Organisational Debt: The Cost of Ignoring Outdated and Excessive Process
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Organisational debt is the build up of inefficient or ineffective processes, practices and technologies over time and can eventually grind business progress to a halt.
Process and policies build and accumulate over time, often layered in ways that make progress painfully slow but difficult to unpick.
No one sets out to build a bureaucratic slow-moving organisation. It's an unintended consequence of risk aversion and policy build-up that eventually grinds productivity to a halt.
Lengthy processes and outdated structures are often overlooked as 'how we do things around here' and are rarely considered a significant business expense. That's why I love the term organisational debt because it associates this build-up of outdated or unnecessary policy that is not only frustrating employees but has a significant financial burden for the business.
Examples of organisational debt
Someone messed up and we implement a policy to prevent it from happening again
The mistake may be a one-off or a learning opportunity but instead, a policy is put in place for all employees.
One example from a technology client I worked with was how their expense policy became so burdensome they lost employees over it.
In their earlier years, they had a company credit card system that employees who traveled frequently could use it for business expenses.
The system worked pretty well until an employee decided to put his new kitchen appliances through the company card 😬
As a result, all employee company credit cards were revoked and a new approval system was implemented. Expenses were pre-paid by employees then applied for and approved by two layers of management.
The system meant that expense payments were often delayed by months, with some employees owed more in expenses than their salary.
The time required for employees, managers and finance as well as the cost of the technology far outweighed the original cost of the employee misdemeanor.
Alternatively, the original solution could have been to discipline the employee.
Changing the complicated process back to a simpler one was a tricky sell, after all the ‘investment’ that was put into it.
Meetings where most participants neither participate nor get value
(to calculate: number of surplus participants x average hourly wage x hours per year attending this recurring meeting)
Multi-step approval process
Five people sign off a document that one or two people could approve - building in not only additional cost but lack of ownership.
Something is better than nothing mentality
The snore-inducing onboarding deck? Lacklustre employee training software that employees mindlessly click through to get to the end? Failing to give productive helpful feedback? These all have significant long-term price tags and effect the longevity and profitability of a business.
Can you think of other examples?
This week's tweak for better work is to identify and reduce organisational debt
Meetings: If you host regular meetings, look at the invite lists, is everyone necessary? Do they know why they are joining (their role) and the purpose of the meeting? If not, adjust. Taking 1 participant with an average wage of €80k out of a one-hour meeting every working day will save over 10k per year.
Reporting: You are involved in the production of reports that are not actioned. Whether as a recipient of the report or a producer of it - what is actionable? How is it helpful? Can it be simplified, reduced, or eliminated?
Documentation development: If it can be said in 10 words, do we need 8 pages? Simple, plain English, a scannable layout, and fewer words can save thousands of hours for writers and readers.
Process engineering: Are you involved in a regular process that seems to make no sense? Question it, investigate, and offer alternative solutions.
There are loads of other examples. Most importantly offer alternatives, communicate clearly and transparently why you are suggesting change, and experiment with alternatives that are safe to try to create evidence of a better less bureaucratic, and costly alternative.
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