Published on May 16, 2021

Organizational Debt


Technical debt is a well defined problem today. It is the result of prioritizing speedy delivery over perfect code. When you want to go fast, you have to take shortcuts. Over time, these shortcuts accumulate and cause slowdowns. When this happens, you need to invest to fix it. I’ve been in boardroom conversations where millions of dollars were on the line just to fix technical debt.

There was a recent example of this on a large scale with Twitter. Many people have shamed them over the years for their failure to innovate and execute quickly. The real culprit wasn’t management’s laziness; it was technical debt. It took years for Twitter to resolve their technical challenges, mostly by moving parts of their infrastructure stack to the public cloud. With the technical debt largely behind them, they are now moving much faster with really cool innovations just in the past few months.

There is a similar concept that is harder to grasp that exists in companies called organizational debt coined by Steve Blank. It can have the same detrimental impact of slowing down a company. Ultimately, the end result is the same, you need to spend time and money to fix it. The biggest difference between these two types of debt is that organizational debt deals with messy human decision making; thus making it less tangible and less obvious.

This type of debt occurs when an organization does not continuously upgrade its culture, decision making and alignment.

Owning your culture and values 

As a company grows over time, its core cultural tenets and values. They shouldn’t radically change but a small shift is often necessary.

An important question is to understand what frame is used to hire and fire people. Beyond competence for the role, what else are we looking for in team members? What attitude and leadership traits are we looking for?

The same goes for existing team members, how do they evolve in their roles? How do we adapt our organizational structure to take into account a growing number of talented people?

Company culture and values are not static and should be re-examined on a regular basis. It can’t be left as an afterthought.

Unclear decision making

When you’re working at a startup, you will most likely have broad responsibilities covering many different areas. When that startup has grown and added hundreds of people, clearer lines of reporting and responsibility are needed. The biggest zone of friction occurs when responsibilities overlap. If two people perceive to have the same zone, they will ultimately clash. This leads to several questions that a management team should be asking themselves

  • How do we decide?
  • Were the right people involved in making that call?
  • Was everyone given the chance to voice their agreement or dissent?
  • What process are we using to analyse the quality of our decisions?

Lack of alignment 

The biggest source of organizational debt is lack of alignment, particularly at the management team level. There are a few layers to this problem.

  • Are our goals clearly defined?
  • How will we get to where we want to go? Another way of asking this question, is how do we prioritize strategic vs. operational goals?
  • How will people be compensated if we win?
  • Is the board, management and rest of the team all working in the same direction?

Alignment is never perfect, it can only be optimal. Ongoing status updates are needed to determine if the management team is rowing in the same direction.

Let’s go back to technical debt for a second. Technical debt is fixed by refactoring, going into the existing code and “cleaning it up” by restructuring it. This work adds no features visible to a user but makes the code stable and understandable.

It’s rightly perceived as a necessary evil. The same concept applies to organizational debt, it’s addressing issues that lie below the surface but don’t appear to the end user. If left unchecked, it will absolutely hinder innovation and speed. The good news is that it doesn’t cost a lot to address organizational debt if continuously monitored. The bad news when it does become a big problem, you have to break out the cheque book.

Suggested articles


Reasons to be optimistic about technology

Nov 22, 2023

Will technology save humanity or kill us all? The recent discourse seems to be bifurcating in two violently different directions.


Why I moved into venture

Oct 03, 2023

Why I moved into venture



Jun 22, 2023

After 8 great years at The PNR, I’ve decided it’s time to move on. This was obviously not an easy decision to make but I could not be happier to be leaving at a time where the company is in great ...