In a 2014 Deloitte Access Economics report on red tape they reported:
“…self-imposed rules cost $21 billion a year to administer, and generate a stunning $134 billion a year in compliance costs. When combined, the costs of administering and complying with public and private sector rules equate to a quarter of a trillion dollars a year.”
Do you think that cost would have tracked with inflation? My bet is it has beat inflation. And for industries reeling from royal commissions (religious, education, banks, insurers) or about to be (aged care), it is likely to get worse.
Deloitte offer the 5 Cs for tackling the red tape caused by rules: Cleanse the most ridiculous ones, Challenge all of them, Create a culture of performance while complying, Change the way you go about creating rules and the final one is to Capitalise on all your good work.
All good advice. But what is the underlying cause of self-imposed red tape?
Well it’s not just one cause. The most common cause is the rules creators not understanding the business. So often it is back office staff creating the rules. They have not done a good job of standing in the shoes of the business and either don’t appreciate the impact or can’t see how the rules could be designed a better way.
The other big cause is “best practice”. Support function staff from functions like Finance, HR, Risk, Compliance, and Procurement go to industry conferences and seminars and come back with “best practice ideas”. The problem is, these ideas are often only good for the support function, not for the business. Or what might be best practice somewhere else simply won’t work in your organisation.
So do yourself a favour and wage war on self-imposed red tape by ensuring your support functions truly understand the business. You can start by using the two tools I gave you in my last two blogs. My Persuasion Pyramid and the Empathy Map.