AS THE financial industry braces itself for yet more regulation following credit-crunch government bailouts, organisations should not overlook the serious negative impact of over-regulation and over-control, according to an international management expert
AS THE financial industry braces itself for yet more regulation following credit-crunch government bailouts, organisations should not overlook the serious negative impact of over-regula tion and over-control, according to an international management expert.
“Every time we have a crisis we try to compensate through regulation – until we have another crisis a couple of years later,” said Kevan Hall, CEO of Global Integration and author of Speed Lead: Faster, Simpler Ways to Manage People, Projects and Teams in Complex Companies.
“The Sarbanes-Oxley regulations, introduced after the Enron and World Com scandals, are a prime example of the disastrous effect of too much regulation and control. Regulatory attempts to mitigate risk have not been successful,” Hall said.
A recent Global Integration survey of 1200 managers in multinationals found that 34 per cent of managers thought their company already had too much control and 43 per cent felt they were moving to greater central control.
This move towards more central control will have far-reaching conse quences, Hall said. The most obvious and immediate is an escalation in busi ness costs and a significant imposi tion on people’s time.
But the impact also goes much deeper, with a profound effect on staff members’ motivation levels and cre ativity. “Too much control just isn’t healthy for any type of organisation and, as we have seen in the manufac turing industry, decentralising control has led to improved quality, lower costs and higher job satisfaction. Rules breed an attitude of compliance without thought,” Hall said.
One of the solutions is to organ ise training to provide information to fill any gaps in capability, according to Hall, because staff members need to be equipped and encouraged to find their own answers and make their own decisions.
Michael Solomon, CEO of Learn ing Seat, said there had been a defi nite increase in regulation and com pliance, as well as a corresponding lift in demand for online training.
“As we journey through uncharted waters within this current global finan cial crisis, companies face an increas ing pressure to tighten budgets. HR will be no different,” he said.
“Even though an increasing unem ployment rate is a high possibility, given the current global financial situation, it is likely to be short-termed; the long-term reality that exists remains unchanged – people will still need training.”
The areas of the market where there are talent shortages will continue to exist, compounded by the ageing demographic. “This is inevitable,” Solomon said.
“We can only be optimistic about the future. As someone once said ‘When a storm is heading your way, you have two choices – batten down the hatches, or learn to dance in the rain.’ I believe that truly progressive compa nies will be more focused on how they’re positioned to take advantage of the next growth cycle.”
Key points: the burden of regulation and compliance
• Over-regulation and over-control can have a negative impact on organisations
• Regulatory attempts to mitigate risk have not been successful
• The move towards more central control impacts on business costs and people's time
• Over-regulation can impact employees' motivation levels and creativity
