The Organizational Debt You Don't See and How to Fix It
- ivesconsultingllc
- Mar 30
- 4 min read
I first encountered the concepts of "technical and organizational debt" during my corporate consulting days. My client needed to identify and resolve legacy technologies -- old systems which were technically unsupported but still in use.
As we worked with the client's IT team to track, plan, and retire or replace outdated systems and applications, I noticed these tech issues actually revealed deeper organizational decisions and patterns that had accumulated over time.
If you're leading an organization, or managing staff and budgets, read on to understand why this hidden liability is critical to controlling costs and staying competitive.
Understanding Our Terms
Technical Debt
Technical debt is the long-term consequences of choosing quick and easy technical solutions, often to meet a budget or deadline, rather than selecting a better designed solution.
A good analogy is buying an old used car. The car may work for the first year or so, but it eventually costs more in maintenance than it's worth. Similarly, technical debt collects "interest" through higher maintenance costs, reduced reliability, and eventual replacement expenses.
Organizational Debt
Organizational debt is what businesses accumulate when they don't update how they work while the world around them changes. This often includes things like outdated processes and policies, inaccurate job roles, ineffective communication norms, and outdated ways of working. Technical debt is a type of organizational debt.
A good analogy is an old house with years of piecemeal renovations. Each time something breaks or needs updates, the homeowner patches it with whatever is available rather than addressing the underlying issue (e.g. one owner adds new plumbing without updated plans, the next owner fixes the electrical system themselves, etc.). Like that house, organizations accumulate odd processes, outdated policies, and structural roadblocks over time.
How They Connect
Technical and organizational debt create a reinforcing cycle:
Systems that don't work well together force people to create manual workarounds.
Resources spent maintaining old systems and processes can't be invested in innovation.
Outdated systems create security and compliance risks that further drain resources.
How to Tackle Debt
Based on my experience and research, here are six steps that you can take to address debt at your organization:
1. Discuss With Your Team
Ask and identify:
What systems, processes, or structures are slowing us down?
What elements do you find most frustrating or draining?
Where could we simplify to create more space for innovation?
2. Map Your Debt
Develop a comprehensive overview of your organization’s situation with help from your team and experts:
Technical inventory: Identify and document tech systems/applications in use, dependencies with other systems, lifecycle status, and their costs.
Process list: Identify and document key processes, their purposes, and how actual outcomes compare to intentions.
Policy audit: Review existing policies to find those no longer serving their original purpose.
3. Differentiate Between "Good" and "Bad" Debt
Not all debt needs to be resolved in the short-term. Some technical shortcuts might remain for business reasons. Focus first on addressing debt that creates significant risks or costs.
4. Calculate the Interest
For technical debt, compare the cost of maintaining legacy systems/applications vs. replacing them. At my client, we identified potential savings of $500,000 by retiring and replacing 25 legacy applications.
For organizational debt, you can estimate costs by looking at: staff time spent on non-value-adding processes; decision delays due to complex approval processes; and knowledge loss when specialized employees quit.
5. Create a Debt Reduction Plan
Based on your inventories and analysis, develop a roadmap for targeting technical and organizational debt items. Organize it in three buckets:
Quick Wins: Identify items that can be eliminated with little effort or risk.
Org. example: Review laborious policies like travel approvals, and reduce multiple management signatures when one would suffice.
Tech example: Archive unused features in your existing systems, such as custom report templates that haven't been used in over a year.
Strategic Investments: Plan for debt reduction items with the highest ROI that will require at least some effort.
Org. example: Launch a 3-month program where senior managers create short, searchable video tutorials, in order to reduce new hire onboarding time and preserve institutional knowledge.
Tech example: Schedule upgrades for systems approaching end-of-life to avoid pricey extended support costs.
Long-Term Transformation: Develop plans for addressing systemic issues that require even greater change and effort.
Org. example: Redesign hierarchies that no longer reflect how work flows; flatten management layers to speed up decision-making.
Tech example: Develop multi-year roadmaps to replace old systems; select modular services to avoid large future replacement projects.
6. Establish Conscientious Practices
You can address existing debt while preventing taking on more. Start by:
One In, One Out Rule: For every new policy or system, try to retire an existing one.
Regular Debt Reviews: Schedule quarterly reviews of both technical and organizational debt. Check on progress and see where help is needed from the the folks working on it.
Debt Gut Check: Before starting something new, ask if it might create problems you'll need to fix later. This will help you be more proactive from the get-go.
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