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Section 1: What is sludge?

Have you ever been placed on a lengthy hold when you just needed a quick answer to a question? Been frustrated by a clunky onboarding process? Felt uneasy when granting permission for various online services to share sensitive personal information?

These experiences are all examples of ‘sludge’, a term that refers to any element of a process that increases its difficulty or unpleasantness, thereby impeding progress.

Funding applications are often rife with such problematic elements or ‘frictions’. Sludge is created by elements of a process that are:

  • Missing (e.g. an absence of guidelines on eligibility)
  • Excessive (e.g. duplicate paperwork requirements)
  • Difficult to understand (e.g. jargon)
  • Hard to navigate (e.g. mandatory fields that block applicants from seeing forms in their entirety)

What are the effects of sludge?

Although any one of these frictions may seem relatively small or insignificant, their impact is not. According to behavioural economists, every “click, step, field, form and signature” can introduce frictions that are as detrimental as gender bias, poverty, racism and other large-scale barriers.

Sludge has been shown to have disproportionately negative effects on those who are already facing extra hardships or struggles – for example, people who are busy, poor, elderly, unfamiliar with the dominant culture or language, or have a disability. Tasks that impose unnecessary cognitive complexity or administrative burden frequently results in a loss of access to the goods, services, information and opportunities that would benefit their lives.

Women entrepreneurs often face both time scarcity AND financial scarcity, particularly in the early phases of their businesses. When they encounter funding applications that immediately bite into their time and generate uncertainty or frustration, many entrepreneurs opt out of applying for grants, loans or lines of credit. Instead, they turn to more familiar and immediate funding options such as personal savings or credit cards. They intensify their efforts to generate income through activities that are much more under their direct control (e.g. sales and services). Unfortunately, this kind of self-reliance can compromise the growth potential of their business as well as their own financial well-being.

Is sludge always a bad thing?

Not all frictions are bad.

In fact, they are considered advantageous when they improve the quality of decision-making (usually by reducing impulsivity or by directing attention to options that might otherwise be overlooked).

A well-designed application process will include some frictions that guide entrepreneurs to consider both the advantages and disadvantages of borrowing. Thoughtfully designed “speed bumps” can assist them in understanding what funders are looking for and alert them to vulnerabilities within their business model.

It is equally important to note that not all sludge is removable. No organization can translate its materials into every language on earth; no designer can account for every aspect of neurodiversity when designing websites or forms. When determining what constitutes acceptable versus unacceptable sources of sludge, each organization will need to apply standards of reasonableness that are, by their nature, highly subjective. Sludge audits help to uncover the blockages and impediments. It is up to the organization to determine whether it is necessary and desirable to invest in removing them.