Small business

4.9 Developing effective regulatory bodies
Objective: To create organisational capacity to deal with all process aspects of regulation.
The effectiveness of regulations for SME development depends above all on creating an organisational
capacity to deal with all process aspects of regulation - the law in itself is insufficient. Three issues are
very important in creating such capacity:  
1) Regulatory processes must be designed to keep the transaction costs to businesses low and limit the
size of the regulatory bodies avoiding the establishment of a costly and slow-moving bureaucracy ;
2) The development of effective training programmes for staff of all regulatory bodies, especially to create
empathy with SME, ensuring that:  
3) Organisation culture is sympathetic to SMEs and geared to flexibility in applying regulations.
The major challenge is the last. The culture of the bureaucrat is essentially one of valuing hierarchy, order,
control, systems and formality. The micro and small enterprise in contrast has values associated with
informality, trusting in personal relationships and observation, and living day to day with ambiguity and
uncertainty. 
The failure of SMEs to conform to the regulatory environment very often reflects the lack of empathy of
those who operate it. It can, for example, be argued that in many transition economies the real challenge
of entrepreneurship is not so much the education of entrepreneurs (most are learning full-time by doing)
but mainly in developing those who manage the environment for SMEs, so that they facilitate enterprise.