In many organizations, agreements are treated as routine: check-the-box documents to secure a deal, place an order, or fulfill a compliance need. Once signed, they’re archived, forgotten until something goes wrong. But this approach misses the full picture. Far from being background paperwork, contracts shape how a company operates, spends, earns, and protects its interests.
A recent analysis by World Commerce & Contracting and Deloitte looked closely at how companies approach this part of their operations. They reviewed data from over 1,200 businesses across a variety of industries. Their conclusion: while there has been some forward motion, most companies are still losing out financially due to weaknesses in how they handle agreements.
When Contract Value Slips Through the Cracks
Every business enters into agreements with an expectation—secure a service, deliver a product, manage obligations, and move forward. But the reality often falls short. Delays, unclear terms, avoidable disputes, and scattered data all chip away at the intended value.
The research shows that companies, on average, are losing 8.6% of contract value through these issues. This is only a small improvement from the 9.2% loss reported nearly a decade ago. While a few top performers have reduced losses to about 3%, others are experiencing value erosion in excess of 20%.
That’s not just a minor dent in earnings—it’s a warning sign. And it begs the question: why aren’t companies doing more to fix it?
A Widespread but Unfocused Effort
Interestingly, most businesses are aware there’s room to improve. In fact, nearly four out of five companies have made some kind of investment in their agreement-related processes in the past five years. Many have acquired tools, reworked policies, or added personnel to improve how contracts are handled.
So why hasn’t the average value loss dropped more dramatically?
The answer lies in how these investments are made. Instead of a coordinated effort, many organizations have addressed only parts of the process. One department might use one tool, while another uses a different one. Legal may focus on risk, procurement on price, and sales on speed—often without a shared system or common view.
This patchwork approach results in friction, poor handoffs, and missed data. Without a clear, shared process from beginning to end, it’s easy for value to slip away unnoticed.
More Than Just Paperwork
At a glance, contracts may look like dense documents filled with formal language. But behind that formality lies a deeper function. Agreements define how business gets done. They include the terms for how products and services are delivered, paid for, and evaluated.
And yet, despite their central role, agreements are often created, reviewed, and managed without a clear plan. A single transaction may touch sales, finance, procurement, operations, legal, and IT—each using different systems, working from separate assumptions, or applying different standards.
This fragmentation doesn’t just slow things down. It creates risk, drives up costs, and makes it harder to understand where problems are coming from.
Segmenting the Workload: A Smarter Approach
One strategy that has gained traction is sorting contracts into categories based on their level of complexity and the stakes involved. A low-risk purchase order, for example, doesn’t require the same scrutiny as a multi-year services contract with performance benchmarks.
By sorting agreements into buckets—based on size, risk, complexity, and purpose—organizations can tailor their process. Simpler transactions can be handled more quickly, often through self-service tools or standardized formats. More involved deals may benefit from hands-on oversight, negotiated terms, and formal review paths.
This doesn’t just save time. It also frees up skilled personnel to focus where their effort can have the biggest impact.
Clarity Matters More Than Ever
Another challenge many organizations face is the lack of clarity in their agreements. Dense language, vague terms, and inconsistent formatting make contracts hard to read—especially for the people actually tasked with delivering on them.
In fact, studies show that it takes the equivalent of 17 years of formal education to fully understand the average commercial contract. That means many team members—whether in sales, operations, or finance—struggle to pull out the key points they need.
When agreements are easier to understand, everyone benefits. Misunderstandings decrease. Disputes become less frequent. Performance improves. And businesses are less likely to spend time and money cleaning up mistakes.
This shift toward clarity isn’t just a trend—it’s becoming a necessity, especially for businesses working with small suppliers, public agencies, or international partners.
From Static Documents to Useful Tools
Some businesses are also rethinking the way they build their agreements. Instead of relying on one-size-fits-all templates, they’re using collections of pre-approved clauses, supported by automated tools that help teams select the right terms for each situation.
This approach reduces bottlenecks. It gives business units more control. And it helps ensure that contracts reflect not just legal protection, but also practical, workable agreements that support delivery.
Combined with automation, these tools can reduce the time it takes to get an agreement in place—and help the business move forward faster.
The People Side of Contract Management
Technology is important, but people still play a central role in how contracts are created and managed. Roles and responsibilities need to be clear. Staff need the right training, and the process needs to be consistent enough that new team members can step in without confusion.
In many companies, far more employees are involved in contracting than leaders realize. The study found that around 26% of the workforce plays some part in contract activities—from drafting to approval to monitoring.
That means improvements can’t just focus on a single department. They need to consider how different teams work together, what tools they use, and how they handle reviews, data, and handoffs.
Looking Beyond the Signature
A major finding from the research is that many organizations stop paying attention once an agreement is signed. But that’s just the beginning. To protect and gain value, companies need to track performance, update terms when conditions change, and keep an eye on whether all parties are delivering as expected.
This is where visibility into contract data matters most. Yet, in a typical large company, contract information is scattered across two dozen or more systems. That makes it hard to monitor performance, spot risks, or adjust terms when needed.
Some organizations are now working to connect these data sources. The goal: improve awareness, support faster action, and avoid expensive surprises.
Taking the First Step
Improving how agreements are handled doesn’t mean overhauling everything at once. A good starting point is to map out the different types of agreements used, who’s involved, and what the current process looks like.
Next, compare the process and tools used for each contract type against its level of complexity and business impact. This will quickly show where effort is mismatched—and where results could be improved by adjusting your approach.
From there, organizations can prioritize changes. Some may start with clearer language. Others might focus on better coordination between departments. In more advanced cases, automation and self-service tools can make a real difference—especially for high-volume, low-risk transactions.
Bringing More Value Back Into Focus
At its heart, this isn’t about contracts. It’s about how well a business runs—how clearly expectations are set, how well performance is tracked, and how smoothly agreements translate into action.
By paying closer attention to the way agreements are created, reviewed, and managed, companies can recover lost value, reduce delays, and improve their overall performance.
The data is clear. The tools exist. The question now is: which companies are ready to take this part of their operations seriously—and reclaim what they’ve been losing for years?
We welcome the opportunity to discuss how our CLM solutions expertise could benefit your business. Contact us here.
Source: The ROI of Contracting Excellence
