Recording integrity: assessing records' content after enron: in the post-Enron, Sarbanes-Oxley environment, RIM professionals must expand their thinking and responsibilities to improve and more proactively manage the information content in organizations' corporate records.

At the Core

This Article

* discuss 19 criteria to measure the overall quality of information contained in corporate records

* explains how the quality of corporate records affects compliance with the Sarbanes-Oxley Act 

* provides basic recordkeeping fundamentals that an affective corporate records audit should address

A culture in records and information management (RIM) circles seems to be emerging, one fostering greater concern about the form of corporate records than the substantive content they contain. Clearly, form and format (e.g., paper, electronic, microforms) present issues that need attention. Ultimately, however, the most significant concern lies in the information the records contain, notwithstanding the form in which they reside. Records managers then need to become even more aware of valuing their primary subject matter--the information content of their corporate records--because in the post Enron/Arthur Andersen era, content rather than form will emerge as the most critical concern.

A Necessary Paradigm Shift 

Several bedrock elements contribute to the paradigm shift that is required of the traditional RIM culture, including

* a more detailed understanding of the business in which the organization is engaged

* an appreciation of the factors that determine the quality of the information the records contain

* a willingness to serve other corporate professionals as recognized and respected experts in the RIM/knowledge management (KM) field

* an attitude of performing corporate records audits with a constructive, value-adding mentality rather than from an accusatory one

These basic elements must be undertaken in a turbulent corporate world that has been turned on its head by many causes, including Enron, Arthur Andersen, MCI-WorldCom, Tyco, and the Sarbanes-Oxley Act of 2002. If this fundamental paradigm shift from form to content can be realized, corporate records audits will be much more productive, effective, and valuable.

While the form and necessary processes of RIM are critically important, records managers need to expand their thinking and responsibilities to focus on dealing with and more actively managing the information content in their records. How, for example, can CEOs responsibly make the necessary certifications required by the Sarbanes-Oxley Act, which was passed by Congress to ensure corporate accountability, if their records contain information content contrary to what they are certifying? Admittedly, this is not an easy problem to solve, but it is one that demands much thought and work. Most of that thought should come through the records audit process with leadership and implementation from records managers.

Effecting the Paradigm Shift

A business paradigm is a model, a pattern, or an example of a way of doing business. A paradigm shift is a fundamental change in that model. For example, for years the Swiss were the recognized experts in the watchmaking business. In 1968, they owned 65 percent of the world sales and more than 80 percent of the world's profits in this industry. By 1980, however, their market share had collapsed to less than 10 percent and their profits to less than 20 percent. This was due to a major paradigm shift in the watchmaking industry: the move from mechanical to electronic watches. As Joel Arthur Barker notes in his book, Paradigms: The Business of Discovering the Future, everything the Swiss were good at--making gears, bearings, and mainsprings--became largely irrelevant in the era of the electronic watch.

Expertise in Business Purposes and Operations

The first necessary element of the paradigm shift toward the content of corporate records requires records managers to develop basic expertise in the fundamentals of the business. In simplest terms, knowledge of the business' positions necessitates that records managers appreciate what information and knowledge is critically important to the business' future and whether that information is being captured and preserved properly and adequately in the records.

Records and recordkeeping in an organization can be perceived in one of two ways. It may be something one has to do, much like paying taxes, or it may be an opportunity to preserve information critical to business success so it can be shared easily and readily with those in the business who need that information and knowledge to make their contributions more valuable. If those responsible for providing RIM are seen as knowing little about the goals and purposes of the business, it is likely that recordkeeping will be perceived as a necessary evil rather than something that positively contributes to the business' success.

Information about the critical aspects of the particular business--rather than about forms and formats--is among the most important criteria for success as a records manager. If the information in corporate records does not relate to the particular business goals and purposes, it has little meaning to the business' future.

Quality of Information

Measuring the quality of the information in corporate records is, however, not a simple, single quantitative metric, nor are all the quality measures of the same importance for every organization. However, effective RIM programs will be attentive to each element of information quality and, together with corporate management, will determine how important each element is to identifiable corporate operations. Often, this effort can be completed most effectively as a part of the corporate records audit process.

There are at least 19 criteria that should be evaluated to measure the overall quality of the information contained in corporate records.

Accuracy

Misleading or inaccurate information in corporate records may be the basis for legal liability. It is better to have no records at all than inaccurate records because inaccurate records typically cause actions that are incorrectly focused or pointed in the wrong direction. At one level, accuracy refers to a lack of simple errors in transcription, collection, or aggregation. At another level, accuracy is affected by resolution of measurements. How finely detailed should this accuracy be? Simple perceptions about the accuracy are also important; if the receiver of the information does not trust the source, then the data's accuracy is questionable. Reliability and credibility also matter and relate to accuracy. Many managers develop and build multiple knowledge channels or sources to corroborate and build trust in the knowledge they collect and maintain.

Completeness

Incomplete information is akin to inaccuracy, yet different. Information may be accurate but incomplete, and holes give rise to inaccurate or incorrect speculation. Information that leads to speculation is counterproductive because it leads to action that is incorrectly focused or misdirected.

Precision

Information in the record should be as precise as possible, particularly where it specifies dimensions. For example, parts may not properly fit together if the tolerance in their size is too large or too generous. The information should specify the necessary precision of such dimensions.

Timeliness

Unless information is up-to-date when actually needed, it is useless. Information may have been fully accurate and complete at some point in time but currently out-of-date or not the information a person needs at the present time. The question of timeliness is also related to accessibility. People often are unwilling to wait long periods of time for information they need. They make the best of what is readily and easily available, so the amount of time it takes to acquire or access necessary knowledge is important to its usefulness and value. The timing of information's availability is relative to its value. Information about the operation of today's production process will be of decreasing value the longer it takes to access it. Information about today's issues will be of lesser value if not available until weeks later.

Appropriate for Retention

Information may be accurate and complete but not appropriate for the organization. It may have been acquired through dishonest tactics. It may reflect circumstances that were once within accepted norms but have since changed, so now they are no longer accepted. However, it also may reveal vulnerabilities or liabilities that should have been addressed and solved and, thus, should be re-assessed.

Relevancy

Information must be relevant to the company's future business needs. It must be in a context that allows it to be understandable for its intended use. For example, if it is about a business area long abandoned by the company, it may inhibit location and retrieval of that which is actually needed. The information's applicability and, thus, its relevance, also depends on the degree to which the collector and recorder of the information is willing to take risks. In A New Archetype for Competitive Intelligence, authors John McGonagle and Carolyn Vella observe that an organization that avoids being wrong usually ends up providing intelligence of such generality and subject to such qualifications that it ultimately becomes unusable.

A measure of the information's relevancy also depends on its significance, which, in turn, depends on the context in which the information will be used. The information may be highly significant and, thus, highly relevant in one set of circumstances but just the opposite in other circumstances. Relevance also has to do with the applicability of the information to the problem or matter at hand and how the potential user perceives its applicability. It is like a piece of a jigsaw puzzle. If the potential user does not see how a piece relates to the overall picture, he or she may have trouble fitting it into the puzzle.

Understandability

The degree of relevancy has another side--understandability. If information or knowledge is in a form that a user cannot understand or appreciate, it "might as well be Greek." Information is relevant only if it is understandable to the user. Understandability of the information in records is dependent on how well it can be used and reused. Information collected in records that are well organized will be much more easily converted to knowledge by the future user when the time comes for its use. The extent to which information is well organized may even have a bearing on its ultimate usability. If information is poorly organized, for example, a potential user may not be able to see how it can be used to help solve the problem at hand. Poorly organized information may not even be understandable by a potential future user. The understandability of information in a message or record is related to how it is perceived, which determines the nature of a communications event.

A fundamental property of communications relationships is that a receiver must attend to a communications message or record for any communications to occur. As early as 1974, business leader Peter Drucker argued that information may be inherently rational, but the perception and interpretation of it is subjective. It is critical that those recording information do so as carefully and as clearly as possible, keeping in mind that how a future user perceives and interprets the information will largely determine its future value. The information's applicability and, thus, its relevance, also are dependent on the degree to which the collector and recorder of the knowledge is willing to take risks.

Adequacy

Information must be sufficiently detailed to satisfy the need, including potential future needs. It should be able to answer the who, what, when, where, why, and how questions that people are asking or will ask about the information.

Credibility

Users and potential future users must believe the data in the recorded information is credible, or making the record is counterproductive. Information must be perceived as objective, unbiased, accurate, and complete or it is a waste of time to record it. Credibility has to do with the perceived trustworthiness of the data involved. Perceptions are important because they significantly influence whether and how knowledge will be used, almost irrespective of other characteristics such as accuracy, completeness, appropriateness, timeliness, ability to engage, and/or relevance.

Reliability

The content of the recorded information has to be reliable; people must trust that when they use the information they can depend on its being current, accurate, complete, and satisfying all the other 18 quality criteria. The information must be dependable so that if it is used again it will produce the same result that it did in the original use.

Shareability

To be useful within an organization, data, information, and knowledge must be shared among those who need and can productively use it. This promotes collaboration, which enables a group of people to be better and more productive than the same number of individuals working independently. Several of the other quality factors affect the degree to which data, information, and knowledge are shareable. The degree to which others are able to understand it is critically important. How and the degree to which it engages people's attention is vital. How accessible and retrievable information is affects how it can be shared. Its credibility and relevancy determines whether someone else will put it to use. The degree and extent of data, knowledge, and knowledge's shareability also is impacted by the communication processes in place among several people.

Often, technology is assumed to be the total solution to such issues, but it is only part of a solution. Corporate culture plays a major role because if trust and respect do not exist among people in an organization, they will likely keep data, information, and knowledge to themselves. No technical solution can overcome that attitude and practice. First, people have to be willing to share the data, information, and knowledge that will be useful to others. Only then can technical methodologies facilitate the communications process.

Ability to Engage

If the information does not engage a user, it will be as if that knowledge does not exist because the user will be blind to it. Information must be noticed to be useful. This partly relates, but is not limited to, the information's accessibility or retrievability. It also involves the user's interest. Will the information and/or knowledge attract the user's attention so he or she can put its value to productive use?

The level of potential engagement depends on format, medium, and presentation, It also will depend on the interest and motivation of the user relative to the subject of the information itself. If the potential user has little or no interest in the subject of the information, he or she will have little motivation to make the most use of it. One factor that affects the interest and the inclination of an audience to act on information or knowledge is the context in which it is offered. In Information Ecology: Mastering the Information and Knowledge Environment, Thomas H. Davenport says this context can involve detailing the source of the knowledge, the comparative value of the information available, and its previous history.

Accessibility and Retrievability

If the information is accurate, complete, timely, and appropriately maintained but cannot be quickly retrieved when needed, it might as well not exist. Retrievability is a measure of the accessibility and understandability of information and knowledge. If the information is readily found but cognitively inaccessible to the user, it will not have any value to that user.

Access in this sense has to do with a user being able to get his or her mind around the knowledge. Corporate information and knowledge systems must be structured in ways that users can find the knowledge needed, understand what is found, and retrieve what they need without drowning in masses of data they neither need nor want. Research has shown that accessibility outweighs quality in determining the usage of knowledge from particular sources. According to J. David Johnson's book Information Seeking: An Organizational Dilemma, because people seek out knowledge that is most conveniently accessible, accessibility becomes most critical in designing knowledge systems and overrides a source's credibility and authority.

Valuable and Fitting

The information being evaluated must contribute value to the organization. It has to fit with or link to the other information being used. It should be like a puzzle piece that, when put in its proper place, contributes to the overall picture. A single piece of a second puzzle will make no contribution and may even be counterproductive in that it wastes the time of someone trying to figure out where it fits when in fact it has no place in the first puzzle. How does the information connect with what the organization already has? Those organizations able to coherently leverage front-line information and knowledge throughout their business will be among the most effective managers of corporate information.

Reusability 

Information has little value to an organization if it is not reusable. Part of this quality relates to the accessibility and retrievability factor, but it is more than that. Many organizations hold vast amounts of untapped information and knowledge. Large repositories of data and lessons learned provide little value if the knowledge contained within them is not reused. Most organizations do a poor job of capturing and leveraging their tacit knowledge, the experiences of their knowledge workers. This wealth of knowledge, if not effectively recorded, walks out the organization's doors each and every day. If information is not reusable, people waste time rediscovering what is already known to some but unknown to others. Speed of search and retrieval is critical to decision superiority. Organizations must improve techniques for gathering and organizing data, creating clear and concise knowledge, and generating usable and reusable knowledge.

Affordability

The information that a corporation needs must be affordable. Acquiring new information almost always comes at some cost, so the question becomes whether that new information is worth that cost. Here is where traditional financial accounting squarely meets knowledge management. The methodology of valuing information, particularly when it is in an intangible form, is getting much more attention today in the knowledge economy because so many companies are valued far beyond their tangible book value. Many are valued at 10 or more times their book value, so it is natural to ask where all that other value comes from or to what it should be attributed. The answer is all the organization's intangibles, many of which are attributable to the unique information the company possesses. Much comes from or can be attributed to the people the company employs and the skills they possess. Then the questions are how to measure the value of these intangible assets and whether information a company needs is worth the cost it will have to expend to acquire it. There is neither a simple, objective way to measure such value nor a "one-size-fits-all" answer. Affordability for one organization might be just the opposite for another because one may not have the same information needs as the other.

Persuadability

The information must persuade others of its accuracy, completeness, and quality. Otherwise, it will be ignored no matter how valuable one person thinks it is.

Communicability 

This quality measure addresses the effectiveness and efficiency of communicating the meaning and nuances intended by the record's creator. It involves the clarity, simplicity, and completeness of the information content the creator has tried to preserve by authoring the record, attracting the attention of and engaging a viewer in the content, enabling the reader to understand what the creator was trying to communicate, and persuading the reader of the information's accuracy, completeness, timeliness, precision, relevancy, and appropriateness.

Potential to be Needed in lite Future

The only knowledge organizations should be retaining is what is likely to be needed in the future.

These quality criteria for the information contained in corporate records are interdependent quality measurement goals that any RIM program should be continually striving to attain. They are much easier to state than to try to meet and to quantify with a rational and practical measurement system, yet they set the direction in which every RIM program should be moving.

The Sarbanes-Oxley Factor

The quality of corporate knowledge has a direct impact on whether the chief executive officer (CEO) and chief financial officer (CFO) can comply with the Sarbanes-Oxley Act of 2002. Sarbanes-Oxley makes it abundantly clear that corporate leaders must focus on the information content in their records or face the possibility of significant criminal penalties. The act requires corporate reports to be consistent with and supported by corporate records. It focuses on five areas that directly affect public companies and their officers and directors, including:

1. Corporate governance 

2. Enhanced corporate disclosure

3. Disclosure controls, procedures, and practices

4. Financial audit practices and procedures

5. Enforcement and penalties

All these areas relate to the quality of the information contained in corporate records. Six examples illustrate why:

1. A key provision of the act requires CEOs and CFOs to personally attest to the accuracy of their company's financial reports, exposing them to significantly greater potential liability than in the past. If the records (not just the formal certified report, but also e-mails, voicemails, databases, data warehouses, lab notes, and any other form of corporate record), wherever they are found in the organization and in whatever form, show that the financial reports being certified as accurate are not, top officers will have a difficult time defending themselves. Effective corporate records audits should become as important as financial audits because of this new potential liability.

2. To preserve the independence of a company's accounting firm, Sarbanes-Oxley prohibits its financial auditors from providing most nonaudit services, such as management consulting. (It is unclear whether this prohibition will extend to limit the company's financial auditors from providing records audits.) Certainly, financial auditors will be able to examine the records for the financial information they contain, but that process raises the question of whether those auditors will be able to help the company improve its records creation and preservation processes.

3. The act requires public companies to perform an annual assessment of the effectiveness of their internal controls and financial reporting procedures. This certainly seems to include how the company creates and protects its records as well as the procedures that are in place and the practices that occur in the workplace. For example, in the Enron/Arthur Andersen case, there apparently were approved records destruction schedules in place, but they were not followed in practice.

4. Sarbanes-Oxley provides criminal penalties for the destruction or alteration of certain corporate documents, including the knowing and willful destruction of audit work papers. Specifically, the act makes it a crime for anyone to knowingly destroy, conceal, alter, or falsify company records with the intent to impede, obstruct, or influence the investigation or administration of any matter within federal jurisdiction. For the first time, corporate personnel can be prosecuted for failure to preserve documents that were the subject of a formal government inquiry at the time they were destroyed or altered. Penalties for such actions include up to 20 years imprisonment, substantial fines, or both. Documents destroyed without some mechanism for evaluating their potential value to an impending investigation may present prosecutors with a prima facie case against company officials. Progressive companies will proactively create reliable policies and systems for controlling and monitoring the destruction of business and financial documents, including e-mails, electronic documents, electronic databases, and paper records. In addition, technologies, processes, and practices must be in place to preserve communications and records that may be of interest to federal investigators if an investigation is pending, imminent, or expected.

5. The act requires attorneys and accountants to report evidence of material violations of the federal securities laws or breaches of fiduciary duties to appropriate company officials, the CEO, or general counsel. If the general counsel or CEO does not appropriately respond, the lawyer must report the matter to the company's board of directors or audit board. If there is no response there, the lawyer must withdraw from the matter and provide a written disavowal to the U. S. Securities and Exchange Commission (SEC) of any document he or she helped prepare that was filed with the SEC containing questionable information.

6. Sarbanes-Oxley makes it necessary for companies to ensure that their internal communications and other procedures and processes operate so that important information flows to the appropriate collection and disclosure points in a timely manner.

Constructive Records Audits

A fundamental objective of an effective corporate records audit is to determine whether critically important business information is being created and preserved in a form most usable by those who will need it in the future.

More specifically, an effective corporate records audit should address basic recordkeeping fundamentals such as:

* Are corporate recordkeeping policies clearly written and accessible to all corporate personnel in a form easily understood by these personnel?

* Are corporate personnel fully aware of their recordkeeping responsibilities set forth in company policy, such as what records they should be creating, what records they should be preserving and maintaining, and what records they should be destroying?

* Are corporate personnel actually creating, preserving, maintaining, and destroying the records they are expected to be creating, preserving, maintaining, and destroying? Are they actually doing what the policies mandate?

* Is there a corporate-wide plan for organizing corporate records?

* Is the organization's plan for corporate records being followed by each unit throughout the organization?

* Does the corporation maintain an up-to-date records retention schedule, with newly created records series or systems regularly and promptly scheduled?

* Is there a professional person or staff assigned to the overall corporate records management responsibility?

* Is the corporate records management professional a highly respected member of the corporate management team?

* Is there an active corporate records management training program for new employees and an effective records management update or refresher for existing employees?

* Is the subject of corporate records management given serious attention and resources by corporate leadership? If not, why not?

* Is there a perception that corporate records create value for the corporation? If not, why not?

Note that these bulleted fundamentals do not distinguish among the different forms that corporate records might take. Some records will be paper, some recorded in magnetic media, and some on film of some type (e.g., microforms, video). The point is that the physical form should not dictate or restrict what fundamental principle might apply and how it should be applied. These fundamentals should be applicable no matter what physical form the records take.

Again, the focus of a corporate records audit is not to ensure that records are being created and preserved for their own sake or for the sake of records managers, but whether the records protect the corporation from allegations that might be brought, and are of positive use and value to the organization. The likelihood of this happening will be much higher if corporate personnel understand and respect this philosophy, and if records experts have a fundamental understanding of the business needs of all the people in the organization who contribute to its success.

Becoming a Corporate Leader

Traditionally, corporate information technology and RIM have remained separate and have often gone their own ways. If the ultimate goal of both areas of responsibility is providing corporate users with the most valuable information and knowledge, then the methods of doing that should not be separate or divided. Historically, the reason for the division may have been that records managers were seen as clerks incapable of handling or unwilling to handle the technology of the electronic age. To maximize the value of corporate information and knowledge today, however, this culture of divided responsibilities must disappear. Chief information officers, chief knowledge officers, and all those that work for them must be as sharp and skilled as anyone else in the organization. They need to be skilled and comfortable with technology. They also need to have the "big picture" about the value and importance of corporate information and knowledge whether explicit or tacit, residing in paper records, corporate databases, or data warehouses, or existing only in the minds of corporate personnel. They must appreciate what factors contribute to information and knowledge quality and how it might be improved even further.

Ultimately, corporate leadership, however a particular position may be formally titled, is about making each person contribute as much to the organization as he or she is capable of doing. This is particularly true with respect to corporate information and knowledge. According to the Delphi Group, a consulting firm that specializes in knowledge management, about 70 percent of a company's knowledge resides in the minds of its employees and that knowledge walks out the door every night--and occasionally never returns. The best corporate leaders find ways to capture as much of that tacit knowledge as possible in forms that permit it to be easily and quickly shared with others in the organization and made available for as much reuse as possible. Pervasive information and knowledge sharing fosters and encourages a culture of innovation and creativity because when people feel they are trusted with a valuable source of their organization's competitiveness, they want to be a valuable and contributing part of its success.

Criteria for Measuring Information Quality

* accuracy

* completeness

* precision

* timeliness

* appropriate for retention

* relevancy

* understandability

* adequacy

* credibility

* reliabililty

* shareability

* ability to engage

* accessibility and retrievability

* valuable and fitting

* reusability

* affordability

* persuadability

* communicability

* potential to be needed in the future

References

Barker, Joel Arthur. Paradigms: The Business of Discovering the Future. New York: HarperBusiness, 1992.

Clare, Mark and Arthur DeTore. Knowledge Assets: Professional's Guide to Valuation and Financial Management. San Diego: Harcourt Professional Publishing, 2000.

Davenport, Thomas H. with Laurence Prusak. Information Ecology: Mastering the Information and Knowledge Environment. New York: Oxford University Press, 1997.

Dietel, J. Edwin. Designing an Effective Records Retention Compliance Program (Vol. 3, Corporate Compliance Series). Eagan, Michigan: West Group, 1993.

--. "Improving Corporate Performance Through Records Audits." The Information Management Journal. April 2000.

Johnson, J. David. Information Seeking: An Organizational Dilemma. Westport, Connecticut: Quorum Books, 1996.

McGonagle Jr., John J., and Carolyn M. Vella. A New Archetype for Competitive Intelligence. Westport, Connecticut: Quorum Books, 1996.

J. Edwin Dietel, J.D., is an attorney, an independent consultant, and a senior consultant for Records Engineering LLC. He is the author of Designing an Effective Records Retention Compliance Program published by West Group. He may be contacted at [e-mail].