Self-imposed red tape costs South Australians twice as much as government regulation
29 October 2014: Rules are costing South Australians $16 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 rules and regulations at $250 billion annually across the private and public sectors.
This national cost comes in two parts:
- $95 billion – the cost of administering and complying with public sector regulations
- $155 billion – the matching cost of administering and complying with the rules that organisations choose to impose on themselves.
Deloitte South Australia Office Managing Partner, Jody Burton, 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 keep us safe, protect the environment and make us accountable. But poorly designed rules, and too little consideration for their impact and their effectiveness, have increased the cost burden on South Australians, placing a brake on our potential productivity and innovation.”
While the public sector is cutting regulation, businesses are not acting to remove the rules they place on themselves. The Federal Government did away with more than 9,500 rules on ‘repeal day’ – while the South Australian Government is set to abolish dozens of unnecessary boards and committees and has a dedicated Simpler Regulation Unit.
“South Australian businesses spend too much time complying with ‘self-imposed’ red tape – we can do better,” Burton said.
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 $16 billion in South Australia.
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are unintended or unforeseen consequences, with the new rules creating overlaps in regulation, or old rules becoming outdated due to changes in technology or business models.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 of ‘dumb’ rules uncovered by Deloitte include:
- Businesses for which procurement processes exceed the actual time required to complete a project.
- The company requiring CFO level approvals on any ‘adjustment notes’’ valued above 50 cents
- The business that still demands paper vehicle fleet logs even though all usage is recorded via GPS tracking and fuel cards
- The firm that rejects application forms from potential customers if they are completed in blue ink
- The firm that made staff do an ergonomic checklist when moving desks, then introduced ‘hot desking’
- The CFO requesting weeks of otherwise correctly coded timesheets to be reprocessed to reflect a slight change in task description.
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.
“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,” Burton 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.”
She concluded: “Australia’s compliance culture is cluttering our cost base and choking our innovation. That is coming at a massive and rising cost to our nation and to our ability to innovate. Understanding and taking advantage of our competitive strengths as a state 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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