Have you heard about Organizational Debt?
The term was first coined by Steve Blank, the author of The Startup Owner’s Manual, inspired by the concept of Technical Debt.
Similar to Technical Debt—when software engineers make trade-offs to meet short-term goals, leading to long-term inefficiencies in code or even unsupportable systems—Organizational Debt refers to the inefficiencies, compromises, and suboptimal decisions that organizations accumulate as they grow, hindering their ability to function effectively and adapt to change.
Both with Technical and Organizational Debt, we might convince ourselves that these are temporary solutions we’ll fix “when we have more time.” Yes, we are those naive optimists.
Initially, the term mostly referred to startups, where rapid scaling and quick decision-making are common. In such environments, debt accumulates as shortcuts are taken in processes, culture, and structure to achieve immediate goals. Later, the term expanded beyond the startup world and is now applied to larger organizations. After all, every big organization was once a startup, and scaling and growth inevitably introduced complexity.
One of the most common sources of Organizational Debt is our tendency to search for simple solutions to complex problems. Every time we face an issue, instead of understanding its root cause and how it connects to the bigger picture, we rush to create an instruction or policy to prevent the problem from happening again. We introduce new constraints and establish new processes or policies.
Over time, these quick fixes accumulate, leading to:
– Outdated processes and policies
– Misaligned roles and structures
– Neglected culture
– Unclear communication
– Underinvestment in people
– Ineffective tools
and other signs of Organizational Debt. After a couple of decades, the processes become long, entangled, and unmanaged—so much so that only the company’s process managers can navigate and untangle them. The rest resort to finding shortcuts whenever possible.
Probably everyone who has worked in a big organization knows how crucial it is to maintain a strong network to get things done while avoiding the usual processes. And likely, no one can answer, “Why was it done this way in the first place?”
Just like with significant Technical Debt, addressing Organizational Debt means every new change requires substantial effort, resources, and time to implement. It also carries a high risk that the fragile system will break somewhere, with consequences that might be entirely unpredictable.
What was initially designed to be efficient—perhaps by cutting corners—often ends up creating even greater inefficiency, bureaucracy, burnout, and frustration.
I think we can all name organizations like this. Some of us may have even worked in them.
If you were to create your organization from scratch, how many of its current processes, policies, and structures would you choose to keep?
And maybe it is time for your organizational culture refactoring?
You might also be interested in:
The Cobra Effect
Coaching in the Workplace
Teams: Diversity or Similarity?
