It is an accepted fact that all organisations inevitably acrue debt. These debts come in many forms; technology debt (eg insufficient test coverage) is well known, whereas bureacratic debt (eg more steps then required to achieve a task) is less well known but felt more starkly day to day.
From time to time, organisations take steps to reduce org debt by running broad programmes or establishing organisational mandates to achieve specific outcomes (often to much fanfare). Despite having top level leadership support, it is not uncommon for these initiatives to fail to achieve their intended goals, or to make any meaningful difference.
The reason for failure is paradoxical; the organisation is simply trying too hard to achieve outcomes in too short a time period. It is nigh impossible to eliminate cruft built up over years in a quarter or two, and yet organisational memories and reward systems being short sighted don’t allow for organisations to take a long term, multi year perspective in eliminating debt.
When working to reduce organisational debt, a key rule is not to set ambitious targets, but rather to set sustainable, achievable and long term targets. I like to describe this as the 5% per quarter rule. The 5% per quarter rule is simple: it states that every quarter, the debt metric is to be reduced by 5%.
Why 5%?
Firstly, it is a very low target. As a consequence, it will be considered to be achievable and the organisation will have little reason to say no to it.
Secondly, it does not require exceptional tradeoff considerations against other organisational priorities.
Thirdly, it is sustainable quarter after quarter; burnout or fatigue or disillusionment does not set in.
Finally, it is a target that is often exceeded. As progress on meeting the target builds throughout the quarter, sheer organisation momentum causes the target to be exceeded. Call it Newton’s first law of inertia applied to organisations: an organisation in motion likes to stay in motion.
5% may not sound like much, but the benefits acrue consistently, quarter after quarter.
Most organisations are slow moving and resistant to change. Hence, a 20% improvement in the first year and a 40% improvement by the end of the second year are substantial enough for most people to take notice.
Contrary to startups, in large organisations, different physics apply: one achieves more in the long term by doing less in the short term. The 5% per quarter rule is a perfect case in point.