Western Sydney’s potential held back by rules, rules and more rules
29 October 2014: Rules are costing New South Wales $73 billion every year and rather than simply blaming the government, businesses in Western Sydney need to look at cutting through their own, self-imposed red tape.
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 Western Sydney Office Managing Partner, Danny Rezek, said: “We often blame governments and their bureaucracies 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.
“Some 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 Western Sydney businesses, and placed a brake on our potential productivity and innovation. Dumb rules are holding back Western Sydney’s potential.”
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are unintended or unforeseen consequences, with the new rules creating overlaps in regulation, or old rules becoming outdated due to changes in technology or business models.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 regional branch of a company that submitted a proposal for the same tender that their central office had also submitted for
- The business where receptionists were made to record every guest coffee made, but were allowed to order as much alcohol as they liked
- The firm that made staff do an ergonomic checklist when moving desks, then introduced ‘hot desking’
- The debt collection agency that implemented a process of maximum time on the phone per case, resulting in less cases resolved in each phone call, which in turn required more follow-up phone calls and ultimately less debt recovered overall
- 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’.
There are concrete steps businesses can take to unleash their people, and hence their productivity, by getting out of their own way:
- Cleanse: Slash the stupidity – ask people to list the dumbest things they are required to do as a result of the company’s own rules, and then stop doing them
- Challenge: Stop asking “what could go wrong?” and focus on “what must go right?”, then challenge rules in this light. What are the rules really trying to do? Could they be improved? Are they cost-effective? If not, there may be more to dump
- Create: Foster a culture focused on performance rather than compliance, and ensure the organisation’s rule-makers are aligned to its business goals
- Change: Change the way new rules are set and old ones are audited to better link rules with strategy and risk appetite
- Capitalise: Make the most of these changes to realise the business’s full potential.
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,” Rezek 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.”
While there is no one-size-fits-all solution when it comes to breaking the burden of excessive rule-making, risk, and the associated regulatory burden, needs to be approached in a different way by:
- Trusting employees to use their initiative and judgement
- Tapping technology to streamline our decision making
- Treating time as a resource that’s as valuable as capital
- Redesigning internal rules to eradicate overlaps and redundancies.
“Understanding and taking advantage of our competitive strengths as a growth region is as important as ever, but the value of doing so pales before the potential efficiency gains of ‘ruling ourselves’ more effectively. By cutting or simplifying our rules, we can get out of our own way and unleash the potential of our pent-up productivity,” Rezek said.
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 copies of the report are available on request.