Engineers are very familiar with the concept of technical debt. This is when you write quick and dirty code to ship a feature fast, knowing you will have to rewrite it later. If you do not fix it, the code becomes unmanageable.
Founders often fail to realize that this same dynamic applies to their people and processes. This is called Organizational Debt.
Organizational Debt is the cost of organizational structures and policies that are no longer effective but are still in place. It is the accumulation of decisions that made perfect sense when you were five people in a garage but act as anchors now that you are fifty people in an office.
It is the ghost of the company you used to be, haunting the company you are trying to become.
The Origin of the Debt
#Organizational debt rarely comes from bad intentions. It usually comes from a lack of maintenance.
When you were small, you likely had a rule that the CEO had to interview every single intern. This ensured culture fit. It was a good policy.
Now that you are hiring ten people a month, that same policy creates a bottleneck. The CEO is overwhelmed. Candidates are waiting weeks for an interview slot. The policy has not changed, but the context has changed completely. The asset has become a liability.
Symptoms of Accumulation
#How do you know if your startup is suffering from organizational debt? There are clear symptoms.
- The “Why” Void: New employees ask why a process exists, and the only answer is “because that is how we have always done it.”
- Decision Paralysis: Decisions that used to take minutes now take days because the approval chain is unclear or outdated.
- Workarounds: Your high performers are secretly bypassing official channels just to get their work done.
If you find that your team is spending more time managing the internal bureaucracy than they are solving customer problems, your debt load is too high.
Structural vs. Cultural Debt
#This debt manifests in two primary ways.
Structural Debt is visible. It is found in your org chart and your handbook. It is the VP title you gave to a co-founder who is no longer performing at an executive level. It is the reporting line that makes no sense but exists to spare someone’s feelings.
Cultural Debt is invisible. It is the unwritten habits of the team. It might be a culture of consensus that worked when you were small but now prevents bold leadership. It might be a reliance on oral tradition instead of written documentation, which leaves new hires lost and confused.
Paying It Down
#You cannot ignore organizational debt. It compounds. The longer you leave a broken process in place, the harder it is to remove because people get used to it. It calcifies.
To pay it down, you must “refactor” your organization just like you refactor code. This requires a periodic audit of your processes.
You have to be ruthless. You must ask: “If we were starting the company today from scratch, would we implement this policy?” If the answer is no, you must scrap it.
This is painful. Refactoring code does not hurt the code’s feelings. Refactoring an organization often involves changing roles, removing titles, and breaking habits. However, it is the only way to maintain the velocity of a startup as it scales.