Records Management Is Always Cost-Justified

By Cary McGovern

ithout exception, records management is always less expensive than passive recordsstorage. This column discusses the method that can prove it to your customer.

There are three typical ways that companies store their business records. These methodsinclude storing them on site, storing them off site using their own personnel forretrieval and delivery, and contracting with a storage and retrieval service provided by acommercial source. Let's take a brief look at each of these methods.

Storing Records on Site

By far, the most costly of the three variations is storage and retrieval of businessrecords on-site at the customer's own facility. The cost per square foot is generally twoto three times higher than other storage-location costs. The hard cost of existing staffrequired to locate the records generally runs between $25 to more than $100, depending onthe salary of the person "fetching" the record.

It is not uncommon for several staff members to search for hours to find a file. Whenthey can't find it, the search escalates and management or professional personnel arebrought into the "hunt." Missing and lost files are common in virtually allbusinesses.

Storing Records Off Site

The second method reduces the cost of storage by about one-half to two-thirds butincreases the cost of retrieval since, not only is their own staff member stillresponsible for finding the file but, now, there is additional travel time required.

Outsourcing the Storage and Retrieval Service

This method is always the least expensive, since it is always a fixed cost for eachretrieval and delivery. The storage charge is reduced to a monthly unit cost, so there isnever a need to lease additional space. New boxes added to inventory increase the monthlycost only incrementally, based upon the increased cubic footage in storage.

Performing the Cost-Benefit Analysis

Let's begin the cost-benefit process with a couple of definitions and assumptions:

Definition: Storage is the cost of storing a unit record, such as a box or a file.

Assumption: Storage always costs something.

Definition: Retrieval is the activities surrounding locating, fetching and delivering arecord.

Assumption: Retrieval always costs something; there is no such thing as free space orfree employee time.

Requirements

In order to determine the actual cost, you must discover and acquire several itemswhile performing your site survey. (For more information about the survey process, you canrefer to my past columns in Inside Self-Storage, or visit www.insideselfstorage.com  or www.fileman.com.)

Items needed:

1. The location of all stored records.

2. The cost of the space of those areas. If the customer owns the building, ask whatthe value of the space would be if he rented it.

3. The hourly cost of the staff member who most typically retrieves the file or box.Add to that 25 percent for benefits and management overhead.

The Analysis

There are 10 steps required in this analysis:

1. Add the total cost of all storage facilities in which boxes are stored. Includeclosets, file rooms, storerooms and anywhere that boxes are stored. Count the number ofboxes stored in these areas. Use a standard of 1.5 cubic feet for the average amount ofspace a box consumes. (Some boxes may be smaller--for example, the 1.2 cubic footletter/legal storage container. Others will range well over 2 cubic feet. The 1.5 factoris considered an average size by the commercial records industry.)

2. Divide the total storage cost by the number of boxes. This number results in anaverage storage cost per box.

3. Determine the hourly cost of the employee that typically retrieves the file or box.Be sure to add at least 25 percent to that hourly cost to represent the benefits andmanagement overhead related to that staff member.

4. Determine the average time it takes for the staff member to receive and interpretthe request, plus the travel time to and from the storage location. Multiply the time inhours by the hourly salary rate plus the benefits factor derived in step 3.

5. Double the dollar amount determined in step 4. The staff member is not only takingthe time to do the task, he is also not performing some other more important task.

6. Multiply your storage charge by 1.5 to compute average box-storage cost.

7. Add your retrieval cost to your base-delivery cost. (The base-delivery cost is thecost of the first unit delivered. Typically, deliveries have a base charge and anincremental cost for additional boxes.)

8. Add the average storage cost per self-managed box to the average retrieval cost indollars. The result equals the unit-retrieval cost of self-managed records.

9. Add your base-delivery cost to the results of step 8. This equals your totalunit-retrieval cost.

10. Compare the self-managed cost to your cost.

The Edge

It is difficult to argue with the results of this analysis. Clearly, the commercialrecords center always has the edge on any self-managed facility, either on- or off-site.In fact, the services you provide are of great value to the customer as an outsourcedservice. Your customer requires fewer staff members, and the service results in a fixedunit cost for each box. Additionally, since you require a regimen to be followed forindexing and describing each box, you ensure that the customer can always find his recordswhen he needs them.

Keep in mind that the cost of storage is the smaller part of the two costs involved inrecords management. Retrieval costs are always greater than storage. Do not to sellrecords management based on price; instead, sell it based on "value." So what isthe value of records management for most businesses?

Value is found in the mind of the customer. What you value may be different from whatyour customer values. Value revolves many times around finding your customer's pain andhealing it. Your records-management system will make his life simpler. Finding recordswill no longer be a problem. Lost and missing files will be a thing of the past. Rememberto look for their "pain" when selling value.

Regularcolumnist Cary F. McGovern is a certified records manager and owner of File Managers Inc.,a records-management consulting firm that also provides outsourcing services, file-roommanagement and litigation support services for the legal industry. For more informationabout records management, contact Mr. McGovern at File Managers Inc., P.O. Box 1178, AbitaSprings, LA 70420; phone (504) 871-0092; fax (504) 893-1751; e-mail: [email protected]; www.fileman.com.