Organizational Debt — A Necessary Evil

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Regardless of their state of growth, all companies face a certain level of organizational debt, which can paralyze them if it’s not kept under control.

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Alina Ghiarasim, Lead Business Analyst, Endava
Alina will be speaking at the ‘Business Analysis Conference Europe‘ 21-23 September 2020, London on the subject, ‘Leverage UX Techniques for Agile Business Analysis
The conference will be available via live streaming and face to face.
This article was previously published here.

In the IT industry everybody is familiar with the concept of technical debt. “Organizational debt is like technical debt, only worse.” (Steve Blank)

Organizational debt is accrued through all the people, process or quality compromises that an organization makes to get things done, even though they are not “done-done”.

As a business analyst I get to work for a lot of organizations and I’ve seen organizational debt manifesting in many ways, some of which are detailed below. These are all pretty intriguing situations with complex root causes, but they are also indicators of how companies should restructure, evolve and define strategies for sustainable business agility and success.

Accumulation of legacy processes

Every time new company policies are created without reassessing and restructuring the existing ones, accumulation is generated. After years of accumulation some organizations find themselves strangled by scary amounts of organizational debt that make them rigid, slow and inefficient. Too many overlapping roles, super complicated processes distributed across many departments, rules or constraints without a relevant justification, an insane decision flow with a million approval layers — these are all pitfalls that define the organizational landscape for many corporations.

Acknowledging their negative impact and working towards fixing them is not an easy thing, as some of them require organizational changes that would take a lot of time and effort to be properly defined, implemented and adopted and have significant risks associated. And that’s why they are being postponed over and over again…

Automation without optimization

Many companies try to gain efficiency through automation. But they don’t take time to first think through the process and then automate. Or maybe they do, but the hassle of reshaping an obsolete heavy process is so discouraging, that they short-cut the optimization and go straight to automation.

In general software is built on top of business processes, but if these are lacking efficiency, then the software is just perpetuating bad behaviors and building up organizational debt. Looking carefully at the process, reassessing the steps to see if some can be removed or redesigned, considering the involved structures to understand if all of them are still needed, and reviewing the decision points to see if some of them can be dismissed would help the organization shape up the optimal flow that can deliver real value.

Once the process is properly thought through, automation can be used to speed up business results.

Sacrifice quality over speed

Especially in the early stages of their existence (but not only) companies tend to take short-cuts because this gives them speed and agility. They operate in a very dynamic environment, they change priorities very often and they deliver half-baked solutions just to get that client that they desperately need. And that’s ok! Up to a point — when they need to realize that every compromise they make to speed up getting a new client makes them slower on getting the next one. And if they don’t manage the organizational debt properly they might end up in a chaos with a completely unstable product, unhappy employees and frustrated customers.

Organizations need to learn when to swing the balance in favor of speed and innovation and when to swing it in favor of hardening the product and tackling the debt so that they ensure high quality and sustainability.

Dangerous dependence on suppliers

When organizations become too dependent on suppliers, they lose their freedom of choice. Suppliers will tend to increase prices, lower the quality of their service or impose conditions which may not only be unprofitable, but even absurd. An organization does not get into a situation like this over night, but through subsequent bad decisions taken over time. When they don’t stop to evaluate their position and the risks involved, they just give away their power bit by bit.

If the supplier is driving the strategy instead of supporting it, we are talking about severe organizational debt that threatens the organization’s stability and strength.

Lack of value stream thinking

A big challenge for traditional organizations comes from the way they evolved. In their efforts to ensure strong planning, predictability and execution control, organizations have developed structures that are siloed, disconnected and driven by very specific tasks. These structures usually work towards their own priorities and localized benefits, missing the big vision. Silo mentality is a form of organizational debt that alters the company’s culture and harms the overall efficiency and agility. Value is organized around the enterprise, instead of having the enterprise organized around value. Organizing around value streams brings significant benefits to the company, such as leaner budgeting process, smoother internal collaboration, faster learning, higher productivity and shorter time-to-market.

To sum it up…

Organizations should always question the way they are achieving their results and understand the compromises they make to get there. Decisions should be carefully considered and companies need to be ready to change or dismiss them when they no longer fit the purpose, or even worse when they become an impediment in the way of efficiency.

Organizational debt is inevitable, but as long as it is planned, acknowledged and properly managed it can work as a strategic instrument to boost the short-term benefits.

Alina is a Lead Business Analyst with 15 years of experience in the IT field. She has extensive experience in agile software delivery, digital transformation, pre-sales activities and end-to-end product life cycle. She has run the Business Analysis discipline in Endava Iasi location aiming to grow analysis skills within the department and she is also a mentor teaching and supporting professionals who wish to change their careers to the BA field. She is involved in the local product and design communities evangelizing the importance of investing in analysis skills to increase project success rate.

Copyright Alina Ghiarasim, Lead Business Analyst, Endava

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