Since its first months in office, the Government has signalled its desire to deliver economic growth. Making this a reality, however, is more difficult than perhaps we all expected, and the question as to whether regulation has a part to play has become a hot topic.
The PM spoke last Tuesday about ‘cutting the weeds’ of regulation to allow growth. As any amateur gardener knows, one person’s weed may be another’s wildflower, and only with care and knowledge can you get the result you are looking for.
The role of a regulator isn’t to drive growth. Its role is to encourage and support innovation and stop the worst excesses of the market (or monopoly) it governs and the consequences that can stem from systemic failures. Its role is also to protect those who are most vulnerable.
It’s the job of investors, businesses and entrepreneurs to drive growth – and the role of government to act as a catalyst by providing the right investment opportunities to provide fertile ground for creativity, innovation and controlled risk-taking. This is what truly drives growth.
Regulated businesses need to work out the intent and the motivation behind the regulatory frameworks they adhere to, and these should not stymie growth or create a tick-box environment – where hitting minimum standards to meet regulatory requirements becomes the focus!
Our recent research on regulation looks at how it can help raise standards of underperforming organisations whilst ensuring they don’t overburden high performers. The challenge should always be how we ensure organisations continue to innovate for their customers. This is complex (and influenced by the market dynamics in each sector), but far from impossible to achieve.
Consumer Duty, for example, has successfully put customer service at the forefront of board discussions – and it is probably no coincidence that financial services firms recently dominated the top 10 of the UK Customer Satisfaction Index.
The cost of poorly designed and implemented regulation, however, is a problem. By understanding the risks we need to guard against and focusing on the best outcome for customers, all parties can get what they are looking for. Importantly, regulators need to be proportionate in how they apply the right standard and consider the end-to-end customer experience. After all, we should all know there is no better way for a business to achieve growth than by serving its customers consistently well.
But let’s not lose sight of what is at stake here. We might be talking about someone’s life savings, pension, critical health or access to the necessities of life. Strong regulatory oversight is particularly essential when there’s little choice of provider in a market or when there are serious consequences to consumers when things go wrong.
Our regulation research shows that 73% of consumers favour more regulation to ensure businesses properly consider the interests of their customers. So, how can we deploy regulation effectively to protect customer interests and boost their service experience without restricting well-performing organisations and hampering growth?
We identified several recommendations, including strengthening the customer perspective in strategy and decision-making, a greater focus on influencing organisational culture; agility in selecting from a variety of tools and interventions; and consistent and transparent measurement.
A vital protection, when implemented thoughtfully
To use the PM’s metaphor, rather than simply cutting the weeds, we should also consider how we nurture and feed regulation so customers are better protected and businesses are encouraged to innovate. This will drive improvement in customer satisfaction – a key contributor to long-term economic growth.
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