The operational tax most scaling businesses don’t know they’re paying
Engineers have a language for the cost of decisions made in a hurry. They call it technical debt – the accumulation of shortcuts, workarounds and “right enough for now” code that slows a product down over time. Everyone in a scaling business has heard of it. Most leadership teams understand it as a real liability they have to actively manage.
There’s an almost identical phenomenon on the operational side of the business. It’s bigger, it’s more expensive, and it’s almost never named. I call it organisational debt, and it’s the single biggest thing a consultant COO is brought in to work on. If your business has grown past 40 people, you’re almost certainly carrying more of it than you think.
What organisational debt actually is
Organisational debt is the accumulation, over time, of decisions that prioritised short-term progress over long-term stability. It’s the things that were right for the business at ten people and have never been revisited. It’s the structures, processes, titles, team shapes and cultural norms that made sense at a different stage and quietly stopped working somewhere between 40 and 120 headcount – without anyone noticing because everyone was busy.
Some examples from businesses I’ve worked with:
- The founder has been doing all performance reviews for two years because the “proper” review system never got built.
- Three people inherited “senior” titles from a rapid growth phase and the roles underneath them have never been redefined.
- New joiners are onboarded by whoever happens to be free that week. There’s no shared standard, so everyone gets a different picture of the business.
- A client escalation process was drawn on a whiteboard 18 months ago. Nobody uses it. Everyone just Slacks the COO.
- The weekly leadership meeting was designed when the business was a third of its current size. Nothing about the agenda, cadence or attendees has changed, and it’s now the most frustrating hour of everyone’s week.
Individually, none of these feel like a crisis. Collectively, they’re a tax on every hour of work the business does. Decisions take longer. Handovers drop things. Talented people feel like they’re swimming in treacle. Founders can’t work out why the company feels heavier than it did last year. That heaviness is the debt compounding.
Why it’s inevitable – and why that’s fine
A scaling business that didn’t accumulate organisational debt would be a scaling business that stopped to perfect every process before moving on. That business wouldn’t scale. The whole point of early-stage growth is to move quickly, accept imperfect solutions, and worry about cleaning up later. Every founder I’ve ever worked with has done this. I did it myself running Deeson before we sold to Panoply in 2018. At TPXimpact, scaling from £31.5m to £83m, we accumulated plenty of debt we had to address in flight.
So the goal isn’t to avoid organisational debt. It’s to see it, name it, and actively manage the backlog – the same way an engineering team manages technical debt. The businesses that get this right aren’t the ones with no debt. They’re the ones with an honest view of what they’re carrying and a deliberate plan for which bits to pay down, which bits to leave, and which bits to rewrite on the way through.
“Simon very quickly identified the things we’d been quietly living with for years and put them into a proper priority order. It was like turning a light on in a room we hadn’t realised was dark.”
Stuart Arthur, CEO, Pivotl
Four moves that actually work
1. Make the implicit explicit
The most important discipline is calling out debt as you create it. When a leadership team takes a decision they know is “right for now”, they should say so out loud, in the room, and write it down somewhere. “We’re doing this because it’s what we can do this quarter. We know it won’t scale past fifty customers, and we’ll need to revisit it when we get there.”
That little act of naming does two things. It stops the team pretending the decision was optimal. And it gives future-you a breadcrumb back to the original trade-off so you can rip the thing up when the context has changed. Most organisational debt becomes invisible because nobody said “this is debt” at the time.
2. Build a proper debt backlog
Engineers keep a backlog of technical debt that they review alongside new work. Operations should do the same. Start with a single document that lists everything in the business where a leader would say “we should really fix that one day”. Every process, structure, tool, habit or unwritten rule that everyone knows isn’t quite right.
You don’t need to fix it yet. You just need to have it written down in one place. The act of surfacing it is usually shocking. Most founders I work with have never actually seen their full list in one view, and once they do, priorities rearrange themselves quickly.
3. Review the backlog on a fixed cadence
New initiatives have a planning cycle. Organisational debt should ride on the same cycle – reviewed quarterly, with a small handful of items pulled onto the active list each time. Without this, debt gets crowded out forever by whatever is loudest this week. With it, you make visible progress on the structural health of the business every quarter without disrupting delivery.
A well-run business operating system already has a planning rhythm that can carry this. If you don’t have one, the debt review is a good excuse to build the rhythm in the first place.
4. Distinguish debt you can leave from debt you can’t
This is the subtle, high-leverage move. Not all debt is worth paying down. Some of it becomes irrelevant in the future and you can safely leave it behind. A clunky CRM process matters a lot less if you already know you’re moving to a new CRM in six months – the fix is to apply the lessons to the new deployment, not to painstakingly clean up the old one.
Other debt can’t be left behind. A poor onboarding process over the last six months isn’t solved by designing a new onboarding flow for the next hires. You also need to do something deliberate with the people who went through the bad version – a re-onboarding, a catch-up, a structured conversation about what they didn’t get first time round. Leave it and you’ll pay for it in engagement and churn for years.
Getting this distinction right – what to repay, what to abandon, what to rewrite on the way past – is most of the value a good consultant COO brings to this kind of engagement.
The signs you’re carrying more than you thought
- Simple decisions take longer than they should, and nobody can explain why.
- Every new initiative seems to bump into an old one nobody quite wants to touch.
- You’re getting the same complaints from new joiners that you got from new joiners 18 months ago.
- Leaders are firefighting things that look suspiciously like things they firefought last quarter.
- You’d struggle to explain, in writing, how any given process in the business is actually meant to work.
None of those on its own is a crisis. Two or three together is a strong signal that it’s time to put debt on the agenda as a real piece of work, not a vague aspiration. The businesses I’ve seen handle scale best are the ones that treat this as routine hygiene, not as a crisis response.
Next step. Working the organisational debt backlog is one of the two main shapes of consultant COO engagement I run – the other is a structural restructure of a scaling business. The broader picture is set out in the consultant COO guide, and the book a call with Simon to talk it through.
