Compliance without tears

Compliance, at first glance, seems straightforward. The government makes rules. Citizens and businesses have to follow them. If they fail to do so, enforcement divisions chase them down and penalize them. For decades — even centuries — no one questioned this formula.

But is there a better way?

Could we get better results?

Could we even get better results at a lower cost?

The answer is emphatically “Yes!” But what is required is a wholesale transformation in the way we design, organize and — most importantly — think about compliance.

Head shot of Bill Eggers
Bill Eggers, executive director, Deloitte Center for Government Insights

What is the customer experience revolution?

The starting point for rethinking compliance is a simple fact: most people want to obey the law. Of course, there are always a few bad actors out there. But the vast majority of citizens and businesses who run afoul of government regulations are honest and well-intentioned. It’s just that the processes of registering a business, applying for a license or permit, filing a report and paying fees and taxes are so difficult, expensive and unpleasant that people give up, cut corners and make mistakes.

Fortunately, these problems can be fixed and we don’t even need to reinvent the wheel. Instead, we can look to the customer experience (CX) revolution — a set of innovations that have, over the past decade or so, transformed how businesses interact with customers.

The essence of CX is two-way communication. Instead of just developing products and putting them on the market for customers to accept or reject, companies are now constantly asking customers what their needs are, and how products can be improved. In fact, most of us have been unwitting participants in the CX revolution, by rating a product, chatting on a help line or filling out a customer survey.

CX: A human-centered approach to improving compliance

The multi-disciplinary CX tool kit that has been developed by the private sector can be used by government agencies to develop a pain-free 21st century approach to compliance. And it will likely cost a lot less than traditional enforcement mechanisms.

The essence of a CX approach to compliance is that it focuses on changing organizations, adapting them to better accommodate the needs and preferences of businesses. It is multi-disciplinary, collaborative, horizontal and flexible. It is exactly the opposite of traditional compliance, which strives to change people’s behavior using methods that are legalistic, adversarial, vertical and rigid.

As explained in the recent Deloitte University Press study, Compliance Without Tears: Improving the Government-to-Business Experience, CX reforms are founded on a nuanced understanding of how an organization’s users behave. Operational changes are designed to make compliance quicker, easier and less expensive in light of the real-life human context. The process of reform is ongoing and iterative, less a one-off restructuring than a transformation of systems, mind-sets and culture.

New Zealand’s better for business initiative

Let’s look at an agency that has been at the forefront of creating a CX culture in government, New Zealand’s Ministry of Business, Innovation and Employment (MBIE).

MBIE started out with the same concern that plagues many governments around the world — that regulations were stifling private sector growth. Instead of wading into the political minefield of deregulation, the MBIE decided to make compliance easier with a CX reform program called Better for Business.

The first step was to carry out more than 2,000 user surveys and interviews with businesses to find out what was working, and not working, in New Zealand’s current-state regulatory system. The job of designing reforms was assigned to “accelerator teams” that included business owners, as well as government officials and experts. Bearing in mind that CX reforms work best when they transcend institutional silos, the MBIE invited the Internal Revenue Department, the Ministry of Primary Industries, the Customs Service, the trade promotion agency and the government statistics office to co-lead the project.

Better for Business introduced more than 80 reforms across government. Federal agency databases were linked up so that businesses need to submit basic information and changes only once. Each New Zealand company was assigned a single identification number to use in all registrations, applications and filings. For shippers, a single online window was created where cargo manifests could be submitted simultaneously to customers, maritime safety officials and the ministry of health.

Company registration procedures were streamlined so that it now takes, on average, less than a day to set up a new business in New Zealand.

During the research phase, building contractors had complained that permitting glitches were costing them customers and financing opportunities. Better for Business responded with VIZBOT, an online “wizard” that contractors can use to track their permitting applications through the review process. Users are even able to see the notes made by regulatory officials, alerting them to potential problems during the process.

Four years after Better for Business was launched, business compliance costs in New Zealand are down 12 percent. The business identification numbers alone are estimated to have saved $60 million per year in compliance costs. Taxpayers are spending 23 percent less time dealing with the Inland Revenue Department. An astounding 98 percent of building permit applications are reviewed in less than 15 working days. The World Bank ranks New Zealand as the second easiest country in the world to do business.

Looking to the Future

New Zealand is not alone. Key elements of Better for Business — public-private collaboration, cross-agency coordination, simplification of processes and ongoing communication with users — are being implemented by New York City, Boston, Utah, the Small Business Administration, the Commerce Department, U.S. Citizenship and Immigration Services, the Department of Veterans Affairs and the IRS.

There is certainly much more to be done. But the vision is already there. With well-designed CX-based reforms, paying our taxes or renewing a license could one day be as easy — but perhaps not as pleasant — as ordering a new book or downloading a video from Amazon.

William D. Eggers is the Executive Director of the Deloitte Center for Government Insights and the author of nine books, including his latest, Delivering on Digital: The Innovators and Technologies that are Transforming Government. Greg Pellegrino is a principal with Deloitte Consulting and a recognized leader in customer experience strategy.

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