Operational Debt: The Business Problems That Add Up
You know how sleep debt is a thing?
When you don’t get the amount of sleep that you need, you start accumulating sleep debt. You might be able to function for a little while, but eventually it starts impacting you and your ability to function. You have to address it before you continue accumulating more.
I currently have about eight hours of sleep debt from my trip in Italy, and I was thinking about how it’s impacting me right now and how I’m trying to address it before I accumulate more.
It got me thinking about business and how businesses can accumulate operational debt in a similar way.
What operational debt looks like
There are all of these little day-to-day inefficiencies and issues that happen in a business that, on their own, might not seem like a huge deal.
You can have a workflow that’s outdated. You can have a process that isn’t clear, or documentation that isn’t in a centralized location, so the team doesn’t know where to find certain documentation.
You can have a team member who isn’t clear on their role, what they’re responsible for, or what they’re supposed to be taking ownership of.
You can have an automation that isn’t working, an alert that isn’t being addressed, or something that wasn’t set up properly that you don’t find out about until later.
These things can seem small on their own, but they accumulate.
That’s operational debt.
How those little issues start impacting the business
Over time, those little issues start becoming bigger issues, which then impacts the business. It impacts the way work flows through the business, the performance of your team, the efficiency of the work, how people are utilizing the processes and tools that are in place, and your ability to deliver to your clients.
That’s why it’s important to make sure these things are being addressed and not allowed to continue accumulating.
Looking at the business as a whole
When I’m looking at a business operationally, I’m looking at the Founder, People, Processes, and Tech and how all of those pieces are working together day to day.
I’m looking at the little things that are happening inside of the business and how those things are impacting everything else.
A workflow issue can impact a process. A process issue can impact a team member. A team member not being clear on their role can impact how work gets done. A technology issue can impact a process or create an issue that nobody realizes is happening until later.
That’s why I think it’s important to look at operations as a whole.
You can’t always look at one issue in isolation and understand the full impact it’s having on the business.
Sometimes the thing you’re dealing with today is connected to something that wasn’t addressed months or even years ago.
So, how do you pinpoint the root cause
When something isn’t working in your business, start by defining the problem. What is happening, and what specifically isn’t working?
Then identify the cause. Why is this happening?
From there, keep asking why. Why is that happening? And why is that happening?
Keep going until you get past the symptom and can pinpoint the root cause.
Once you understand the root cause, identify where the problem lives.
Is it a Founder, People, Process, or Tech issue?
Founder: role, capacity, responsibilities, decision-making, approvals, and personal operational bottlenecks.
People: team structure, individual roles, ownership, accountability, and internal communication.
Process: workflows, project handoffs, SOP documentation, service delivery, and the movement of work through the company.
Tech: digital tools, automation pipelines, operational visibility, and whether the existing technology stack supports the business goals.
Once you know the root cause and where the problem lives, you can figure out what needs to change.
The goal is to address the thing that is creating the problem rather than creating another workaround for it.
Pay attention to debt before it compounds
You can notice the impact of one bad night of sleep. The same can be true for one operational issue in your business. The problem is when those issues continue to accumulate and start affecting other parts of the business.
Eventually, you can find yourself dealing with problems that are much bigger than the original issue.
That’s operational debt.
You don’t have to wait until everything is falling apart to address it. Paying attention to the little things, identifying the root cause, and making the necessary changes can keep those issues from continuing to pile up.
Just like sleep debt, operational debt accumulates, and eventually, you feel the impact.
Tired of constantly saying “WTF”?
When I audit a business, I'm usually looking at how these four areas interact with each other. If something in the business isn’t working, I’ve found that it is usually the result of misalignment between the founder, people, process, and technology.
What’s important is understanding how the business functions currently, identifying what’s creating an issue, and then forming a plan to fix it in order to get you to your future state.