Organizational Debt

Continuing one of my favorite themes in this blog, of using technical metaphors to explain organizational issues, I happily came across one of Steve Blank‘s recent posts:

Organizational Debt is like Technical Debt, but worse

Steve’s definition of Organizational Debt is short and simple: “all the people/culture compromises made to “just get it done” in the early stages of a startup. ”

Just like technical debt can hinder your ability to scale your product, organizational debt hinders your ability to scale your company. Accruing these debts is sometimes the right business decision to make. But you need to be aware that you’re taking them on, and have a well defined trigger for identifying when you should stop whatever else you’re doing, and invest the time and focus in refactoring them.

Onboarding, training, culture and compensations, are a few examples of organizational systems that are likely to accrue organizational debt at the early stages of a startup.

A secondary theme that Steve calls out in his piece, is also worth noting: VCs tend to be not particularly good at helping their companies identify organizational debt and refactoring it. Fred Wilson also tangentially acknowledges that challenge in his “What VC can learn from PE” piece.