Australian businesses are spending billions of dollars to comply with self-imposed red tape, according to a Deloitte Access report published today.
The report, Get out of your own way: Unleashing productivity,looks closely at the red tape associated with Australian business. It calculated $250 billion annually is spent to fulfil rules and regulations across the private and public sectors.
Deloitte surveyed 137 businesses and found the cost of complying with self-imposed rules created by the private sector is double that associated with government regulations.
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All up, self-imposed rules cost $21 billion a year to administer and generate $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.
“We were stunned by the size of the red tape,” report co-author Chris Richardson told SmartCompany.
“The bigger the business is, the harder it is hit by red tape,” Richardson says.
The report found small business suffers the least from internal business rules though, with only five hours a week spent on complying with internal rules, compared to nearly double that in larger businesses (nine hours) and six hours for medium-sized businesses.
Richardson says “human nature” is the reason why smaller businesses have less red tape.
“The bigger a business is, the harder it is to understand the problems and issues of those lower down in the chain of command,” he says.
The report found some of the main motivations for adopting internal rules were to minimise corporate risk, improve health and safety, collect data, meet best practice and fall into line with global requirements.
Richardson says “disconnection” is the big issue for business leaders and owners.
“Those at the top need to trust their employees and ask their employees what dumb things they’re getting them to do and what could be done better or done more efficiently,” he says.
Deloitte collated 1000 suggestions of ways management could improve how employees spend their time.
“New rules relating to information technology, finance and human resources were all among the top of what could be changed,” Richardson says.
An example given by Deloitte of self-imposed rules is a transport business requiring drivers to drive to the depot to return their mobile phones at the end of each shift.
Richardson identifies this as a “dumb” task and an example of red tape that needs to be changed so wasted finances and employee time could be better utilised.
He says businesses should plan sensibly and for “quick wins” when creating new rules and regulations within the business, and that being “reasonable” and “fair” when handling employee matters is the key to start the reduction of red tape in Australian business.