Businesses burying themselves in billions of dollars in red tape
Australian companies are drowning in their own red tape, wasting valuable hours of employee time and costing the economy billions of dollars.
In what it believes is the first assessment of red tape in both Australia's public and private sectors Deloitte Access says government regulations cost about $27 billion a year to administer and cost businesses $67 billion a year to comply with.
"Businesses are wearing self-inflicted wounds": Chris Richardson. Credit:Andrew Taylor
But it says red tape imposed by businesses themselves costs $155 billion a year - $21 billion to develop and administer and $134 billion a year to comply with.
"Businesses are wearing self-inflicted wounds," Deloitte director Chris Richardson said.
"Our research shows that senior executives and middle managers each spend more than eight hours per week complying with internal rules. Even non-administrative staff each spend an average of more than six hours per week."
The burden is somewhat less in small businesses where each staff member spends an average of five hours a week complying with self-imposed rules.
Deloitte says so big has the growth of Australia's compliance workforce become that it has roughly offset the decline in Australia's back-office workforce.
The report to be launched by Treasurer Joe Hockey on Wednesday says Australia's "non-productive" workforce is scarcely any smaller than it was two decades ago.
"For every back-office job that has vanished, a new compliance job has been created, wiping out the productivity benefit," Mr Richardson said. "For the most part, these are not jobs necessitated by government regulation, but jobs dreamed up by the companies themselves."
The mining sector has seen the fastest growth of compliance workers as a proportion of the workforce, followed by construction.
"Mining and construction were among Australia's fastest-growing industries between 2006 and 2011," Mr Richardson said. "This means the compliance workforce in those industries has grown even faster.
"Let's be clear. Rules and regulations are vitally necessary. They cement the key foundations of our society, protecting the rule of law and a wealth of standards in everything from health to safety and the environment. And they can help businesses to reduce risk and plan for the future.
"However, a decade of prosperity has seen us reach for rules often without weighing up their costs and benefits."
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.
"Every few years we ask our people: what are the dumb things we do? What is stopping you doing your job?" Mr Richardson said.
"We get lots of suggestions, we stop infuriating staff and we save money. But the process also does something else. It says to our staff: hang on, these guys are serious about doing things better.
"The next step is to conduct a campaign called 'Project Why'. We want our staff to ask why we have each rule and whether there is a better way.
"After that we want our business and others to embrace
"We want people to be able to say, this is the rule, I am not doing it, I think I've got a good reason and for the managers to approve what they've done and allow them to get on with their lives."
Examples included in the Get out of Your Own Way report include:
· The global headquarters that told a newly acquired Australian subsidiary that it couldn't put an Excel spreadsheet on its website, even though the new subsidiary's line of business was selling data in Excel format to its clients
· The firm that made staff record every guest coffee made, but let them order as much alcohol as they like
· The firm that made engineers sign off on new parts at a fixed location, making them walk 15 kms a day
· The organisation in Sydney that required high level approval for staff to travel to Parramatta because it was deemed to be outside the 'city limits'.
Peter Martin was economics editor of The Age between 2014 and 2018. He is a former Commonwealth Treasury official and a visiting fellow at the Australian National University.