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Addressing Organizational Debt

| by Savita Pahuja Follow 2 Followers on May 25, 2015. Estimated reading time: 2 minutes |

In his recent blog Steve Blank, Lecturer at New York University, talks about organizational debt which is similar to technical debt. He says that growing companies need to understand how to recognize and refactor organizational debt.

While technical debt is an understood problem, it turns out startups also accrue another kind of debt – one that can kill the company even quicker – organizational debt. Organizational debt is all the people, culture compromises made to “just get it done” in the early stages of a startup.

Steve says that parallel with the technical debt on a company-wide level is "organizational debt." If technical debt is issues embedded within the software that hamper its maintenance, organizational debt would be issues in the day-to-day running of the company that prevent it from operating smoothly. He gives following examples of the organizational debt:

  • Different departments have their own tools and methodologies to address the same problems, making it difficult for executives to see similarities in order to address company-wide issues.
  • Managers create processes or implement software solutions that seemed like a good idea at the time, but didn't address the root cause of the issue and end up creating more problems in the long run.
  • Because of a particular time crunch, the team decides to complete a task in a less-than-ideal manner "this time". But that manner is repeated in subsequent tries because no one remembers that the first time was intended to be a one-off situation.

Bassam T. Salem, COO at MaritzCX, mentions in his blog, that the notion of organizational debt is one we can all relate to seeing in the corporate world. He gives the following examples of such debt:

  • Duplication debt: Over time, individual teams decide to build specialized roles to meet gaps in their workflow so as to remain independent of other teams.  
  • Ambiguity debt: Over time, with departments merging and splitting, some organizations are left with substantial ambiguity in the roles and responsibilities of the people in them.
  • “Should’ve-fired-a-long-time-ago” debt: Hiring a candidate is so much easier than firing an employee.  For that reason, without proactive, diligent management of talent, over time, organizations can be filled with people who really shouldn’t be there, but who are perpetually on verbal warnings or plans and will have to be dealt with at some point.

Scott Norberg, manager- internal systems at INSTEC mentions that organizational debt is harmful for the organizations. Organizations shouldn’t try to implement all the processes having debt for new projects.

Companies that have a high amount of organizational debt do so because their culture has trouble distinguishing between value-adding activities and mere busywork. As a result, when they go to build or implement new software, they not only try to implement all of the processes that existed previously, they try to implement all of those processes at once.

Scott shares following solutions to minimize technical debt:

  1. Apply good change management techniques.
  2. Encourage business leaders to look at the big picture instead of giving small scale solutions.
  3. Deliver changes in small increments.

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