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Canberra’s compliance burden mostly self-imposed
29 October 2014: Rules are costing the ACT $10 billion every year.
In a new report, Get out of your own way: Unleashing productivity, the fourth edition of its Building the Lucky Country series, Deloitte calculates the national cost of complying with rules and regulations at $250 billion annually across the private and public sectors.
This national cost comes in two parts:
- The cost of administering and complying with public sector regulations ($95 billion)
- And the matching cost of administering and complying with the rules that organisations choose to impose on themselves ($155 billion).
Deloitte ACT Office Managing Partner, Lynne Pezzullo, said: “We often blame governments for imposing rules and regulations and forcing us to comply with them.”
“Yet the dollars locked up by businesses in complying with self-imposed red tape are double those associated with government regulations.
“Rules are vitally important. They protect the likes of our health and safety and the environment. But poorly designed rules, and too little consideration for their impact and their effectiveness, have increased the cost burden on our State, and placed a brake on our potential productivity and innovation.
“ACT businesses and public sector departments and agencies spend too much time complying with ‘self-imposed’ red tape.
“And with nobody, in effect, promoted for taking risks in the public service – this sector takes too few risks, thereby delivering poor value for taxpayers’ money.”
In total, the costs of administering and complying with rules and regulations – both public sector rules and those that organisations choose to impose on themselves – come in at $10 billion in the ACT.
Businesses usually impose rules on themselves for good reason – to increase controls, avoid risk, create compliance or make the organisation more effective. Yet often there are unintended or unforeseen consequences, with the new rules creating overlaps in regulation, or old rules becoming outdated due to changes in technology or business models. Examples uncovered by Deloitte include:
- The Commonwealth public servant who needed two approvals to spend $35 on catering for a meeting
- The ACT public servant who needed approval to travel to Queanbeyan as it was deemed to be outside the jurisdiction
- The HR department that went through with an interview process even though they knew that part of the organisation was being disbanded.
- The booking process for a training room that involved calling someone who often wasn’t in.
Deloitte has taken a dose of its own medicine, asking its employees to identify ‘dumb rules’ that get in the way of innovation, collaboration and creativity, with a ‘Dumbest Things’ internal campaign.
“Every few years over the past decade we ask our people ‘What are the dumb things we do? What is stopping you doing your job?’ And each time we identify a disappointing level of unnecessary rules, which we have to remove,” Pezzullo said.
“We only did this recently, for the fourth time, and still we are finding rules that slow us down.
“For us, our Dumbest Things campaign is the beginning of a purposeful and programmatic unleashing of productivity across the organisation. It’s about actively reminding all our people that innovation comes from building a culture that focuses on what must go right, not what could go wrong.”
The report looks at a range of industries and their compliance burden. The chart below shows that the average worker in the public sector spends 10 hours a week on self-imposed red tape – substantially above the national average.
Such an excess burden from the ‘self-imposed’ red tape in the public sector is driven by poorly defined authorisation levels, as well as divisional/branch structures that create activity and compliance silos, plus the poor use of technology for compliance services.
In particular, self-imposed red tape in the public sector is well known in areas such as:
- Approvals for travel by public servants
- Procurement processes (especially for contract labour)
- ‘Death by committee’ (leading to an over-reliance on internal meetings)
- A range of HR and IT processes.
Time spent per week on self-imposed red tape by type of organisation
Source: Deloitte survey
“Not surprisingly, as the centre of the Federal Government, the ACT has the largest compliance sector in the country,” Pezzullo said.
“From a business and organisational perspective, understanding and taking advantage of our competitive strengths as a nation and as the ACT is as important as ever, but the value of doing so pales before the potential efficiency gains of ‘ruling ourselves’ more effectively.”
“Both our public and private sectors can benefit from a new approach to rules and regulations, but the biggest opportunity lies in business slashing its own red tape. By cutting or simplifying our rules, we can get out of our own way and unleash the potential of our pent-up productivity.”
Note: Separate media releases cover the red tape challenges at a national level and those faced by industry sectors.
A Get out of your own way infographic and the report are available on request.
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