PMO Genius: Massive Savings Hidden In Documents

Today’s best solution often cause tomorrow’s biggest problem. Consider the baby diaper, the humble nappy. Pampers, the first practical disposable diaper, was introduced in 1961. Like any new product it was a less than perfect solution. They used wood pulp for  moisture absorption, making them bulky and leaky, and requiring a LOT of storage space for just a few days of diaper changes. However, technology evolves and diapers quickly became: smaller, more reliable, higher capacity, and lower cost.  The next generation of parents overwhelmingly switched to disposables. The price of success, unfortunately, was landfills overflowing with diapers. Solve one problem and make another! While today’s Blog does not solve the problem of baby’s diapers, it does solve a mess that is even bigger and… well… just as… ahem… urgent. Today we’re going to take a peek inside of corporate documents and see how big the problem is, and then show you how to clean up this mess! Take a deep breath and let’s dive in!

When parents first tried to go diaper-less, corporations were making their first attempt at paperless. In the early 60s, IBM introduced the video monitor, which quickly spread through corporations. We could now read and edit documents on a monitor… and later in color and with video… the idea began to develop that we didn’t need to print to paper. Add rising concerns about the environmental, and reducing the mountains of paper reports naturally leads to visions of a paperless office. But as usually happens with a revolutionary idea, the revolution didn’t turn out that way we expected. What used to be one paper document becomes hundreds or thousands of electronic documents. When the paperless office was first envisioned, color was a rare and incredibly expensive commodity. Today we spew document versions as we endlessly edit… fonts, colors, formatting, embedded audio and video, and our distribution lists when we email our completed documents. E-docs have been so successful that we are drowning in documents, and the number of e-docs continues to rise!

According to The Radicati Research Group, we each send 50 emails a day and read another 100 emails; another study places our daily load at 105. The U.S. post office delivers about 215 billion pieces of mail annually; Radicati Research estimates that we receive 300 billion email DAILY.  Pause for a second and think about that. When were we all given time to go through 100+ emails a day, and the documents embedded in these emails? Multiply that times every single worker in your organization. Are you beginning to see the size of the problem e-doc have created? The problem comes from two properties of e-docs. First, they are very easy to create and replicate. It takes much more effort to send a physical document to a thousand people rather than one; an e-doc takes little effort or cost, especially if the thousand recipients are in a single distribution list. Second, e-docs are not subject to the physical limitations of paper documents. With paper, when you run out of filing cabinets you need to archive documents offsite or destroy unneeded documents. E-docs have no physical space limits. A page of plain text is about 2,000 characters. A 3 TeraByte (TB) hard drive holds 1.5 billion pages, or 3,000,000 reams of paper, or 450,000 cubic feet of storage space. A dozen of these drives can fit in your backpack! Not surprisingly, we treat storage space as free, and we keep infinite version of our documents and send to endless recipients on email. The massive number of e-docs has a profound but deeply hidden cost for every corporation. Yet, most firms act as if we can neither measure the cost of e-docs nor provide solutions for the e-document monster. However, we can solve this problem! Let’s break this down, measure the problem and develop solutions…

CORPORATE PROFILE: Corporations vary, both in size and in cost structure. No estimate will fit every firm, but each firm has the same cost elements. For example, there are about 1,000 US firms with 10,000 or more workers (Walmart leads with over 2,100,000 workers); another 3,000 firms have 5,000-10,000 workers. Of course there is a similar number of large European and global firms. Most of the readers of this Blog work in firms of this size. The cost of an employee varies dramatically, depending on industry. In an Investment Bank, the average employee makes over $400,000. The base salary in a large law firm is over $160,000, not including bonuses and other compensation. Neither example includes the cost of taxes, benefits, space, software and contracted services. While the average American salary is around $50,000, compensation in the largest corporations is much higher (especially in knowledge-based  firms). For our purposes, a cost of $100,000 per employee is very conservative.

EMAIL: We use email inappropriately and too often. A previous Blog detailed the inefficiencies of email. In short, ATOS (an $11 billion European firm) researched its own email and found that the average worker manages 100 emails a day (similar to Radicati’s findings), 85% of email time is unproductive, 15-20 hours per week are consumed by email, and most of us work more than 40 hours per week… at least partially because of email. A few calculations show that 25-30% of ALL work time is spent on “useless” email. That means that every worker is your firm is paid $25,000 to $30,000 a year to manage “junk” emails. Time for solutions…

  • Education: The ATOS study also found out that communications form the CEO about this waste immediately reduced email traffic by 20%. I’ve personally seen the same thing happen at several other firms. And, a week or two later everyone goes back to their old habits. Without follow-up and accountability, the change does not last. Why not add accountability? Put an organization in place to  monitor email patterns (not the content of emails), educate internal spammers, and identify further projects to fix email limitations. At a minimum if you can maintain the 20% reduction in junk email, it would be worth $5,000 per user or $50,000,000 for the firm. A more aggressive program, obviously, could yield much more.
  • Expiration: We not only read emails, we archive them and read them again later. Many emails either have no value after a short time, or should be destroyed as part of your records retention rules. If just a few documents expired or automatically followed your firm’s document retention rules, you could reduce waste email time by another 10%, or a savings of $2,500 per worker, or $25,000,000 for the firm.
  • Transport: We use email to move around files when we have no alternative, creating duplicate files. We further duplicate files because it’s easy to make new versions and ask for old emails we can’t find… “Can you send that file again? I don’t know what I did with it! What version of Word is this… I can’t open it? Can you make a new version of that file, or can you…””). Provide an alternative (document management tools?) and you wasted email time can be reduced by another 10%  ($2,500 per worker, or $25,000,000 for the firm).
  • Benefits: Benefits do require some expense. So, let’s provide a budget of $10,000,000 for staff and new software to ensure these benefits, leaving a net benefit of $90,000,000.

LEGAL: When a large firm is sued courts identify the types of documents that are relevant to the case; the defendant then finds the documents (wherever they are), collect them and literally review every document to identify the specific documents that will be provided to the court. This process is incredibly expensive, with costs rising as more documents are reviewed. Because of the growth of corporate documents, legal department budgets are driven by document reviews. Larger investment banks have legal budgets (including contracted legal services) of a billion dollars or more. Other large firms (especially those with high-value  assets) have similar legal costs. Between 30% and 70% of all legal costs are due to document reviews and litigation. Here’s how to bring down these costs…

  • Fewer Documents: Reduce the documents and you reduce the cost of litigation. Let’s assume a conservative $100,000,000 legal budget. By reducing emails and having document management (above), we might reduce the number of documents by a modest 20%, or $20,000,000.
  • Technology in Reviews: Lawyers are very conservative and tend to trail the available technology. As a result, the document review process is very manual. In another Blog, steps for developing a pilot program for Technology Assisted Reviews (TAR) are provided. Your firm will adopt TAR tools. It’s just a question of when. If you set up this pilot, you will start saving years sooner. A TAR reviews cost far less than half that of Linear (i.e. “read everything manually”) reviews. Conservatively that’s $40,000,000.
  • Fewer Lost Cases: Talk to your legal department about how many cases were lost or had to be settled out of court because of emails and documents that should never have been in your systems, or should have been removed as part of your document retention policies. How much? Let’s just leave it as, “millions and millions of dollars.”

IT SERVICES: A huge part of the cost of operating an IT department is the cost of documents and emails. For a firm of 10,000 the cost of an IT department will vary between $100 million and $1 billion a year, with as much as a third of the budget devoted to: storing and archiving documents and emails, maintaining backup sites, building network and internet bandwidth for email, and of course restoring lost files.  Let’s be very conservative and say it’s just $10,000,000.

EVERYTHING ELSE: The “normal” discussion of document management covers: copy centers, marketing materials, document centers, print sourcing, document warehousing, outsourced printing, sourcing of printing and print supplied, etc. If you firm consolidated these services there is a potential for huge savings. However, I’m not going to add any of these savings to this analysis because your firm is probably aware of these opportunities and is discussing different approaches. This is a potential of many million more… but we’ll leave it out of this discussion.

Our conservative analysis yields a modest $160 million cost savings for our “small” corporation of 10,000 employees. A more aggressive approach to documents could more than double these savings, and larger savings are possible in a larger firm. These are low risk projects (that can be tweaked for even lower risk) that are simple to execute, and have a phenomenal payoff. Is your project portfolio filled with document projects? Do they provide similar savings? If not, isn’t it time to talk to a few departments around your firm and see if you can help them to develop new projects? Whatever comes out of these discussions will add significantly to the value of your PMO’s project portfolio. This problem of e-documents has been building for a long time, but this could be the year that your firm starts to take control and tame the e-document monster. At least, that’s my Niccolls worth for today!

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