Tuesday 4 December 2012

Rush to Regulate

The media rushes to push for regulation on the premise that it protects the consumer and that corporate bodies and entrepreneurs  are evil and need controlling. Regulation is set out as a good thing and something to aim for in one industry after another; it is portrayed as good for the customer.

However there is another side.

Regulation cost money, a lot of money, this ultimately rises costs for everyone and the consumer has to pay for it. Whilst in recognising that some companies have been under hand in their dealings with the public and regulation as been the response as a result the cost to the majority of the behaviour  minority is huge. It is a bit like regulation being like an insurance policy, we all pay more to cover the eventuality of bad practice , or an attempt to prevent it in any case.

Regulation actually diminishes the customer experience - how?

Well you hear so many people complaining about inane scripts and pre-recorded messages and bundles of "pointless" fulfilment material; this is not always the providers fault, in many cases it's the result of compliance with regulation.

In a globalised market our localised regulation in staffing matters raises our costs and makes us uncompetitive. No wonder much of our processing activity was off-shored. Lots of people complain about the service that arises as a result.

On the up side compliance and regulatory matters have kept us change professionals in supplies and rations during the recession as mandatory change activity was the only work around!

So am I saying regulation is a bad thing?

No, people should be protected particularly from being exploited in employment but when the playing field isn't level the reality isn't that simple. The message here is regulation has  a place but it has to have its consequences thought through.

Let me finish off with an example of unintended consequences which illustrates why we need to think regulation through properly before jumping to knee jerk regulatory responses to problems:

A very well known university town council in England decided to regulate private rented accommodation that was shared; it required licenses and stipulated higher safety requirements including separate fire proof doors to bedrooms and the like.

All good stuff I hear you say but:

The stock of accommodation in that city has reduced substantially as landlords now only rent to families not shared groups, many don't want to incur the costs or ruin the look of their feature filled Victorian housing stock.

Sharers are being turfed out as their current rental agreements come up for renewal and then have to pay higher rents as the supply has substantially dropped and landlord recoup there extra expenses from this regulation and also benefit from increasing prices as the scarcity of their product has increased as a result. This on top of higher university fees is another blow to students and young professionals in the town under discussion.

Rents have gone up as a consequence and the house sharing young people foot the bill.

The same houses with no safety enhancements are now populated by families instead, the stock is the same standard not any safer either. The prices for licensed properties for young people have gone up with little benefit to anyone except the regulators and bureaucrats who charge the fees for the license, perform the inspection and administer the scheme. If a house is safe for a family, why is not safe for three young adults to live in?

The issue here is people with good intention, politicians and public employees, have little commercial knowledge and don't think through the business model that sits behind the regulation. This needs skills in business design and requires the skills often seen in disciplines like business architecture.

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