Inefficient internal structures costing businesses

 

A recent study from Deloitte has highlighted just how costly it can be for businesses to have ineffective internal processes, creating a large cost as companies attempt to administer their own procedures.

In fact, Deloitte estimates that the cost of compliance for firms across Australia has reached $155 billion a year, as organisations implement processes that are holding back their productivity.

Of this cost, $21 billion is coming from companies creating and administering new rules, while $134 billion comes from compliance costs. In terms of time, this is equivalent to every worker in Australia spending eight weeks a year working solely on completing internal processes.

Among the main reasons for this high cost is that companies are regularly creating new rules that overlap with existing guidelines, creating an ever increasing network of different processes that affect productivity.

Deloitte also pointed to the impact technology can have on existing rules. Rather than review a company’s processes following the integration of new technology, many are simply leaving these rules in place, curtailing the positive influence technology can have on productivity.

One solution to this issue of excessive internal rules is to use business management software that can collate and rationalise these different processes. This software can make it easy for companies to keep track of their performance and better understand the areas where productivity is slipping.

Gerhard Vorster, Deloitte’s chief strategy officer, also suggested that businesses need to do more to work with staff to find processes that are slowing them down.

“Individual businesses need to unlock the profit potential they’ve tied up in their own red tape,” said Mr Vorster.

“The pay offs to better rules have the potential to be a big driver of gains in productivity, as well as our living standards.”

With such significant savings possible for companies that take a serious approach to their internal processes, the comparative advantage of removing these unnecessary rules will only increase with time.