NSW workers spend an average of six hours a week complying with rules, rules and more rules
29 October 2014: Rules are costing NSW more than $70 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.
That 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 NSW Office Managing Partner, John Meacock, said: “We often blame government for forcing us to comply with rules and regulations – often without weighing the costs and benefits of doing so and without thinking about any unintended consequences of their implementation.
“Yet it’s the dollars locked up by businesses in complying with self-imposed red tape that are a more significant problem – they 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 productivity potential and our innovation.
A survey of Australian business leaders revealed that, on average, employees in NSW spend a remarkable – and costly – 6.6 hours a week complying with rules that organisations set for themselves.
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 $73 billion in NSW.
Hours spent complying with ‘self-imposed’ red tape per week
Note: Australia is not a weighted average of State results, as many survey respondents operate in more than one State
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are unintended or unforeseen consequences, with the new rules creating overlaps in regulation, or old rules becoming outdated due to changes in technology or business models.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 that ‘solved’ significant project overruns by adding additional steps in the project approval process, only to discover that projects now required 200 signoffs and up to 260 days to obtain approval
- The firm that rejected application forms from potential customers if they were completed in blue ink, despite technology changes meaning colours other than black could be read by optical readers
- The business that implemented an effective control process to book out expensive components from a central inventory location, the result of which was that workers were made to walk 15km a day to and from the location – spending half their day walking rather than working
- The firm that made staff do an ergonomic checklist when moving desks, then introduced ‘hot desking’
- 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’.
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,” Meacock said.
“For us, our Dumbest Things campaign is the beginning of a purposeful and programmatic unleashing of productivity across the organisation. We then take a much deeper look at our structure and policies to see what can be done to unleash productivity. A key component is to actively remind all our people that innovation and productivity comes from building a culture that focuses on what must go right, not what could go wrong.”
Meacock concluded: “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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