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Tasmania’s ‘branch office economy’ comes with a heavy compliance cost
29 October 2014: Rules are costing Tasmania $5 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 Tasmania Office Managing Partner, Carl Harris, 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.
“Tasmanian businesses spend too much time complying with ‘self-imposed’ red tape.”
Many Tasmanians are caught up in the ‘branch office syndrome’, with a Deloitte survey of corporate Australia showing that organisations operating across States had compliance burdens more than half as time consuming again as those faced by organisations operating in just the one State.
So, with corporate headquarters in Sydney or Melbourne calling the shots or many local entities suffering from a steady build-up of rules on top of rules, local compliance costs are huge. 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 – weigh in at $5 billion in Tasmania.
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are unintended or unforeseen consequences, with the new rules creating overlaps in regulation, or old rules becoming outdated due to changes in technology or business models.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:
- The organisation with 200 pages of procurement guidelines that no-one ever checked when purchasing
- Staff made to write down all the risks they faced into a database which then never saw the light of day
- A firm that spent all its time preparing, reviewing and assessing tenders as it went to tender too often
- Board papers that buried Directors in heaps of words and numbers without adding value
- The organisation that made staff monitor and report on those using meeting rooms without bookings
- The employees who complete purchases orders to get invoices approved after the invoice has been received.
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,” Harris 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.”
He 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 is available on request.
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