential for creating an optimised contract approval process that not only facilitates quicker decision-making but also ensures the process is transparent and accountable.

Designing an Optimised Contract Approval Workflow

The foundation of any efficient process lies in its design. By visualising and planning the journey of a contract within an organisation, potential bottlenecks can be identified and addressed. A clear map ensures every stakeholder knows their role, reducing delays and redundancies.

Integrating Delegation of Authority with Automated Processes

Delegation in itself is powerful, but when paired with automation, its efficiency multiplies. Automation ensures that once a decision is delegated, the process that follows is swift, precise, and devoid of manual intervention.

Notifications and Alerts for Pending Approvals

In large organisations, contracts can easily get overlooked. Automated notifications and reminders ensure that every contract gets the attention it requires. These alerts keep the process moving and prevent unnecessary delays.

Tracking and Reporting Capabilities

To improve a system, understanding its performance is crucial. With in-built tracking and reporting, organisations can get a clear picture of where the process excels and where it needs improvement.

Seamless Collaboration between Departments

Contract approval is often a cross-departmental affair. An optimised workflow promotes collaboration, ensuring that departments work in harmony and not in silos. This unity not only speeds up approvals but also fosters a culture of collective responsibility.

Case Study:Speeding Up Contract Approvals at Powerco

New Zealand energy provider, Powerco, grappled with an outdated contract management platform, resulting in a backlog of unfinished contracts and an overwhelmed Legal team. To rectify this, they introduced Plexus, an innovative legal operating system.

Key ways in which Plexus expedited contract approvals through enhanced workflows and authority delegations:

• Automated Contract Management: Prior to Plexus, contract uploads were a manual process that consumed hours each week. Post-Plexus, the system automated many tasks, enabling swift movement of contracts through their lifecycle.

• Streamlined Approval Process: Powerco's Service Delivery Project Manager, Craig Aplin, cited that smaller contracts, which used to take weeks to get approval, could now be signed off in half a day. This was largely due to Plexus's efficient digital workflow.

• Real-time Contract Tracking: Plexus allowed users to trace contract progress, identify bottlenecks, and see who was next to sign. This clarity facilitated faster decision-making and approvals.

• Automated Reminders for Signatories: Instead of manual follow-ups, Plexus sent automatic prompts to individuals due to sign contracts, ensuring that no contract languished awaiting approval.

• Empowerment of Contract Owners: Plexus provided templates and guided users through the entire contract process, reducing the need for frequent legal interventions. This delegation of authority meant contracts could move forward without unnecessary delays.

• Remote Approval Capability: During the COVID-19 lockdown, tools like Plexus's drag-and-drop function allowed employees like Karissa Tooman to manage and approve documents remotely, ensuring continuity in contract processing.

In essence, by leveraging the capabilities of Plexus, Powerco was able to drastically reduce the time spent on contract approvals by implementing efficient workflows and delegating authority, resulting in smoother and faster operations.

Best Practices for Implementing Delegation of Authority

Incorporating delegation of authority into an organisation's workflow isn't just about designating tasks. It involves creating a culture where delegation is accepted, understood, and optimally executed.

Identifying Champions within the Organisation

Every transformative process requires leaders or champions who spearhead the change. Assigning and leveraging key individuals who are passionate about the initiative can be instrumental. These champions can motivate others, drive the change, and set examples for the rest to follow.

Continuous Monitoring and Adjustment of Delegation Levels

The process of delegation is not static. For it to be effective, organisations must regularly evaluate and adjust delegation levels. This ensures that the process remains relevant, efficient, and aligned with the changing needs and goals of the business.

Regular Training and Communication on the New Processes

For delegation to work, everyone involved needs to be on the same page. Regular training sessions and consistent communication ensure that all employees regardless of position are well-informed, understand their roles, and are equipped with the skills required to execute their delegated tasks efficiently.

Overcoming Resistance and Ensuring Success

Introducing new processes or systems often leads to apprehensions and resistance among employees. Here are some tips on how to navigate this challenge.

Address Potential Concerns from Employees and Stakeholders

Open channels of communication are crucial. By actively listening to concerns and addressing them head-on, organisations can foster trust and buy-in from employees and stakeholders. Addressing doubts early on can prevent misconceptions and resistance down the line.

Emphasise the Positive Impact on Decision-making and Efficiency

Change is more easily accepted when its benefits are clear. Organisations should consistently highlight how delegation improves decision-making speed, reduces administration, enhances efficiency, and contributes to the overall growth and success of the company.

Conclusion

Efficient contract approvals are pivotal in today's dynamic business landscape. Delegation of authority offers a solution to sidestep traditional approval bottlenecks, empowering employees and streamlining processes. When combined with legal automation tools, it enhances accuracy and compliance in contract management. However, its successful implementation necessitates strategic planning, regular training, and open communication.