Everything you need to know about Cultural debt

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Corporate culture has a profound impact on any business. It starts with recruitment to retention and ends with how external stakeholders perceive your brand; corporate culture influences every facet of the company. Better corporate culture enables organizations to retain employees, increase productivity, improve ROI and brand equity. As there is so much at stake, corporate culture must be adaptable and open to improvement.

We are all familiar with the term debt and the pain to recover from it; we have debt on our car, debt on education, and debt on our credit card. But, the best thing about financial debt is, we know the amount and time it will take to recover from that debt.

Then, what is Cultural debt?

‘‘Cultural debt is compromising company culture to speed up growth and transformation, which results in significant repayment in the future.’’

Unlike financial debt, cultural debt is invisible, and the cost to repay is unknown. Furthermore, if the cultural debt is not repaid, similar to financial debt, it can accumulate interest, making it harder to implement changes later.

What causes the cultural debt?

The cultural debt incurs when there is no solid framework that supports a positive culture within an organization. It occurs when organizations take the shortcut to suffice the current need, impacting your company culture in such a way that it damages trust, morale, and communication.

It mainly occurs due to poor management and underinvestment in HR functions, such as employee reward, employee engagement and training. In addition, due to no corporate value and regulations.

Although this happens without evil intent, the cultural debt will have a prolonged and noticeable effect that can kill your business.

To illustrate, Uber, we all know, is the most successful start-up today. Unfortunately, however, the company was once the victim of cultural debt.

Before 2017, the company offered different services such as ordering a car, tracking a vehicle and software for drivers, etc. and, all services were bundled into one software. Unfortunately, when part of the software crashed, the whole system went down. To recover from it quickly and to stabilize their business, the company started using different software. The company bought 30,000 decentralized software, which eventually came to bite them in the form of technical debt.

To cover up technical debt, they hired people with no experience without focusing much on training for a good amount of work. And the company accumulated cultural debt, which caused them troubles such as decentralized communication, poor leadership and no organization.

Consequences of cultural debt?

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Cultural debt is the most infamous form of debt, although unintended, is far away from easy to identify and rectify. When an organization’s culture starts corroding, it hurts morale and alienates partners, customers and employees. Besides that, the debt of talented people who leave and stop caring about the company is frightful. The longer you neglect what causes it to build, the further unshakeable it becomes.

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