The Curious Guide To Cultural Debt.
What is Cultural Debt? This guide shines a light on what happens when your culture is challenged. From bad behavior to operational structures. And two steps to minimize your Cultural Debt.
I once worked with an idiot — and you probably have to.
You know. The kind that’s toxic, killings moods, and drains everyone’s energy. But they are allowed this behavior for whatever reason, and now it starts to infect the company’s culture.
That’s a classic example of cultural debt. And how it’s primarily defined.
Individuals who infect everyone with their toxicity and slowly alters the culture. That creates a gap between where you are and where you would like to be. And that gap is your cultural Debt.
But I wanted to go a layer deeper.
Is it only people who can create cultural Debt? How do we even quantify it? How do we repay it?
So here is the curious guide to cultural Debt.
What is Cultural Debt?
Cultural Debt is when you borrow against your future as a company. It’s the actions you do today that affect your culture tomorrow.
It comes in two forms:
1) Behavioral Debt — this is how the individuals act in the company. It’s small things we do as a team that, over time, will form how we behave unconsciously. The stuff that creates debt is the behavior that’s not aligned with your defined culture.
2) Structural Debt — this is the structure you put in place to manage your culture. It’s the processes, tools, ways of work, salary, KPIs, organizational structure, and much more. Everything “not-human” but structures to let your people operate within your culture.
To give more context to the two forms, here are a story of each:
Behavioral culture debt: The story of "Them vs. Us"
Behavior is the small thing that forms the way you act. We are social animals, so we’ll pick up on each other’s habits and make them our own.
Doing this as a group of people who works together is what forms our culture. We start to affect each other and align behavior more and more.
You don’t want to have behavior that doesn’t match what you want to do as a company.
It can be things like having a toxic team member, but he’s good at his job, so everyone copes with it. Or someone sexist, but don’t get shut down. Or him that always enters his own meetings 5 minutes late. Or her, who invites to meetings that could have been an email.
All these small behaviors spread like wildfire and accumulate debt.
Here’s a story from my life:
I was a part of a company that got acquired. We went from being a 60-people organization to 270 overnight. After a couple of months, very few people from the acquired company met with any one of the 210 new faces in our organization.
It began to shape a “them vs. us” culture. Used by leadership and employees alike.
Sure, we had said hello to the CEO when he visited us. Some had taken a trip to the new HQ, but we didn’t feel merged together.
It was the same-old-same-old, just with a larger organization somewhere else, calling some of the shots.
That created a gap between the companies (even though it was one now), and when the first project overlapped both “us” and “them,” things got awkward really fast.
Sides looking angry at each other, didn’t want to understand each other or use their resources to fix the problem. So, the project was a poorly compromise instead of a great execution.
Not because “we” were right. Or “they” were. It was simply a matter of “they” didn’t want to feel “we” decided a direction for us all. There was no us. It wasn’t about the work. It was about a cultural debt that kept growing.
If leadership had put a stop to “them/us” from day 1 and had spent some resources on aligning cultures better, my guess is that it would never have happened.
It was a small behavior that accumulated and became a big problem — on both ends.
Structural Culture Debt: Example of changing operational foundation
To support our behavioral culture, we build structures to support it. Office space, workstations, systems, tools, communication channels, leadership structure, salary, KPI’s and much more.
This kind of debt is the most expensive one. Because it sets a foundation, you build upon. When you need to change the foundation, all the bricks you laid on top have to go to.
Here’s a classic example:
You have 20 salespeople on your team. They are doing field-sales, so everyone spends a lot of time in cars and meetings around the country.
One day you need to change from field sales to virtual sales. It could be internal optimization, customer pressure, competition, or any other reason.
This is the day you also realize how much structural cultural debt you have.
You have built structure to support your sales culture, but now it’s changing, and with it all the structure as well.
- How you work: Field-sales -> Virtual Sales
- What tools you use: Showcase map -> Zoom presentation
- What you measure: 2 meetings a day -> 8 meetings a day
- How you compensate: Commission-based -> Fixed Salary
- How you hire: Key Account Managers -> Sales Engineers
- Where you work: At the customers -> In-office or remote
The list goes on.
It also affects people’s behavior:
- They don’t spend time on the road but sits in front of a desk now.
- They don’t get miles money so they can afford their big car.
- They need to have way more meetings per day.
- They lose their stake-dinners with customers.
- They need to figure out how to read people on a screen rather than in real life.
Again just a handful of the effects.
Because you move away from the foundation of field sales, all structures need to be realigned with the new reality.
Market shifts expose your debt balance.
You want your culture to evolve over time. Especially your structural culture. But sometimes, we can’t see what we need to evolve to. We have structures in place that work, and then with one blow, everything changes.
Take the current job market. Covid-19 has pushed the remote agenda, and 54% of employees consider leaving if they are offered no flexibility in when and where they work.
That means companies with office-only policies are set to lose top talent and have difficulty attracting new ones.
The market (the employees) has exposed all the cultural debt they carry.
So now they need to scramble to change their structural and behavioral culture to match a new reality, to keep employees, and hire new talent.
The gap between where the market and your culture are your debt.
The effects of having cultural debt
Taking on debt means you start to move slowly. Think of the in-office vs. hybrid work example from before.
You must change all your office-first policies toward building a new kind of organization.
- This means you’ll have to buy and implement new IT systems to thrive in hybrid work. It takes time and new skills.
- The people you have that want to work in-office only are starting to miss the culture you had because the office is empty some days.
- Leadership changes from seeing people every day and picking up small signals to operate on distance. That requires new skills and even more training.
- Meetings are changed forever. Before, they were the driver of progress, but now it’s hard to know if you can get people in a room on the same day. Or you start planning weeks out before it can happen, which slows down progress even more.
And so on.
All of this slows you down. And in many cases creates a lot of frustration because so much change at once is hard. You now need to relearn the things you mastered before if they aren’t obsolete now.
There’s a good chance that happiness goes down and productivity follows. The outcome is a lack of speed and growth.
Can we avoid cultural debt?
Avoid it, no. Manage it better, yes. 2 steps make it easier to manage both behavioral and structural culture.
1) Defining your culture and live by it
To align behavioral culture, you should have a defined cultural deck that gives direction for operating as a business.
This makes it easier to point out when someone is wavering from the cultural guidelines. This helps you align your behavioral culture. See HubSpot’s culture deck for inspiration.
2) Being progressive as a company, rather than reactive.
Instead of relying on what you have now is excellent, you should be more progressive to find new ways and adapt to market change earlier. It’s easier to steer a ship in motion.
Always be running small experiments with new technology, talk actively with customers and see what moves in the market. Set aside some resources to actively experiment with new things.
This makes you aware of significant shifts you need to make in your structural culture and gives you time to align it rather than a hard reset.
A combination of the two should place you in the sweet spot where you avoid most cultural debt.
Repaying your debt and aligning culture again
We need to think of culture as something that is evolving all the time. Take the Hybrid work example. To stay competitive, companies change, and cultures follow.
Here’s how you can pay off your cultural debt in two ways:
Evolving the culture
The evolvement trajectory means you work from where you are right now with both behavior and structure and slowly turn it in the right direction.
In my mind, the best way is to involve people. Challenge the team by saying: “This is what is happening. We need to figure out how to get here, so we can achieve/avoid this thing. How do we do that?”
Making a plea to people and making them co-responsible for figuring out the solutions creates the ownership you need for the alignment process.
The process is described in our People-Led Growth Methodology.
Resetting the culture
If the debt has become too big, you may need to reset it. This tactic comes with all kinds of warnings because it means firing people and tearing down structures.
If you want to make a quick cultural shift, you need to let go of the people who resist the change and replace them with new folks who have the right mindset for where you are going. And force your way with new structure and live in chaos as it’s happening.
This is only an option when the cultural debt has become so large you can’t overcome it. And there’s no telling you how that looks. It’s a gut feeling when to make the turn-around.
A great example of this comes from Facebook.
In the early days, Facebook had a saying: “Move fast and break things.” It was a mantra to put speed in front of anything else, and breaking something along the way was accepted to gain that speed.
But as Facebook grew and became a money-making machine with billions of users, it was no longer okay to crash Facebook because you were experimenting.
So, they changed their mantra: “Move fast with stable infrastructure.”
Not as sexy, but as the company grew, their culture had to follow. So, they had to cash in their cultural debt and tell 1000 developers to forget the old ways and start doing things slower, more securely, and with more oversight.
The debt was a complete restructuring of the operating practices and letting many talented people go because they didn’t want to work that way.
They lived for the start-up, fast-paced environment “Move fast and break things” created. And with it, Facebook slowed the development of the platform drastically until the culture was restored and back on track.
It was a hard reset of old ways to align with what the company had become.
I wrote about this earlier on the blog as well with more details on their story: How failing is a core value in the culture of Facebook
Can we use cultural Debt as a tool?
Think of a bank loan. You can borrow to pay for something you need right now. But you take on debt you need to repay. Cultural debt works the same.
Let’s play with the idea of a start-up getting $10M in funding. In time, they believe their customers will come to them. But the solution they make is not known yet, so they need to do something that doesn’t align with what they want to become.
To do this, they intentionally take on debt. Using half of the money to create awareness with ads. This requires a lot of people and a lot of structures they don’t need or want in the future. So, while it gets them to their short-term goal, it also affects how the culture is shaped.
But if we are intentional about it, we can counter it as it happens, and when our goals are reached, repay our debt and move on from it.
Tours of duty
Ried Hofmann writes about tours of duty in his book The Alliance. The idea is that very few of us are meant to go on a life-long journey at the company. Some just come in to fix a problem. Others to build to a certain point. And others to switch between problems to continuously align them to the purpose.
You can use that tactically if you know you are going outside your cultural frame, like our start-up ads detour. We could hire an expert in scaling start-ups through ads and make it a 1-year contract. Or hire for long-term culture but give a short-term project and switch the role to another place later.
But all of these are only options if you are aware of how behavior and structure affect your business. And the culture is strongly defined.
If we can take debt, can we also make a savings deposit?
Behavioral culture is primed to do this. The more aligned the team is in acting towards your values, the more capital you deposit in the bank. So, the day you go out of character as a company, you could have enough in the bank for the organization to self-correct accordingly to your culture.
The higher in an organization you sit, the stronger impact your actions also have on culture. A fuck-up from a CEO is way more costly than anyone else. They should be the prime example to follow, and bad behavior here signals to everyone else, this behavior is okay.
Culture is a pain to agree on. But that's okay…
I want to thank Dharmesh Shah of HubSpot for being my inspiration to write my understanding of cultural debt. Here’s his quick view on it:
I wanted to go deeper, and this is my version of cultural debt. I hope it gives you some fresh perspectives because this was immensely hard to write. The reason is that I’m trying to add depth to something we hardly can’t agree on defining; culture.
I described two types of it. Some will agree; others disagree. The rest have 8 other ways to define it.
But that’s okay.
Don’t take my words too seriously. Look at the examples and make up your own mind about cultural debt and figure out how it looks at your business.
After all, not many cultures look alike. So why would the equation?