Getting management buy-in for an in-house document management system “wasn’t a slam dunk,” says Sierra Systems general counsel Robert Piasentin.
But there was a “strong will” among senior management for change, driven by the risk of “hefty” fines for failing to respond fully to e-discovery requests — particularly for those parts of the business dealing with the U.S., he adds.
Across the border, sanctions can run into millions of dollars. While Canadian courts have traditionally been less punitive, experts are predicting an increasingly strict regime more akin to that in the U.S. Tightening legal budgets and the rising complexity of IT systems are adding to concerns about the risks of high e-discovery costs.
In a survey of 350 lawyers in Canada and the U.S., published in March by Robert Half Legal, 22 per cent said their company had started handling more e-discovery projects in-house within the past year.
Managing documents in-house and, in some cases, customizing systems to fit particular sectors and processes, is seen as a way of recapturing some control over an area that has strong implications for finances and business efficiency.
But such a project should not be rushed into, advises Piasentin, who introduced a system three years ago that centralized document management across seven offices in Canada, three in the U.S., and several satellite offices. “It took us a lot of time at first. We had to get an understanding of what was already happening,” he says. “We had a policy about document retention but we didn’t have any actual policies in place to make sure it was being done.”
A point person took responsibility for finding out how processes worked in each location, as well as providing feedback on the centralization plans.
Piasentin investigated the different software options on the market, testing out demos before selecting a tool. It has proven to be an ongoing project.
“It’s been working reasonably well,” he says. “I wouldn’t say we’re 100 per cent perfect there — we’re investigating a potential upgrade, or getting something else.”
Dominic Jaar, KPMG partner and national practice leader, information management services, agrees it’s best to take things slowly to ensure the best long-term outcomes. “This is an incremental process,” he says. “It’s not as easy as people might think — [it doesn’t involve] picking the management system and bang it’s done.
“It’s about reviewing the existing processes. You really need a three-year plan, rather than an overnight approach.”
Starting from square one
As a first step, he recommends developing a taxonomy and classification scheme, setting out conventions for naming files that ensure all titles are structured in exactly the same way. This should enable anyone to find a file saved by someone else, and will help to migrate files to a new system.
Failing to standardize document processes before introducing a new piece of technology is doomed to fail, says Jaar. “The technology is there to support existing procedures.
“Trying to roll out technology from the top down is a recipe for disaster.”
Taking a slower approach means that smaller firms, in which budget holders may take some persuasion to invest upfront, can start preparing their files for when sign-off is eventually granted, he adds.
Morgan Borins, director of business operations at CounselQuest, agrees on the need for gradual change, to allow time to achieve buy-in from those who will be using the software.
CounselQuest, acting as an intermediary, matches companies with software vendors offering suitable solutions for document management.
Borins says people are generally averse to change, so if they’re set in their ways and you introduce a new system that doesn’t always flesh out well. “There has to be a proper strategic approach [involving] getting feedback and educating new users. It can’t be a short, fast implementation. The worst situation would be you make the upfront investment and users are still filing the old way,” he says.
Educate the users
After budgets are allocated, Jaar says legal departments should avoid blowing their entire project budget on a shiny new system without leaving any funding for educating employees on how to use it, or tailoring it to the company’s needs.
There must also be a lawyer “power user” who understands how the system works and can answer colleagues’ questions. “If you just implement it with a third party and they go away, you can’t just rely on IT staff, you need someone who really understands the software from a subject matter expertise standpoint,” he argues.
But the lawyer overseeing the project needs to be someone who’s able to quickly grasp its more technical elements,
Borins says. “In some of our discussions with smaller organizations it’s just the general counsel who would quarterback the task because it falls under their role.
“That lawyer has to have some technical expertise, otherwise it would go over their head. Or, they would need to be willing to be brought up to speed quickly. There has to be some research and understanding.”
Before shoe company Aldo brought in a Legal Suite system about three years ago, general counsel Catherine Ross set aside time to thoroughly test the software herself. “Lawyers working for other companies were always surprised that I was so involved in the introduction of the tool because they thought it was something I would delegate to a junior lawyer or paralegal, but I thought it was very important to plan how to map the tool,” she says.
She explains it’s not a cheap investment. “In my case I didn’t want to just have an icon on my computer and feel [the tool] wasn’t reliable or useful. So it was very important for me that we’d all use it.
“There are certain fields that you need to customize. I knew exactly what I wanted and what information I would be looking for, the kind of questions I would receive from my internal clients.”
She started out by introducing an intellectual property database to bring together all the information Aldo had on its trademarks. When that proved to be a success, the company brought in a contracts management tool. The two-step approach was an easier sell when Ross presented her business case to Aldo’s president.
After getting sign-off for the contracts management tool, she manually added 30 to 40 contracts into the system to check that the results met her expectations. She then enlisted the help of two summer interns from law school, who followed guidelines prepared by Ross, in order to roll it out comprehensively across 800 contracts.
“It was a really good experience for a student,” Ross says. “This was more than just entering data in a database, because you needed to read the contract. For most, it’s the first time they get to read contracts; you don’t really do that when you’re in law school.”
The students spent about four months working full time on the project, and had their work quality assured by Ross and another colleague.
Would a smaller company have the budget for this approach? “If it’s a small company they would have fewer contracts,” Ross points out. “Some students are prepared to work without any remuneration just for the experience.”
But after a system’s up and running, don’t expect to sit back and relax. Tools often need to be tweaked and updated as a business grows, contracts, or shifts its focus.
Renato Pontello was tasked with providing high-level guidance on some additional features for his former employer, Zarlink Semiconductor’s in-house document management system, before Zarlink was acquired in October 2011.
He decided, since the firm had acquired a number of other companies, it would be useful to add a patents database to draw lots of scattered information together in one place. Correlating patents of product lines would make it easier if the firm were involved in litigation and help to quantify a potential lawsuit.
Integrating complex records from other large companies was no mean feat, but setting realistic goals helped to keep colleagues from other departments on board, he says. “By setting realistic deadlines I never used the excuse that ‘we’re working on the database so can’t support you.’ I always made sure we did both, so it never became an issue.”
As Zarlink diversified, selling off real estate in Sweden and a manufacturing plant in Swindon, Ont., having well-organized records provided for swift, smooth transactions.
But Pontello, now legal counsel at Solantro Semiconductor Corp., says the document management system really came into its own when Zarlink received a hostile takeover bid in May 2011.
“The bid was strategically timed so that a lot of the battle would be fought in the height of summer when our white knights would be vacationing,” he recalls.
“We were able to create a virtual data room within the first three to four days. We hastily prepared it with the central records we had for human resources, finance, legal.
In a short period of time we had a due diligence room set up. It allowed us to move forward very rapidly.”
In the end, Zarlink had 30 interested parties and was able to build up its price due to all the information it had at its disposal from the database.
“We were able to educate [the parties] as to our product lines. If we had been caught flat-footed we would have been sitting ducks and really wouldn’t have achieved the same market valuation,” Pontello says.
Another way to extract value from a document management system, says Jaar, includes using it as a knowledge management system. This can involve customizing it to identify questions that have already been answered, perhaps by lawyers working in other offices.
Automated destruction settings can also be added, to ensure that certain types of documents — such as a plea — are deleted after a certain period of time.
“Use it to help you get rid of stuff that’s useless and just takes up space,” says Jaar.
While some may balk at the thought of precious data being accidentally deleted by an automated tool, this is less of a problem than the danger of hard drive crashes, or being unaware of what information is being retained and for how long, Jaar adds.
And there are particular risks associated with using a more ad hoc records system, he says. For example, an unsophisticated system hosted by IT could unwittingly provide workers with access to confidential information — such as the names of those in a redundancy pool. Sensitive data on mergers or acquisitions could also be overly accessible, bringing the possibility of insider trading.
Piasentin says Sierra Systems has “already saved costs” due to the reduced need for lots of paper storage, although work continues on scanning and destroying the physical copies of documents. An annual review is held to help decide what needs to be stored and what can be thrown away.
Despite the benefits of in-house document management systems, many companies are still “stuck in the mindset that having filing cabinets full of paper files with a lock on is the best way to file documents,” says Borins.
Some say they are put off due to security concerns. But a lot of [tools] offer security that matches “the highest level of online banking,” he argues.
Borins makes the point that not all aspects of document management have to be dealt with internally. “In switching to a digital system, you’ll want to maintain paper references for a period of time — there are companies who can handle these aspects for you.
“There’s always the option to offload [parts of it] to someone; that may be the best use of everyone’s resources,” he says.