Getting Rid of Operational Debt – A Light Bulb Moment

light bulbWhen was the last time you researched light bulbs? It’s one of those small things in life that we don’t want to spend a lot of time thinking about. Bulbs go out, we buy new ones, and replace them. It’s what we have always done right? When a friend told me I could cut my home electricity bill in half by replacing all of my old 65 watt light bulbs with LED 8.5 watt bulbs I didn’t believe him. There had to be a catch right?

Turns out there is no catch. Well at least not anymore. LED bulbs used to cost around $10 a bulb making their payback period really long. Now they are less than a dollar on Amazon. They give off the same brightness, illuminate immediately, and use about 13% of the electricity required of a more traditional bulb. So what was stopping me from reducing my electricity bill?

Technical debt is a concept in software development that reflects the implied cost of additional rework caused by choosing an easy solution now instead of using a better approach that would take longer. Outside of the software world, many of us experience what I call “Operational Debt”. Similar to technical debt, operational debt is the ongoing overheard/tax we pay by not taking the time to make processes more efficient. For the light bulbs in my house, it was the upfront cost of researching which bulbs to buy, buying them, and the hour or so of labor to replace them.

In my current job, I own the revenue forecast and actual reporting for a large portion of our services business. I have an incredible team that does an amazing job each month making sure we are as accurate as possible with our forecast and reporting. The nature of the work is very demanding, especially during our month end close and forecasting periods. Even though we are really good at what we do, over time we have built up a lot of “operational debt” in the form of inefficient processes resulting in sub-optimal performance. This is business school speak for “the process works, but if I had time I would improve it.” As you can imagine, the processes that need the most improvement coincide directly to the busiest times of the month.

And while I felt like my team was already performing at a high level, it was time to get rid of our operational debt.

A few days before our latest close and forecast weeks, I proposed that as we went through our normal processes everyone should take notes on needed improvements. We wouldn’t try to clean up anything right away, just note it down. After the forecast week, we had a short meeting to compare notes and divide the work among the team. I then blocked everyone’s calendar for an entire day and suggested they turn on their out of office status. This is critical not only to give a sense of priority, but to provide managerial cover to avoid distractions. During the day we checked in on each other’s progress and provided support and suggestions.

The results were incredible! A small sample of what we accomplished:

  • Forecast model enhancements
  • New automatic reporting capability
  • Linking to systematic data sourcing
  • New metrics
  • Allocation file simplifications and enhancements
  • Transition documentation for our rotational analyst

Even simple formatting changes were huge upgrades as it eases the mental energy needed to understand complex models. All of these refinements improved our team’s agility and speed for when it’s needed most (business school translation: it makes our jobs much easier which let’s us do more.)

One consequence I had not anticipated was the increased energy and excitement around this project. Operational debt tends to weigh on the minds of high performers. Given the chance and the managerial support to do it, people will jump at the chance to improve processes and work streams. Spring cleaning always feels good after it’s over right?

I would highly recommend holding a “remove operational debt” day. With proper planning and prioritizing, it can dramatically improve your team’s performance.

Oh and yes, my electricity bill was cut almost in half 🙂

You can find me on Twitter @rhettweller or drop me a note.