Tag Archives: Organizational debt

Organizational debt

Scott Belsky of Benchmark Capital recently wrote a great piece on organizational debt. Scott defines organizational debt as “the accumulation of changes that leaders should have made but didn’t”.

I like to think of organizational debt as the outcome of the obvious people decisions you know you should be making but avoid making due to short-term thinking. The key words here are “obvious” and “people”.

So a mistaken entry to begin serving an unprofitable customer segment or a mistake in your product pricing strategy are not examples of organizational debt. The reason is that such decisions are usually non-obvious and not directly about people.

Continuing to work with someone you know you should no longer be working with, or having a culture where team members avoid challenging each other in exchange for not having their own views challenged, are examples of organizational debt. The reason is that the changes necessary in these cases are both obvious and clearly about people. The discomfort resulting from addressing these obvious people issues is what makes them so tempting to put off.

You can read the full piece here.