At a recent management presentation, I opened by stating the cost of compliance activities in their business costs them about 25% of their actual revenue.
To put this into perspective, the Australian Federal Government expects to receive $444.4 billion in taxes and charges for the 2017/2018 financial year. If they spend 25% on compliance activities, that’s $111.1 billion to just have boxes ticked instead of investing in hospitals, education or actual services.
Yet the managers at my presentation told me I was wrong. They said their organisation probably spends 40% of their revenue on compliance activities.
Spending time, effort and money on compliance is critical. My argument is we should spend far less time effort and money to achieve the same compliance outcomes.
Consider the following perspectives for a moment.
Dr Robert Long from Human Dymensions talks about the Safety Volume Mass Index (SVMI). Put simply, he argues that the longer the length of your safety documentation and records in linear centimetres, the less effective it is.
Or Ken Miller who states; “Government is a group of hard-working people trapped in dysfunctional systems producing invisible things for people who do not want them, on behalf of others that do for reasons we can rarely articulate and hardly measure.” In my view, this statement applies to a lot of activities in corporate life as well.
Or as my good friend and colleague, Di Armbrust says in her book The 2% Effect, “We tend to design our policies and procedures around the 2% who break the rules. Unfortunately, the unintended consequences are that the 2%ers break the rules anyway and all the policies and procedures do is get in the way of the good people who don’t’ need them in the first place.”
Unfortunately, I’d have to argue that my own Human Resource Management profession wastes too much time, effort and money on compliance activities. Take performance appraisals as a great example.
When I combine Dr Long’s linear measurement idea, Ken Miller’s dysfunctional systems producing invisible things idea, and Di Armbrust’s 2% Effect idea, I realise that our current approach is not about giving feedback to employees but rather about completing a compliance activity in a very expensive and time-consuming way that adds no value.
I think Jan Victor from the UK explains it best when he says;
“Over the past 10 years I’ve had to do so many appraisals and never has any of my team members ever even remotely suggested that they saw any value in these. We did all the paperwork, got all the signatures and had the discussions but nothing ever came from it. It was a good time to catch up on coffee though.”
I’m not alone. Robert, Ken and Di also argue we can achieve the same compliance outcomes with less time, effort and cost.
Dr Robert Long argues; “The biggest safety myth is the belief that volume equals quality whereas volume does not demonstrate due diligence and will protect a company in court if something happens. Instead we need to focus on culture and the social psychology of risk”
Ken Miller argues; “You don’t make widgets, you don’t see the system. And if you don’t see the system you cannot improve it.” Ken works predominately with government agencies.
And Di Armbrust says: “Nothing is more distracting or more off-putting in business than people behaving badly. Unfortunately, the 98 per cent are generally too polite to say anything to these people. However, they are sitting there wishing you, their manager, would do something about them. They can’t understand why you don’t”.
Back to my presentation. I did demonstrate to the managers that they could take the HR activities of performance appraisals and salary reviews and achieve the same outcomes with 80% less time, effort and cost. They were stunned.
I will leave you with the same challenges I left the managers at my presentation:
What are your worst widgets?
Where can you avoid ’The 2% Effect” and
What reduction in the cost of compliance can you achieve?
Why? Not because you can save time, effort and cost – that to me is a by-product. To me, it’s because by reducing the time, effort and cost of compliance activities, we allow people the opportunity to achieve more meaning and purpose in their work. And I think that’s a better outcome for everyone.