In Civ games, it is usually the rule that you must switch out of your starting form of government as soon as you can get any other form. This is not always true in this game. It is surely important to adjust your Social Engineering choices, but the time must be ripe. Would you want to switch to a Police State if you're already inefficient? No! You should only use Police State if your empire is reasonably efficient and will remain so. More details on the effects of Social Engineering here.