PlaybookChapter 3

Organizational Debt

It’s tempting to hold out on process until your first HR hire, but you’ll be setting them up for burnout and failure.

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Startups typically begin looking for their first HR hire once they hit 30 people. For most founders, HR is synonymous with “getting our act together”. So they leave process on the back burner, confident that eventually, their new Head of People will swoop in to save the day.

What HR Leads Actually Do

HR has so many jobs, it’s often tough to nail down what exactly they’re responsible for. But for early-stage companies, there are two types of HR lead you’ll run into most often:

  1. Recruiting experts specialize in attracting candidates through channels like cold email, LinkedIn, and event marketing.
  2. Compliance experts specialize in protecting your company from compliance risks like incomplete employee documentation or the lack of a formal harassment policy.

It’s extremely rare to find an HR lead with deep knowledge of both recruiting and compliance.

Paying Down Organizational Debt

Most startups are familiar with the concept of technical debt: over time, brittle code written to test new features or ship a release on time becomes expensive to maintain and incapable of scaling. Unfortunately, by the time they hire for HR, those same startups also have an invisible backlog of organizational debt: all the compromises they made on people and culture early on to get things done.

“Organizational debt is all the people/culture compromises made to ‘just get it done’ in the early stages of a startup. Just when things should be going great, organizational debt can turn a growing company into a chaotic nightmare.” — Steve Blank, creator of the model behind The Lean Startup

Organizational debt manifests itself in unexpected ways, with people left asking “Why is this seemingly easy thing so difficult here?” These examples might feel familiar:

  • Your team regularly descends into “holy wars” over technical or design decisions.
  • No one is willing to confront a brilliant employee no one likes working with.
  • Days or weeks go by without a single progress update from a remote employee.

Building the Plane in the Air

It’s tempting to assume your new HR lead will fix everything in a month. But if you’ve been racking up organizational debt, they’ll spend 90% of their time putting out fires while doing their best to keep essential things moving:

  • Writing job postings with no job descriptions for the existing roles to reference.
  • Negotiating raises without an up-to-date list of full-time staff and their salaries.
  • Trying to onboard new hires when they had little to no onboarding themselves.

(By the way: they’ll be doing all this while working 12- to 14-hour days.)

While you can’t escape making some trade-offs early on, paying down organizational debt is expensive, and it compounds over time. The sooner you start, the less you’ll end up spending in the long run.

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