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‘Organizational debt’ is hurting my company

FringeSport has been experiencing growing pains. I recently became aware of the idea of “technical debt” and realized that we have “organizational debt.” I then Googled organizational debt and learned that I’m not the first person to have thought of it.

What is organizational debt?

I’ll start with technical debt. It refers to drift or “cruft” (or inefficiency) in code or software systems. When someone writes code well, the resulting software is lean and mean.

But code is frequently sloppy or becomes that way over time. Sloppiness adds complexity, which causes the code to run slowly or not at all. Additionally, sloppy code is often time-consuming.

Similarly, organizational debt has unwanted complexity. It’s caused by creating an operation or organization that suffers from “debt” — inefficiencies in processes, systems, and procedures.

In my case, FringeSport’s operations (and revenue) have grown significantly. Legacy systems and processes no longer work for us, because of organizational debt.

In this post, I’ll describe four types of organizational debt and suggest ways to overcome them.

Organizational debt refers to outdated operations or systems that lead to inefficiencies, restricting a company’s ability to grow.

Organizational debt refers to outdated operations or systems that lead to inefficiencies, restricting a company’s ability to grow.


The first kind of organizational debt is deliberate — doing what’s quick and convenient. We understand that it doesn’t scale, and it’s not the ultimate solution. But it works now.

Here’s an example. Say you have a customer that wants a refund. Your company needs a clear process for returns, to streamline going forward.

But the first time you experience a refund request, you just credit the customer to complete the task. The problem, however, is that you’ve built no process for returns. You also have created a precedent for solving problems on the fly without judgment or a system.

The way to fix deliberate organizational debt is to avoid it in the first place or commit not to do it.

At Fringe, we’ll no longer produce deliberate organizational debt. We’ll make systems and processes for recurring tasks instead of relying on the judgment and snap decisions of staff.

It’s a difficult change from our customary practice. But we’re doing it.


The second type of organizational debt is obsolete processes. You implemented a solution that worked at the time. You now have better, more efficient options, but your systems and processes rely on the old way.

It’s difficult for employees to recognize a better alternative. There’s a strong attitude of, “We’ve always done it this way.”

I’ve adopted two approaches to minimize or eliminate organizational obsolescence. The first is eradicating the attitude of “we’ve always done it this way” and replace it with “let’s find a better way.”

Beware, however, of overkill. I’ve found that employees might change a process solely because it’s complicated. I ask them to understand the original rationale and then decide if it needs to be changed.

The second way to fight organizational obsolescence is for managers to do employees’ jobs quarterly or annually. This helps managers develop better systems and processes.


Our third type of organizational debt is fractal. We have systems that have solved problems. However, new problems have arisen. We changed the system, and then new problems came up. We changed again, and more problems arose. And so on.

The result is complicated systems that drift from the original purpose.

To solve fractal organization debt, we first try to recognize it. Then we steal an idea from the technical debt scenario: we go back to basics. We wipe away the cruft as best we can and start from scratch. The ensuing process is, hopefully, simple and elegant.


Our final type of organizational debt is humans. It’s the hardest debt to deal with.

Some employees have helped us get to where we are but are unable to help us take the next step. It’s difficult to know when an employee has reached his limit. Yet it impacts the whole team and the mission of the company.

We try to train our employees to help them evolve with the organization. We’ve altered job descriptions to better fit an employee’s skills. I am wary of this, however.

The danger is keeping an employee who no longer fits the company. How does that person affect other employees? She might have been qualified initially, but no longer.

Transitions can be painful. They require compassion. We first offer internal instruction and coaching to help the employee evolve. If that doesn’t work, we ease him to his next job.

Replacing an employee is difficult. But I try to remember a quote from Brené Brown, the author and college professor, from a conference a few years ago. She said, to paraphrase, “Your capacity for success will never exceed your ability for difficult conversations.”

So I have the difficult conversations.

Peter Keller
Peter Keller
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