Not-for-profits at risk of tripping over their own rules

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Not-for-profits at risk of tripping over their own rules

Deloitte report

30 October 2014: The vital role of not-for-profits and non-government organisations (NFPs and NGOs) in delivering services to many Australians is being compromised by an over-reliance on external rules and self-imposed rules.

As recipients of government funding NFPs and NGOs have a close interest in the burden placed on them by public sector reporting and other compliance requirements.

Yet, in a new report, Get out of your own way: Unleashing productivity, the fourth edition of its Building the Lucky Country series, Deloitte has found that the rules that NFPs and NGOs place on themselves – self-imposed red tape – generate a significant additional burden.

The report looks at a range of industries and their compliance burden. The chart below shows that the average worker in NFPs and NGOs spends more than six hours a week on self-imposed red tape.
 

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Time spent per week on self-imposed red tape by type of organisation
 

Source:  Deloitte survey

 

Gaile Pearce, Deloitte NFP Partner, has experienced many examples within NFPs organisations where self-imposed red tape ties up time. These include:

  • Decision making by committee – governance structures that require decisions to be ratified by multiple committees
  • Federation causing duplication – NFPs doing the same thing in different States, but under separate legal entities, sometimes without sharing services, knowledge or information across States
  • KPIs not supporting strategy – internal frameworks and KPIs that do not align with strategic priorities therefore duplicating effort
  • Strategy v operations – role definitions between boards and management not being clear, resulting in boards becoming too involved in operational matters as opposed to focusing on strategy and risk.

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.”

Deloitte’s national leader for NFPs, Chris Campbell, noted that “The current environment for NFP organisations is increasing competition for funding, both from government and the private sector, and rapidly expanding needs for delivery of services to our community. This means NFPs have an enormous opportunity to reap the benefits of reducing the burden of self-imposed rules, enabling greater impact in delivery of services in line with their purpose.”

Like any other organisation, NFPs need to have focus in obtaining these benefits. Alison Brown, Deloitte NFP partner, suggested that an even simpler exercise, like the one Deloitte does internally, may help.

“Every few years we ask our people: “What are the dumbest things we do? What stops you doing your job? What are the rules that get in the way of innovation, collaboration and creativity?’” Brown said. “Each time we conduct this exercise we identify and address rules that stifle our business.”

“We did this recently, for the fourth time, and are still finding rules that slow us down. Deloitte is a better business for running the ‘dumbest things’ initiative but more importantly, by listening to and trusting our people.”

Note: Separate media releases cover the red tape challenges from national and state perspectives. 

not-for-profits at risk of tripping over their own rules

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