While the function of a records information management program (RIM) is clear, quantifying how much of a return on investment they provide isn’t always as cut and dry.
While every organization would like to improve access to records, reduce storage space and limit labor costs for filing/retrieval, there are many that simply can’t justify the cost of the investment because they can’t see how it directly correlates with cost-savings.
Unfortunately, this translates into organizations often stepping over a dollar to pick up a penny when choosing their records management programs.
An effective records management program is as much cost avoidance as it is cost savings. Sure, finding information quicker and cutting back on storage space can save an organization money, but the true value lies in avoiding the potentially immense cost of responding to litigation without a finely tuned records management system. Consider these litigation expenses:
- Each Gigabyte of Data equals approximately 65,000 pages of information
- Assume each document to be reviewed is 10 pages
- One attorney can generally review 300 of these documents per day
- 65,000/3,000 = 22 days or 176 hours per Gigabyte of data
- Generally, a contracting attorney for discovery review costs $150 per hour
- $150 x 176 = $26,400
- Standard litigation has 100 GB of data to review
$26,400 x 100 = $2,640,000
That’s right—two million, six hundred and forty thousand dollars. So the next time senior executives ask for business rationale to justify a records management program, there are a few notable examples that can strengthen your argument. Take these court cases for example:
Coleman v. Morgan Stanley
Morgan Stanley was ordered to pay $1.58 Billion after a Florida state judge presiding over the case blasted Morgan Stanley for withholding production of electronically stored records and instructed the jury to infer that the withheld documents demonstrated fraud.
Where did they go wrong? Morgan Stanley was overwriting emails after 12 months, in spite of a SEC regulation requiring emails to be stored for at least two years. Their failure to maintain email in a readily accessible form resulted in Morgan Stanley bearing the burden of the ruling.
United States v. Arthur Andersen
Tied to the famous Enron scandal, Andersen was convicted of obstruction of justice after shredding documents that were intended to be part of an audit. The court affirmed a criminal conviction due to the fact that Anderson shredded the records that were pursuant to Enron’s records management policy.
Remember the movie “Fun with Dick and Jane?” Released in 2005, it was set in the pre-Enron world of 2000 and the parallels are hard to miss. Jim Carrey, who plays an aerospace engineer named Dick Harper, returns to his office (Globodyne) to find a frantic scene with employees desperately trying to shred and destroy evidence and a top executive (Richard Jenkins) drinking whiskey and drearily talking about cooked books amidst the chaos. When Harper asks what happened, the executive responds, “We took our shifting losses…and we put them into businesses…that we actually owned…and then the balance sheet, it showed profit! But actually there was…” The scene ends with Jenkins showing an empty hand, symbolic of the actual worth of the company.
While attempting to defraud shareholders by misrepresenting the value of the company, Enron was engaging in a similar practice while intentionally destroying any evidence that could serve as a paper trail. Ultimately, these practices resulted in Enron declaring bankruptcy and Andersen’s firm dissolving after being one of the largest audit/accounting partnerships in the world.
Zubulake v. UBS Warburg
A landmark case that resulted in a verdict of $293 Million against UBS Warburg for their failure to produce back-up tapes and deleted e-mails. While Warburg produced a large amount of e-mails, their inability to be comprehensive in their records retrieval resulted in significant litigation costs.
Plaintiff Laura Zubulake filed a gender discrimination suit against her former employer (UBS Warburg), also claiming retaliation and failure to promote. Once again, the intentional destruction of records that could reasonably be expected to preserve in the wake of potential litigation cost the Defendant the case. Warburg’s failure to preserve digital evidence in the form of emails related to Zubulake was groundbreaking in the area of electronic discovery.
Broccoli, et al. v. Echo Star Communications Corp., et al.
In the midst of a sexual harassment suit, Echo Star was eventually charged with spoliation of evidence due to failure to suspend automatic email deletion. Echo Star’s records retention policy required automatic purging of emails and a thorough deletion of all electronic files of former employees less than a month after the employee departed.
Since Echo Star failed to suspend their records retention policy with litigation imminent, the judge instructed the jury to issue an adverse spoilation of evidence order. In the court’s eyes, the intentional “deep-sixing” of pertinent documents, coupled with management’s obvious efforts to avoid their creation entirely was deemed to be “overwhelming evidence.”
In the litigious landscape of the modern world, the ROI for a robust and thorough records management program has never been greater. Landmark cases are often decided by the ability or inability to produce evidence in the form of records.
Whether you are a senior executive, or just trying to convey the value of a records management program to a senior executive—contact Western Integrated Systems today and our team of records experts will illustrate an ROI that will not only improve current processes, but safeguard against potential litigation in the future.
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