Management Debt
Management Debt

    Teams naturally start to incur management debt as they grow and become more complex, just as codebases incur tech debt. The combined weight of past decisions creates a web of precedents and exceptions that can cause problems of varying size over time.

For a concrete example of management debt, consider a team that’s never had performance reviews. They’ve saved time by skipping reviews, but have taken on significant management debt by not setting expectations or addressing over/under performance. When they kick off performance reviews they’ll have to pay down this debt with overdue promotions or performance management.

Management debt shares many traits with tech debt:


  It grows over time and is easier to remove if caught early.
  A small amount is usually fine or even beneficial, but significant costs can arise when it builds up.
  Debt can become entrenched if allowed to persist for too long.
  Debt almost always comes with a concrete benefit – that’s how it gets started!


There are two major differences between tech debt and management debt, however:


  Tech debt never tends to improve without effort – your codebase isn’t going to magically clean itself up – but some forms of organizational debt can resolve themselves naturally over time. Much debt arises during regular recurring actions such as hiring, comp cycles, or promotions. Often doing nothing in those situations pays down the debt.
  Tech debt tends to be obvious prior to when it causes major issues – you know when you’re writing messy code. Management debt, however, is harder to detect and can cause acute problems out of the blue.


Here are a few of the main types of management debt that we’ve seen, as well as some thoughts on how severe they are and how to unwind them.

Span of Control Issues

Span of control issues occur when an organization’s ratio of managers to individual contributors falls out of balance. Overly narrow spans of control are common; for example, when a manager has a single direct report for a very long time.

Span of control issues arise naturally. Alice is a great individual contributor, and wants to move into management. She and Bob are nominally peers, but Bob is significantly more junior. Alice becomes Bob’s manager: She gets management experience and Bob gets more mentorship. Maybe one day we’ll expand Alice’s team. It’s perfect.

However, having an overly narrow span of control causes two problems:


  It adds inefficiency – every additional layer of management adds administrative complexity and overhead.
  It has the potential to miss-set expectations as ambitious team members seek management experience to further their careers. This can cause issues at any team size and if you sense it on the horizon you need to take preventative steps.


The simplest fix for span of control issues is to grow, allowing teams to “fill out” like a gawky teenager bulking up on creatine. One of the most common causes of span of control issues is when hiring doesn’t come through and teams are sparser than anticipated.

The other key component for solving span of control issues is to sincerely invest in an Individual / Independent Contributor track. Removing management experience as a prerequisite for career advancement allows you to continue to reward team members without forcing them to manage. This, in turn, also allows you to draw harder lines on becoming a manager.

Of course, even if you sincerely invest in an IC track, other companies may not, and smart people know this. There isn’t a perfect solution here.

Narrow spans of control have a relatively minor but very real advantage – they let you identify strong managers early, as there tend to be more total management opportunities available. This is valuable in situations with high management turnover.

How to respond:


  If you have narrow spans of control because you’re filling out your org chart, just stay vigilant in case hiring plans don’t work out, but there’s no need to overreact
  If you have systemic span of control issues, stop them as soon as you can and sincerely invest in an IC track


Excessively Junior Teams

A relatively common situation at early stage startups: Two founders start a company after a few years in big tech. They raise money and hire their old teammates and friends from college. This youthful team struggles to hire more experienced talent – the stereotype is that they filter out older candidates because they aren’t “culture fits,” but in my experience it’s just as common for seasoned candidates to bow out rather than enlist in what they perceive to be a child army.

But you need to grow to get stuff done, and continuing to hire junior people provides resources to scale even if it’s imperfect. Suddenly, you have a team of ten people with 15 years of combined experience between them, and 0 of those years were at a senior or executive level.

The good news about a junior team is that they grow over time; time flows in only one direction and the problem of inexperience is inherently self-correcting. The bad news is that while experienced team members will tend to teach you battle-tested lessons (“streamlined deployments minimize risk”) very junior teams will tend to learn random and potentially counterproductive lessons as minor data points dominate the narrative (“only hiring people with 1500+ SATs minimizes risk”).

This problem can get quite severe. The most likely problem is not poor execution. The most likely problem is investing far too heavily in activities that fundamentally don’t matter, or not enough in activities that do, because they’re outside of your field of view.

The first solution is to stop hiring people who are too junior, immediately. Then, hire at least a few industry veterans onto your team. Have them participate in every interview loop. Your goal should be to get to a place where at least 1/3 of your employees have a few years of Senior+ experience elsewhere. These experienced employees will be able to get a hold of your inexperienced employees – one in each hand. Then, don’t resume hiring junior candidates until your existing junior candidates have gotten to a more senior level.

How to respond:


  If your team is trending too junior, prioritize hiring senior team members to balance out the ratio. Catching this early can completely prevent problems.
  If your team is much too junior, stop hiring junior candidates immediately, and don’t resume until you have at least 1 senior per 2 junior team members. Tap your network / investors to hit your seniority goals.


Title Inflation

Title inflation needs no explanation – you roll up to Acme Labs, the new hot Series B startup, and find Directors of Product with 4 years of experience and Staff Engineers with 3.

How did Acme Labs get here? Well, Akshay had been at the company for 2 years and was the strongest engineer, so he was promoted to Staff Engineer since he was better than Ben who was also a senior engineer. Neither promoting Akshay nor hiring Ben seemed crazy at the time.

Title inflation interferes with your ability to have fair compensation and is self-reinforcing. If you have a Staff Engineer with 3 years of experience, what happens when you hire a “real” Staff Engineer? You’ll probably have to pay them more, which means that you’re either now paying people with the same title very different amounts, or you’ll get away with paying them the same despite very different experience levels. Both are suboptimal. Another solution is to grant an even higher title to the newcomer (Senior Staff Engineer? Engineering Fellow?) which continues the escalatory spiral.

The best way to fix title inflation is to prevent it in the first place. Emulate the career ladder and promotion bars of other companies, only make exceptions for people who are obviously great. That way, others who are observing your promotions are more likely to understand why an exception was made. The more serious medicine is to retitle everybody, which requires significant expectation management and can cause attrition, but at least fixes the problem for good.

Another strategy that dodges the problem of title inflation is to remove all titles. This has problems as well. Ambition and competition are interlinked, and many hard-working people care a lot about titles. You can debate whether they need to mature (probably somewhat), or whether it’s possible to only hire people who are both hard-working and lack this competitive drive, but from what I’ve seen they exist and you can’t deny reality.

Title inflation is generally not that severe in the short run – certainly not as risky as having a team that is too junior. But while the inherent severity isn’t high, title inflation doesn’t get better without intervention – you can’t count on everyone advancing fast enough to grow into their titles smoothly. The combination of not-severe-but-won’t-naturally-improve is dangerous as it makes title inflation easy to ignore and every incremental inflated title makes it worse.

Title inflation actually has one positive point – it avoids the unpleasant situation where team members are constantly leaving because they can get a higher title elsewhere. For this reason title deflation, where you’re stingier with titles relative to other companies, is in my opinion often worse.

How to respond:


  If you have crazy title inflation (e.g. everyone is a Director / Principal), you should bite the bullet and hard reset.
  If you have sporadic inflation (a few titles don’t make sense, but most do), stem the bleeding immediately and wait for the people whose titles are inflated to leave or grow into the role.
  If you have title deflation, inflate titles until you’re at market or the attrition stops.


Compensation Inflation

Compensation inflation is title inflation’s evil cousin. Compensation inflation is more directly damaging than title inflation – it costs real money today. However, it also provides direct benefits such as faster hiring and higher retention.

If you need to cut your burn and are paying people far above market compensation inflation is very hard to unwind. Reducing compensation is generally received extremely poorly. As a result, rampant comp inflation can force teams to make the painful choice of rapidly reducing the headcount of poorer performers in order to preserve the health of the business.

The silver lining on compensation inflation is that a rising compensation market can bail you out. During a period like the last ~5 years in tech, in which compensation for many roles increased significantly, you could simply give more modest raises (or stop raises altogether for middling performers) until compensation falls inline with the percentile of the market that you want to target.

How to respond:


  If you have significant compensation inflation across the board, you’ll likely be forced to bite the bullet to reduce burn somehow. Although brutal, it’s likely better to manage out highly compensated low performers than reduce compensation across the board and lose your stars.
  If your compensation inflation is moderate, hit the brakes on increases and lock into more sustainable salary bands as soon as you can.
  If you only have compensation inflation for a few individuals, just explain to them that they’re above market for their experience and likely to remain in place for a while barring overperformance. Again, strong compensation bands can help.


And of course if you have compensation deflation, you should run a market adjustment to increase compensation. This is simple and easy because nobody minds more money.

Takeaways

Management debt is natural, but needs to be monitored and managed just like financial or technical debt. Keeping an eye on management debt – knowing how to draw on it, pay it down, and ultimately pay it off – is an important piece of sustaining a healthy organizational system.


    

    

    

    




  