Bureaucracy when starting up a business. Is it worth it? And how much Bureaucracy is ‘right’?

Bureaucracy is a term that I definitely accuse as a major de-motivator for potential entrepreneurs to start up a business. Well, for any of you that may find this phrase new, Bureaucracy is defined as a governmental administrative system with clear hierarchy of inflexible rules, regulations and procedures. As potential entrepreneurs, most of us will go this painful process, for the moment we will just get a teaser working on our design thinking project.

Kamal Gupta, citing his experience with corporate bureaucrats, said, “We have a word for it; we call these people ‘zombie managers.’

You may ask how does this have anything to do with starting up a business? Let me explain it in my own words; it is a bunch of unnecessary, excessive process of paper work that an entrepreneur must go through before starting their venture, for example registering with governmental organizations for matters such as tax and how your business will ably within the labour law. You know, just like HMRC (Her Majesty’s Revenue and Costs).

“Most governmental bureaucracy is the result of crossed purposes: multiple groups who disagree on the desirability of certain results ….” James Heskett

 

Yes, you may say that this is a standardized process that is swift and must be done to keep record, and I agree with you, to a certain point. On the other hand, in some countries, where corruption levels are high and the government does not enhance an entrepreneurial ecosystem, this procedure is draining to a point where you lose interest in starting a business.

Usually most of the process is done online, Nevertheless, on average a person must go through 26 different governmental and non-governmental organisations to get approvals for their idea, each organisation take up to three weeks to respond, you cannot move forward unless you get an approval which may contradict what has been told to you by another establishment, which adds complexity to your initial situation. This is according to entrepreneurs that I personally know from back home.

Of course, it may differ between one country to another, therefore I would like to compare and contrast different systems to understand what is the optimum level of bureaucracy that should be applied? In other words, how much standardization is required that at the same time enhances individuals to open their businesses, for a country to thrive in the sense of adopting an entrepreneurial ecosystem without its possible negative impacts.

Image result for most efficient governments

From the figure, above, by the World Economic Forum, we can make the suggestion that these countries could have what I identified as the optimum level of bureaucracy. With the aid of GEM (Global Entrepreneurship Monitor) I have drawn the conclusion that these countries have very similar approach towards entrepreneurship which had carved out a system that limits down the bureaucratic procedure to inspire individuals to start a venture in a smooth, cooperative and enriching process.

These factors are:

  1. Implementing an innovative driven economy (in comparison to other countries that are either factor or efficient driven).
  2. Embeds entrepreneurship as a major factor for social and economic progression.
  3. Aims to lead industries by research & development and generate foreign direct investment.
  4. And most importantly, having a free market economy determined by consumers spending other than depending on natural resources.

 The dilemma remains, as studies advocate that when companies grow larger, increases the levels of hierarchy, they themselves become bureaucratic which distorts and tightens the mission of innovative within.  In the end of the day, we need some form of standardization for various reasons. Is decentralization an answer? Possibly, depending on the circumstances of the company itself.

I am very keen to hear back from you on what you think about this situation. Am I taking a one-sided approach on criticizing governments for not being as effective as they should? And is there such an ‘optimum level’?

Sites and further reading:

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alsblog530064767

Hello there, my name is Al Naaman, commonly known as Al. I am an MSc Innovation Management and Entrepreneurship student and here I will be posting my blogs. This is a new experience as I have never written blogs before, I hope you do enjoy. All forms of feedback are welcome :)

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