Are You Incurring Management Debt (Without Even Knowing It)?

Are You Incurring Management Debt (Without Even Knowing It)?

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Tech start-ups love pithy mantras. For Google, it was ‘Don’t be evil’. Apple, of course, has ‘Think different’. With Facebook, it was ‘Move fast and break things’. Of the three, ‘Move fast and break things’ seems the riskiest.

The last thing you want to do when building a company, after all, is to break things. But in the early days of Facebook, Mark Zuckerberg and his team believed (correctly) that the importance of moving fast and staying agile outweighed the risk of occasionally breaking a part of the Facebook platform.

For the first few years, the company was small enough to pull this off. It moved at breakneck pace, expanding its offerings, signing up new users and taking risks.

Related: How To Make Better Business Decisions That Drive Productivity And Profits

Move fast, but don’t break things

Sadly, no company can maintain that start-up mindset forever, though. Eventually, the risk of ‘breaking things’ start to outweigh to advantages that come with moving quickly. By 2014, Facebook was no longer a start-up. It was a publicly-traded international tech behemoth with thousands of employees and more than a billion monthly users. When you’re that size, and the stakes are that high, a mantra like ‘Move fast and break things’ becomes problematic.

Shareholders tend to become a tad nervous when they picture a bunch of millennials running around and breaking things as if acting out a scene from Lord of the Flies.

So, Facebook changed its motto to ‘Move fast with stable infrastructure’. Not nearly as edgy or catchy, but also far less risky. Moving fast and breaking things can be great if you’re a young start-up, but it’s important to remember that it comes with something that famous computer programmer Ward Cunningham calls technical debt.

You can save time by writing quick and dirty code, and not worrying about breaking things too much, but there will come a time when you are forced to pay the debt for it. And the quicker you scale, the more this debt can end up being. At a certain stage, the time and energy you save simply no longer outweigh the possible repercussions.

Management debt

 The Hard Thing About Hard Things

In his book, The Hard Thing About Hard Things, Ben Horowitz argues that entrepreneurs are faced with something similar to technical debt, which he calls management debt. Horowitz was the CEO and founder of a tech company called Loudcloud when the tech bubble famously went bust during the early 2000s.

He managed to save his company and his people, and eventually sold the company to Hewlett-Packard for $1,6 billion, but it was a traumatic experience. The psychological toll that the experience took on him was significant, and it inspired him to write The Hard Thing About Hard Things. As its name suggests, the book argues that there are no easy answers to hard problems.

Related: Leaders Who Make Good Decisions Do These 6 Things Constantly

Building a company is difficult, and there is no point in pretending that it’s easy. If you want to be the boss, you need to be willing to do the hard things and make the hard decisions. If you opt to take the easy way out at any point, you incur management debt.

“Like technical debt, management debt is incurred when you make an expedient, short-term management decision with an expensive, long-term consequence. Like technical debt, the trade-off sometimes makes sense, but often does not. More important, if you incur the management debt without accounting for it, then you will eventually go management bankrupt,” writes Horowitz.

Are there two employees in your organisational chart that fit the same spot, but you’re keeping both? Are you overcompensating a key employee because she received another job offer? Are you ignoring performance management because you don’t want your start-up to feel like a ‘big company’? These are difficult situations that need to be resolved, argues Horowitz. The longer you ignore these kinds of issues, the greater the eventual management debt will be.

“Every really good, really experienced CEO I know shares one important characteristic: They tend to opt for the hard answer to organisational issues. If faced with giving everyone the same bonus to make things easy or with sharply rewarding performance and ruffling many feathers, they’ll ruffle the feathers. If given the choice of cutting a popular project today, because it’s not in the long-term plans or you’re keeping it around for morale purposes and to appear consistent, they’ll cut it today. Why? Because they’ve paid the price of management debt, and they would rather not do that again,” says Horowitz.


Can you make the tough choices?

Top CEOs have one thing in common: They make the hard choices, even if they’re not the popular choices.

GG van Rooyen
GG van Rooyen is the deputy editor for Entrepreneur Magazine South Africa. Follow him on Twitter.