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Organizational Debt

Entrepreneurs and leaders who are unable to make tough decisions end up burdening their companies with “organizational debt.”

Entrepreneurs and leaders who are unable to make tough decisions end up burdening their companies with “organizational debt.” Steve Blank, who first defined this term in an article on his website, explains that many startups initially bend their processes in ways that simply allow things to work. However, this can lead to immense problems later on, resulting in an organizational nightmare.

The consequence of delayed optimization adds up over time.

Organizational debt is thus the sum of decisions that a leader should have made but didn’t. 

The consequences are straightforward. During scaling, massive issues arise across various departments and processes. Inefficient processes and dissatisfied employees are direct outcomes of this.

So, what can you do? Small companies with a culture of honesty have a significant advantage. They can continuously improve their processes. Larger organizations can do this too. Aaron Dignan offers some excellent strategies to eliminate organizational debt in his article, “How To Eliminate Organizational Debt.”

Posted by Titus Lindl