Legal expenses vary enormously according to “practice maturity” on legal holds

The findings discussed below come from a survey of 235 mostly-US companies by the IT Policy Compliance Group (IT PCG) as reported in Info. Mgt., Vol. 43, Jan./Feb. 2009 at 10 (See my post of Feb. 6, 2009: savings from the various practices.).

The author of the survey, Jim Hurley,explained part of the methodology in an email to me. “The participants and organizations involved in the survey portion of the research were randomly selected from a pre-screened list of more than 4,000 organizations. The participants had to qualify and answers from non-qualifying participants (beyond the 235 reported) were dropped.

According to a post on the Group’s blog, seven-in-ten companies are spending 5-to-6 times more on legal settlements, legal fees, and internal expenses to find, produce, protect and preserve information in response to legal requests for information.”

What interests me particularly is a table in the report that gives data on “expenses for legal holds on information.” Above the table it says “annual expenses for legal fees and settlements by practice maturity,” where “practice maturity” means how sophisticated are a company’s litigation-hold policies.

The report uses different levels of practice maturity: “ad-hoc practices”; “repeatable but intuitive”; “defined and measured” – which is the category of normative practices; “managed and measured”; and “optimized and balanced”

The revenue size of the surveyed companies and their associated legal expenses for “normative practices” are $500 million revenue, $0.9 million expenses; $1 billion, $1.4 million; $10 billion, $5.9 million; and $25 billion, $20.2 million. Taking the $10 billion metrics, I believe this says that the survey found that a typical $10 billion company spent $5.9 million on litigation holds if its practices were in the middle of the pack. Since total legal spending runs about 0.5 percent of revenue, for these expenditures to be about 0.14 percent leaves me dubious.

We welcome comments

Your email address will not be published. Required fields are marked *