The AI Edge in Contract Strategy and Legal Ops | Scott Penick

In this episode of "The Counsel's Code," we sit down with Scott Penick, Director of Legal for Keon North America. He provides a masterclass in CLM strategy, from the "organizational and cultural" factors that derail implementation to the critical metrics, like payment terms that truly matter, and why AI is a "co-pilot," not an "autopilot."

Meet the Speaker: Scott Penick

We are pleased to feature Scott Penick, the Director of Legal at Keon North America. Scott's journey began not in-house, but in "big law," working in the financial district of Manhattan during the 2008 financial crisis.

After 15 years in private practice, he moved in-house to Keon, a major manufacturer. He describes the shift as moving from an "outside legal consultant" to being "on the inside" and "part of the team that is getting business done."

Key Insights from the Conversation

What’s keeping you up at night from a legal perspective?

(Scott answered this as part of his introduction.) His focus is on "getting business done, not just being that outside legal consultant anymore, which just wasn't quite as fulfilling." His mandate is to be a true partner to the business.

What legal tech and AI trends are you watching most closely?

• Watching: Scott is watching for a "true red lines contract itself tool." He's seen many claims but hasn't "seen one that... truly can work on its own."

• Worry/Risk: His main worry is "people get lazy and they are trusting the tool to do all of the work," citing the high-profile cases of lawyers facing sanctions. His longer-term risk is that "attorneys start losing their discernment and mental edge... brains are like muscles... use it or lose it."

• Real vs. Hype: He says "data extraction and sort of bulk analysis" is "very real" and "fantastic." The "hype," he believes, is "anything that replaces an attorney." He states, "I haven't seen anything yet that would replace a good attorney," but it does mean "we need less headcount because one person can do more."

What are the organizational, technical, or cultural factors that derail CLM initiatives early on?

Scott believes failures are "usually some combination of organizational and cultural, less so than technical."

• Change Management: "You're changing the way people do their job," and that includes stakeholders outside the legal department.

• Lack of Buy-in: You must "sell the value to the commercial team" by showing how it helps "close deals faster."

• Scope: "Trying to do too much at once, rather than a phased process." He suggests starting with "easy victories first," like NDAs.

• No Accountability: If using the new tool doesn't "become a measurable KPI for someone," they "can ignore it without consequence."

• No Guide: "It's a change management issue... you need a guide to help you do it well." He stresses that companies "can't skimp" on an "expert implementer."

How do you assess a team’s readiness for CLM?

Assessing readiness involves "getting input" from the team, which "is going to inform you how hard the implementation's going to be from a cultural perspective." If you get "a lot of input... that's very negative," you know you have an uphill battle.

The red flags are "people going around the process." If you have "a team that doesn't seem to be interested in it, that already has a hard time following processes," you are "probably not going to get the benefits."

One red flag that says “take a few extra weeks to align”?

"If you don't have clearly defined processes for... intake, review, approval matrices, and things like that."

Scott warns that if you don't have these processes, "a lot of the functions of these CLM tools are not going to be very useful." He advises, "you need to meet internally and figure out how a contract should move through your company... manually," and get buy-in on that process first.

Which metrics matter most to you, internally or to stakeholders?

Beyond just cycle times, Scott points to "payment terms." He notes, "I love all my commercial sales guys, but they don't seem to care too much if it's net 30 or net 90... but that has a big impact on the cash flow." A CLM's value is the "ability to track those sort of metrics that are beyond price" and "go with real data" to finance and commercial teams to strategize.

Have you used or considered AI or analytics tools to help visualize or act on contract data?

"Not a ton," Scott admits. While he has used tools to "create tables and charts that make things more digestible," he sees this as a growth area. He notes, "some of those visual tools just resonate more with decision makers," and it's "something I haven't used enough yet."

How should legal teams balance AI as autopilot or copilot?

"Mostly it's got to be a co-pilot," he says. He concedes you "could possibly test" autopilot for simple, low-risk agreements like NDAs, but even that depends on the industry. For now, AI is a "great assistant" and "a partner to bounce ideas off of" that "makes us faster and better and gives... extra ideas."

Where does AI add real value, and where is manual oversight still needed?

• Real Value: AI is "reliably adding value in research" (with oversight) and in the "analysis of existing documents... it can review them so much faster and pull data out of them."

• Oversight Needed: "Always got to check... the hallucination issue is real." He gives a direct example where an AI tool confidently gave the wrong liquidated damages cap from a contract, and only "good catch" from a human who remembered the deal corrected it.

How would you architect guardrails to catch hallucinations or errors?

Scott suggests you "train the same way you would train a new attorney." This includes "letting the tool learn from a playbook" and, more powerfully, "letting it learn from prior negotiated agreements... iterations of red lines" to see "how does this company really do business... what terms is it willing to give on?"

What criteria should be non-negotiable when selecting a CLM partner?

Scott lists four key criteria:

1. AI-assisted Redlining: This is "sort of table stakes these days."

2. Approval Controls: The tool must have "controllable... escalating approvals" to act as guardrails.

3. User-Friendly: "How user-friendly" and "intuitive is the tool."

4. Data & Visualization: A "great tool to extract the data out" and "visualize" it for business partners.

Which dynamics in vendor-client relationships play a bigger role than technology?

The relationship is critical. Scott highlights:

• Speed: "How quickly can you help get the system up and running?" (as it's "on top of somebody's day job").

• Responsiveness: "How quickly does a vendor respond to questions and issues?" If the tool is down or not working, "I'm doing it the old way."

• Track Record: A "track record and some customer referrals... from a similar business" is "hugely important."

One underrated metric in CLM that people ignore?

"User friendly... it's so important." He argues that this is often overlooked for "fancy features," but "if that's not there, then the other metrics don't matter because... the tool's not going to get used."

Worst habit legal teams should stop now?

"Reinventing the wheel too often" and "everyone doing it a little bit their own way." He attributes this to the "billable hours" mindset from law firms, where "there's really not a ton of incentive to be... fast." The solution is to "stop treating things as one-off" and "start standardizing processes and templates."

One tool you can’t live without (besides email)?

"Microsoft Word." He states, "some of the best tools are the ones that implement well with Word... don't try to push it aside, try to figure out how to work with it."

One AI-powered feature you’d love to see in CLM soon?

"The ability to... have a discussion with the tool... for brainstorming." He says he hasn't "seen a CLM tool yet where I could talk through the agreement... talk about the company's interests and concerns... almost like I'm sitting down with another legal colleague."

What will contracting, legal ops, and AI look like by 2030?

Scott believes "Agentic AI tools" will become much more developed, allowing for "a level of negotiation through predetermined... playbook guard rails."

However, he is "skeptical" about "self-executing" contracts. "I think that's the furthest away... it could come to an enforceability issue... were any minds even involved?"

If CLM were to “go to Mars,” what capabilities would keep it relevant?

"It's still going to be humans, and humans are the common element... user friendliness is going to continue to be the key."

About "The Counsel's Code" Podcast

"The Counsel's Code" is your go-to podcast for exclusive interviews with top legal executives. Discover the strategies they've employed to cultivate their careers, excel in their positions, and emerge as true leaders in their organizations.

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