What Is Culture Debt, and Why is it the Greatest Threat to Your Organization?

The biggest threat to a company's ability to realize opportunity isn't the wrong people, product, pricing, competition or market forces. It's Culture Debt. Does your organization suffer from this?

In business, a common issue today is the idea of Technical Debt. It is the inevitable outcome of having limited IT development budgets that simply cannot deliver everything the business needs. Between not being able to meet every need when a project begins due to scope limitations and poor requirement definition from the business and the fact that its needs evolve while development is going on, it is unavoidable that a company's systems do not fully meet its needs. As a result, people use workarounds, work harder (or longer hours), or carry more staff than they expected to need to make up for system limitations.

An example would be something I saw first hand. A few years after a core system at a prior job was developed, a new regulatory requirement came about that we could not satisfy automatically in the system. So people had to go to a separate system, rekey some information, get an answer, and then write a note in the original system about it. In a perfect world, the first system would just take the info it already had, talk to the second system to get the answer, and capture the response in a structured way that could be reported to or tracked to know that we had done what we needed to do without having to read through file notes to see if someone mentioned doing the work.

While this was not a hard functionality to develop, it was not a top priority, and there was not enough budget or development capacity to make it happen. So the team was left living with this technical debt, and I can promise you they groaned every time they had to do the manual workaround.

Technical Debt is expensive, disruptive and can lead to engagement issues with employees who burn out faster and get more frustrated than they would if the system just did what they needed it to do.

As costly as it is, it pales in comparison to something that seems to get next to no focus, and does not even have a catchy, widely-accepted buzzword of a name – Culture Debt.

What is Culture Debt?

Culture Debt is an issue I have been critically focused on and see as a widespread issue. As I define it, Culture Debt is the idea that the corporate culture is in some way and to various degrees getting in the way of realizing the true opportunity the organization has in front of it. I see it growing in some companies, and firmly engrained in others. Sometimes it comes about as a loss of what once was, and other times it comes about as a gap between what is and what should be.

It is very hard to fix culture once it is in a place of impeding opportunity. Not impossible, but hard. Where I see being aware of the problem as most valuable is for smaller companies that started with amazing culture that drew people in, and got them to perform at extraordinary levels because of how passionate they felt about the company. Inevitably, as the company grows and layers and new functions start to work their way in just to manage the whole thing, the culture slips.

How Does a Culture Debt Develop?

Despite intentions to the contrary, as companies get bigger, the cohesion and closeness of a small organization are hard to maintain. One person cannot run a whole team of 50 like they did a team of five. So that means there are layers of interpretation going on rather than direct connections. And while we all hope every new hire is a perfect fit, sometimes they are a bit off (or perhaps worse!), and their presence impacts the organization negatively. They may have different values and communication styles that leave people who once felt a blurred line between the words work and play now seeing a stark, hard separation.

How Do You Avoid Culture Debt?

A lot of companies talk about value and culture – and few actually mean it. Fewer still probably realize they do not really mean it. Despite good intentions, I see so many companies with lots of hierarchy and politics talking about being a "caring meritocracy", "flat organization," or having an, "open door policy where everyone has a say." I worked at a companythat's the least able to use any of these phrases, yet they were the most vocal about how great their culture was and how deserving it was of all of these phrases and more.

Here are the keys to avoiding Culture Debt for those companies lucky enough to be in a great culture position:

1. Spell it Out. Spell out your culture and values in writing openly, and reinforce it in people's annual reviews. This needs to have teeth – if someone is acting out of alignment with the values, there must be consequences no matter how much they produce. That tells your staff what you stand for and that you really do stand for. That matters tremendously.
2. Hire for Culture. If you have a gut feeling that a job candidate does not feel like a fit, listen to your gut. You have to balance this with unconscious bias leading you to just hire in your likeness. Someone can be different from you and still a great fit. Judge fit from the standpoint of your values, and ask about it in the job interview. Get examples where they have found these values challenged and what they did about it. And if you actually check references (a lost art!), ask about these things, too.
3. Ask Your People. Get feedback from the people. Doing annual employee engagement surveys is a great way to check the pulse of the values and culture of an organization, but you have to do something about what you hear. Do not dismiss the feedback as people just being bitter or not understanding the situation. If even one of those things is true, you have a culture problem. Even if the feedback is wrong or motivated by someone with a bone to pick, the fact that wrong perceptions are out there or that you have someone behaving this way would both be things to address that have a cost.
4. Culture Starts in the C-Suite. Have an owner of the culture at the top. The default owner of culture is either the head of HR or the CEO. Both are fine, but I would err on the side of the CEO because the buck stops with him or her. That leader just better take it seriously and not just be in charge of it in name but really pass it off to someone else or just do nothing with it. One of the best CEOs I got to work for would talk about culture every year at our annual kick off meeting with the entire staff, he talked about it in his quarterly all-staff meetings (with open Q&A where he would get tough questions and would actually answer them honestly), and he would go into groups of people being interviewed and talk to them about the culture and values, the best and worst parts about it, and why it is so important. He was honest, direct and passionate about it regularly, and his actions backed up his words.

Is It Too Late?

What can you do if you are not starting from a good place? The good news is, you can still get there, but you will need to have complete acceptance and ownership at the top, and that can be very hard to get. Often, people in leadership have been there for a while, and that means they may not think anything is wrong or may subconsciously be against a change. Again, this is why ownership and action need to sit with the CEO because the process needs the strength to call (or push) anyone out if they are not on board.

It takes a wholesale look at who the leaders of the company are across all levels and functions, and it takes knowing where the staff reallystand on the question of culture. Getting an honest answer in an organization where honesty is not alive and well often takes a third party to do the asking, and it should be done anonymously or you will get answers that are a bit restrained as people fear retribution or like their thoughts will fall on deaf ears.

In fact, getting a third party consultant to help is likely to be a must-have for most companies seeking culture transformation. The exception would be where a new CEO has come in as they would have the cover of being an outsider, so people who felt stifled may view that new leader as a safe person to open up to.

A warning to keep in mind – shifting culture when it is very engrained could mean that you lose some long-tenured institutions within the organization. You have to be ok with that. The loss may seem big, but if they are not aligned with the culture, they will hold the organization back. While you may be able to size the cost of the loss, you cannot size the benefit of it until they are gone, so it will be scary but will almost certainly work out better than you ever imagined. Every time I've seen a situation like this, there is fear and concern over the loss, and then a couple of months later, the consistent message I hear is, "Best thing that ever happened to have them leave. We had no idea how much they were holding us back."

In the End, Culture Above All

Ultimately, the only thing any company has is its culture. It is not their products, prices, people, brand, etc. It is just the culture. The reason is simple – the culture drives all of these other things.

Look at Apple. The culture defines the company and how it operates, which has allowed them to thrive even after Steve Jobs was no longer there to call all the shots. Or Google, where Sergey and Larry have not run the core company since 2015, yet it continues to grow and print money.

Another example is Microsoft, where Bill Gates was CEO for less time than Steve Balmer, who is totally gone from the company today, and yet it is at its highest valuation ever through the stewardship of Satya Nadella, surpassing Apple's worth in December 2018.

Lastly, you could look at Alan Mullaly, credited with saving Ford and keeping it from the fate of the other two domestic car makers in 2008 who declared bankruptcy. He was a culture-first leader, and never worked in the auto industry before. Some would say it is about the people.

So many leaders tell the staff, "Our greatest asset is our people. It's all of you." That is only true if the culture is right and you hire people who will defend and live it daily.

Otherwise, if culture is broken and you hire to that broken culture, and it is ok but you hire people out of sync with it, everything will ultimately fail. These "greatest assets" will end up making bad decisions, executing poorly, and inevitably failing.

Ultimately, the right people in the right environment will win. Over and over again.

________________

This article is inspired by my book, Do a Day, available in print, ebook and audiobook at www.doadaybook.com or at your favorite book sellers.