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Public sector needs to get out of its own way
29 October 2014: The public sector’s obsession with risk avoidance is coming at a notable cost to taxpayers – as well as stifling entrepreneurship and innovation.
In a new report, Get out of your own way: Unleashing productivity, the fourth edition of its Building the Lucky Country series, Deloitte has calculated the cost of complying with rules and regulations at $250 billion annually across the private and public sectors.
That 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).
Strikingly, public sector employees spend more time responding to self-imposed rules in areas such as human resources (HR), information technology (IT), finance, legal and executive governance than do listed corporates, not-for-profits or private businesses.
Examples we uncovered include:
- The public servant who needed two approvals to spend $20 on marshmallows for a workshop.
- The senior public servant in Sydney who needed the approval of his departmental head to travel to Parramatta as it was deemed to be outside the ‘city limits’.
- 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.
According to report co-author, Deloitte Access Economics’ Chris Richardson, both the public and private sectors can benefit from a new approach to managing risk.
“Where rules don’t exist, we create them. Where they already do, we make more. They overlap, they contradict, they eat our time and they weigh us down,” he said.
“We’ve created a ‘compliance sector’ that employs more people than construction, manufacturing or education, and taking a long, hard look at the rules that individual organisations operate within will reduce the cost and complexity of doing business in Australia.”
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), and
- A range of HR and IT processes.
Time spent per week on self-imposed red tape by type of organisation
Hours spent per week on self-imposed rules
Source: Deloitte survey
In effect, nobody gets promoted for taking risks – and hence the public sector takes too few of them, thereby delivering poor value for taxpayers’ money.
Deloitte’s public sector national leader, Andrew Johnstone-Burt, noted that “At a time of significant budgetary pressures in Australia, the time has come for the sector’s leaders to examine the ways in which self-imposed red tape is adding to burdens without helping either the public sector or those it services.”
Note: Separate media releases cover the red tape challenges from national and state perspectives.
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