Just as the ghost of Jacob Marley was bound to drag the weight of his sins for all eternity, so too are organizations burdened by the weight of their debts — and we’re not just talking about the monetary kind. Companies take on other forms of debt, too, and these can be just as heavy as the greatest financial liabilities. Two of the most nefarious forms are technical and cultural debt, which accrue as a by-product of the decisions and investments companies make along their growth journeys.
In this week’s episode of Three Big Points, Stanford’s Bob Sutton takes us inside ride-sharing giant Uber, which offers an ideal case study. With its hard-charging “break things” culture and a desire to scale the business as quickly as possible, Uber’s leadership team made (and perhaps failed to make) any number of technical and organizational decisions that would ultimately threaten its continued growth and path to sustainability as a business. These choices led to the departure of cofounder and CEO Travis Kalanick and created a tangled mess of a technology platform and an equally disjointed organizational culture — both of which required robust and doubtlessly painful processes of disassembling and rebuilding, lest the company’s progress get stopped in its tracks.
While Uber represents an extreme example of how the choices leaders make to fuel their company’s growth can come back to haunt them, the lessons hold for all companies.
In this week’s episode, Bob Sutton drives home these three big points:
- Some organizational and technical debt not only is a good thing, it’s often required.
- You need to be aware that you’re accruing these debts and watch for the signs that it’s getting to the point where you need to address them.
- As a leader, you may need to create a situation, a burning platform, in order to mobilize people toward paying down the debts.
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Bob Sutton: They had what he called the “spaghetti ball.” They took all of the different services for ordering a car, for tracking a car, and it was bundled into this big ball. And when part of it crashed, the whole thing would go down, and it was very hard to move quickly.
Bob Sutton: They made a whole bunch of technical and, honestly, legal and cultural decisions that really enabled them to move quickly.
Bob Sutton: [It’s] sort of just like when you owe personal debt. You’ve got to keep an eye on how much trouble you’re in and look for signs, in the case of organizations, that say it’s harder and harder to get things done, your best people are frustrated and leaving, your system’s going down all the time.
Paul Michelman: I’m Paul Michelman, and this is MIT Sloan Management Review’s Three Big Points. Each week, we take on one topic that leaders need to be on top of right now and leave you with three takeaways for you and your organization.
Paul Michelman: Just as Jacob Marley was bound to drag the weight of his sins for an eternity, so too are organizations burdened by the weight of their debts — and we’re not just talking about the financial kind. There are other forms of debt that companies take on, and they can carry a weight as heavy as the greatest financial liabilities. Two of the most nefarious forms are technical and cultural debt, which accrue as a by-product of the decisions and investments companies make along their growth journeys. Stanford’s Bob Sutton explains.
Bob Sutton: Actually, both stem from the same problem, which is a kind of impatience and a tendency to take shortcuts so you can get things done now that eventually come back to bite you. With technical debt, it tends to be things like using systems that are only going to be good for a while or, say, buying a server that will only get you to a hundred clients when you know you have 500 coming onboard. Organizational or cultural debt is similar in that you’re taking shortcuts, but it’s having an effect on your culture, on your organizational structure, in such a way that it damages trust, morale, communication. So one of the classic things that people do [is] they will hire people so fast and won’t take time to train them — [they] throw bodies at a problem.
Paul Michelman: Sutton studied the way companies, both large and small, accrue technical and cultural debt. This phenomenon is clearly at work in legacy organizations that have deeply embedded systems.
Bob Sutton: The number of organizations that we all have patronized that have old creaky systems… I would point to the Internal Revenue Service, as I understand it, that needs to upgrade so that people can move fast and be more efficient and everybody suffers as a result. Or in the commercial real estate space, the way that most of the building deals are done to buy large commercial real estate, it’s kind of state-of-the-art 1970 with faxes.
Paul Michelman: But it’s an even bigger issue at newer, seemingly more nimble organizations that take risks in order to scale. The poster child? Uber. Sure, we know the ride-hailing service burned through nearly $2 billion in cash last year, but that hardly accounts for the totality of the company’s debts.
Bob Sutton: They made a whole bunch of technical and, honestly, legal and cultural decisions that really enabled them to move quickly. And they spent 2017, 2018 especially, paying down the debt that they created by doing things that enabled them to move fast.
Paul Michelman: First, we’ll look closer at the company’s technical debts, which are probably more intuitive to most of our listeners. In a new case study about Uber that Sutton wrote with his Stanford colleague Huggy Rao, the authors spent time with Thuan Pham, who took over as Uber’s CTO in 2013. Here, Sutton describes the technology mess that Pham encountered and how he initially addressed it.
Bob Sutton: They had what he called the “spaghetti ball.” Essentially, they took all of the different services for ordering a car, for tracking a car, the software that the drivers used, and so on, and it was bundled into this big ball. And when part of it crashed, the whole thing would go down. And it was very hard to move quickly. So they made a radical transition because of that technical debt, if you will. And they moved to what they called micro services, where by the time we got to 2017, [there were] 3,000 different sort of decentralized hunks of software that were designed and developed by various teams. And then you had a different sort of technical debt that was leading to all sorts of coordination problems and all sorts of crashing and the system going down.
Paul Michelman: These technical decisions — made to help Uber’s business scale quickly —had some unintended consequences.
Bob Sutton: It was taking 50% longer to get things done than it really should. And the analogy he used, which I really like, was: We had 3,000 speedboats going in 3,000 different directions. And he uses the difference between speed and velocity, which was: The speed of the average speedboat was really fast, but the velocity of the company was really low because those speedboats were all going in different directions. It is one of those choices that they made so they can move fast, that eventually came to bite them technically.
Paul Michelman: Meanwhile, Uber was quickly accruing another kind of debt — the cultural variety.
Bob Sutton: Travis, the founding CEO, he talked about this notion of “always be hustling” — this idea that we can do whatever we want in our team and, you know, sort of screw everybody, we’re just going to push forward and make things happen. Well, as you need more coordination across the teams, that becomes a debt. And on top of that, another form of organizational debt that happened at Uber that they really worked on — they had remarkably little tenure. They kept hiring all these people who simply lacked the experience to be able to run teams and to think about the greater good.
Paul Michelman: Now the big question today: Has Uber really been able to shed those debts and chart a more sustainable course for the organization?
Bob Sutton: Well, first of all, they’ve got a new CEO, Dara, who has changed the culture quite a bit. And you know, some of the jokes we hear in Silicon Valley is: Now, it’s move slow and build things. And they’re also doing things to deal with the technical debts. So you think of all those zooming speedboats? They’re putting in technical protocols… that increase the ability of people to communicate with one another.
They also, and this is a classic cure or, I guess, treatment is better, for decentralized organizations — they built something, they call it Arc. But they built, essentially, interdisciplinary teams of people from all different parts of engineering. And their job is essentially to go through and look for ways to create general understanding of the code base to make it easier for people to communicate across teams and for people also to understand the greater good that they’re aiming toward.
Paul Michelman: But the process of recruiting and hiring also needed to be turned on its head. First came a bit of a hiring freeze on young engineers right out of school that lacked the right experience.
Bob Sutton: They really got into training. And they also changed their performance evaluation system, which was a stack-ranking system that encouraged individualism and even dog-eat-dog sort of behavior to one that deemphasizes individualism and backstabbing and rewards people for cooperation. By the way, a lot of these changes are similar to changes that have been made at Microsoft. Quite similar, because Microsoft has moved from more of a backstabbing, individualistic culture to a more collaborative culture under his leadership. So there is a precedent at a big, old, stable company that seems to be working there, too.
Paul Michelman: That’s Bob Sutton, professor of management science and engineering at Stanford University, where he also codirects the Designing Organizational Change initiative. You can link to the full Uber case study via Bob’s website: www.bobsutton.net.
OK, let’s get to the takeaways. The three big points you need to remember about technical and cultural debt are
Number 1: Some organizational and technical debt is not only a good thing, it’s often required.
Bob Sutton: With proper precaution, it’s sort of like taking a loan out on your house. Many of us would not be able to buy a house if we had not gone into debt and gotten a mortgage.
Paul Michelman: Number 2: You need to be aware that you’re accruing these debts and watch for the signs that it’s getting to the point where you need to address them.
Bob Sutton: [It’s] just like when you owe personal debt. You’ve got to keep an eye on how much trouble you’re in and look for signs, in the case of organizations, that say it’s harder and harder to get things done, that your best people are frustrated and leaving, your system’s going down all the time. Those are signs that you’re in debt, and you’ve got to do something about it. Fix it.
Paul Michelman: Number 3: There are times when a leader needs to create a situation, a burning platform, in order to mobilize people toward paying down the company’s debts.
Bob Sutton: If you’re heading toward a technical and organizational debt crisis, sometimes to mobilize action to turn people’s attention to the problem [is by] essentially declaring an emergency, having a burning platform. And that’s what we saw in the Uber case in 2017 [when] all the problems started arising.
Paul Michelman: And that’s this week’s Three Big Points. You can find us on Apple Podcasts, Google Play, Stitcher, Spotify, and wherever fine podcasts are streamed. We will be forever in your debt if you’d take a moment to rate our program or post a review on Apple Podcasts.
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