Functional Fencing – Defining the Regulatory Framework

This week we are looking at the second type of strategic input to the superior business analysis model. Whereas business goals – which we discussed last week – are a very optimistic ‘shoot for the stars’ type of input, business constraints are the ‘glass half empty’ strategic necessities that restrict what the organisation can do.

I see the strategic component of the SBA organisational model as a pyramid in its own right, comprised of the business goals, business constraints and business principles; and each of these are important in their own right too. The business goals are the apex of the pyramid, which each policy, programme and project of the organisation should be aligned with. The business constraints – which I’m about to delve into further – are the inclining sides of the pyramid, restraining the direction, actions and behaviour of the organisation. And the business principles – my favourite of the three (!) and the subject of next week’s blog – form the base of the pyramid, upon which everything else is built.

So, business constraints are quite simply the limits of an organisation’s legal behaviour and resources. I would also suggest that to be useful as a strategic level, the focus should be more on high-level constraints within a type of business constraint (eg the Blah Act)than on each individual constraint (eg section 96 of the Blah Act).Fencing

Business constraints include:

  • The regulatory framework under which the organisation must operate – These are the more corporate style standards that any organisation must operate and is not industry specific. These are the pieces of legislation and regulation which govern the commercial, financial and ethical actions of any business, government agency / department or not-for-profit.
  • The regulatory framework under which the organisation’s industry must operate – These are the industry-specific standards that any organisation working within a certain technical space must adhere to.
  • The budget within which the organisation must operate – Pretty self-explanatory!
  • The jurisdiction/s within which the organisation will operate – This is the geographical region (real or virtual) which the organisation will apply its business goals to.

And, sitting here at the moment, I can’t think of anything else! I would argue that anything else that appears to look like a business constraint (eg time, human resources etc) should in fact be constructed as part of a business goal or business rule. But these are the very top level constraints that have been decided or must apply on how an organisation will function.

It is worth noting that although all organisations within Australia are subject to all these types of constraints, they have differing levels of control over what the relevant regulatory constraints actually are. Government departments – unlike non-government bodies – generally have a team (or teams) responsible for policy and legislative reform, and they are often responsible for administering the acts and supporting legislative instruments under which they themselves operate.

An example of this is the South Australian Natural Resource Management Act 2004 (SA). This act has been committed to the Minister for Sustainability, Environment and Conservation – the same minister who is responsible for the Department of Environment, Water and Natural Resources (DEWNR). The Minister has delegated his obligations and powers under this act to officials within DEWNR, but at the same time DEWNR officials are also responsible for the maintenance of this same act.

In contrast, a private company or not-for-profit has very little control over what goes into an act that applies to them. They are able to lobby the government for changes to legislation, and their owners / employees / customers are able to vote for who is to be their elected representative in parliament – but they have no responsibility for the administration and word-smithing of relevant legislative instruments.

To summarise…

A business constraint is:  A specified limit to an organisation’s legal behaviour and resources.

The purpose of defining business constraints:  To ensure that all policies, processes and other mechanisms within an organisation are created and carried out within its high-level legal and material limits.

What do you think?

Is this the right definition of a business constraint? And are there any other types of constraints that I haven’t included?

What do you think?