This week we are talking about people debt with Matt Bradburn, co-founder at People Collective.
Following the interview last week with Joe Clark on financial awareness, we go back today to talk about people operations, covering aspects of efficiency and growth.
Matt is the perfect candidate to share some insights on this topic. He recently wrote a fascinating article (go check it out!) presenting his perspective on why people debt is the hardest business debt to pay back, and I had some questions that I couldn't resist to ask.
For those that don't know Matt, he has a wealth of HR, People Ops and Talent Acquisition experience, accumulated by working at some of the fastest growing startups in London including Qubit, Lyst, and Peakon. He also co-created DBR, the largest Slack community (also running talks and events) in London for Talent and People professionals. Currently, with his team at People Collective, he's focusing on helping startups overcome growth challenges and costly mistakes related to that.
I'm excited about this, also because Matt went above and beyond in addressing my questions, making for an amazing piece which I hope you'll love. Thanks Matt 🙏
Matt, could you tell us a bit about your background?
I started as a recruiter 11 years ago, working with high growth businesses of the time, like Ocado, Cloudreach and Autonomy (RIP). During this time I grew fascinated with being a part of that story instead of sitting on the sidelines, so I moved into an internal role with a company called Qubit (where I had the pleasure of meeting Karo and hiring Gio). It then took a couple of years to realise that my passion was not just hiring amazing people, but seeing what they could achieve, and to help companies overcome the challenges around scaling teams once they had hired them.
What’s people debt and why business leaders should care about it?
People debt is the accumulation of bad communication, documentation and processes to an extent which hinders the growth or development of a business and its people. This could be a lack of a clear vision for the business, slow and inefficient hiring, poor onboarding, no clear goal setting or management support, or a lack of clarity on what behaviours are tolerated.
By building an organisation like this, by default, not through design, it means you have no foundations.
In practice, this means:
- You have no bar to assess hiring quality so your interviewers can easily make the wrong hires.
- Your people get onboarded too slowly or poorly and become disillusioned quickly.
- You have no clear compensation planning, and inevitably a gender pay gap building up.
- Over time people want to progress, but you have a subjective approach to progression and performance, causing frustration and retention problems.
- Then for those who get a promotion, they must become managers, so then you have bad managers, managing people badly, who then also get frustrated.
- Finally at the heart of this, you have no purpose, no clear goals, no direction and no prioritisation, making it incredibly hard to grow and even harder to make money.
That, I think, pretty much sums up why people should care!
You stated that People Debt is “the hardest business debt to pay back”. Why do you think that’s the case and how it how does it compare with other forms of debt (eg. financial debt or technical debt)?
With People Debt the complexity is caused by both it’s intangible nature, and the emotional reactions it causes. Although we see similar outcomes for companies in terms of the manifestations, each company got into that situation in their own way and each will need their own, nuanced, design to be able to fix things.
This means it’s incredibly hard to nail down a path to clearing that debt, particularly when founders think everything is fine. You can liken the view of execs to Edward Smith, the ill-fated Titanic Captain, seeing only the surface Ice and not the underlying berg-like-issues which are often clear to others in the business.
This intangibility, and lack of insight, combined with the deeply rooted feelings people build up around an organisation and their role within it make it particularly challenging. For anyone who has tried to change the type of coffee served, let alone demoted people after running a leveling exercise, you will know the depth of feeling held by individuals, and often rightly so (although I disagree about the coffee point).
Of course, it’s a touch flippant to say that it’s tougher than financial debt, but with the relatively cheap cost of credit, the plethora of funding options available to growing companies, combined with our understanding of root causes and routes to solving it, one could argue financial debt is easier to pay back.
Technical Debt is where I see a closer analogy, particularly in terms of the comms, the lack of documentation and the effects this can have on business outcomes.
Based on my understanding, by putting in place a People Ops/HR function in the early days, companies can mitigate the risk of accumulating people debt and grow better. For some companies early is 10 employees, for some others 200 employees. When is the right time to start thinking about this, and what options do companies have? And also, what would an ideal team composition look like at different stages of growth?
I tend to agree with you that early is better, but again it comes down to the individual business, the capability of the wider executive team, the planned speed of scaling, the amount of internationalisation and the humility of the founders, amongst other factors.
When it comes to options, again it really depends on the team, but a general rule of thumb to go by is:
In a company with an inexperienced founder and a management team lacking in capability and/or confidence, I would look to bring people into the Talent and People teams earlier, at 10+ mark, particularly if you’re planning to scale quickly (200-300% the team each year for 2+ years from 10 people).
In a company with an experienced leader and a stronger, more capable executive team, you could leave it until a little later, but even post 50+, the administrative burden of hiring, onboarding and retaining employees means you want to be starting to put a team in place.. However, if it took 5 years to get to those 50 people, you’re more likely to have understood, mitigated or solved some of the problems caused by people debt, whereas if you’re rapidly scaling, you’ll need to add more capacity at a faster pace.
For team composition, you need to not only think by stage, but also by the type of problems you’re solving, broadly: Hiring, Development or Legal and Admin. These then break down into role:
- Talent (Attraction, Hiring, Onboarding and more if you’re lucky)
- People (Development, Performance, Retention, Comms and have to be a commercial thinker)
- HR (Legals, Admin, Operations, have to be very detail focused)
Once you have this, you can break it down roughly by stage, having roughly this number of people by the end of each stage:
|Size of Company||Required Team|
|0-50||1x Recruiter or HR (don’t try to hire both in one role)|
|50-100||1x Recruiter, 1x Head of Talent, 1x People Partner or Lead and 1x HR|
|100-150||2x Recruiter, 1x Head of Talent, 1x People Partner, 1x People Lead and 1x HR|
|150-250||3x Recruiter, 1x Recruitment Coordinator, 1x Head of Talent, 2x People Partner, 1x Head of People and 2x HR|
Uber famously left it to 400 employees before they started growing their People team. Although you cannot say for sure it would have been more successful had it done so earlier, I would say that it could have gone a long way to solving many of the structural and behavioural issues which underpinned the narrative of their growth.
My colleague Kristian has written a great blog, going into this in detail.
In big tech hubs like London, New York and San Francisco, we are exposed to the concept of ‘Hyper Growth’ and ‘Blitzscaling’, which is effectively promoting accelerated business growth at all costs. What are the implications of these models on people and culture, and ultimately on the business?
By the nature of the question, it’s being implied that both “hyper growth’ and ‘blitzscaling’ are both negatives, however I don’t see rapid growth as inherently bad, you just need to invest in the teams to solve problems and manage the challenges effectively.
I agree that many of the companies which take those approaches are more vulnerable to the accumulation of People Debt but the outcomes on their people, culture and business are not necessarily different, but instead amplified versions of the ones I spoke about earlier. These outcomes are detailed in the press exposes on Uber / WeWork / Theranos so I won’t go into details.
However, not all companies end up this way, those which invested well into the foundations of their businesses and their philosophies, beliefs and approach have scaled well, kept great people and become household names, or will do soon - your Stripe, Slack or Notion.so.
In order to scale at speed and care for your people, you need to be honest, have clarity on your goals and expectations and then support and remove blockers for the People Operations team. The COO of Stripe gives a wonderful talk on the pitfalls and implications in this SaaStr podcast.
I observed that when companies are focusing on hiring there is nothing else. No time for processes, no time to think strategically, no time to plan for the long run. Do you think that focusing on one thing, getting it done and move on, is right in this specific scenario? If not, how would you recommend to balance a fast paced hiring cycle with everything else?
When a company is solely invested in hiring, that’s the most dangerous phase for the accumulation of people debt, as all resources get dragged in by the gravitational pull of needing more people.
I see this all the time, Kahneman has it right in “Thinking Fast and Slow” and I always wish people today would set more time aside to think, both deeply and carefully.
I often recommend to my clients at the 40+ people mark to have a Head of Talent and then a People Partner. This means you have two tracks, with clearly demarcated projects. If you run out of hiring capacity, then hire another full time or contract recruiter, don’t get the People Partner to do it!
Once you have this team, I like to work in two week sprints, refocusing regularly on the business needs, both in recruiting and in strategic projects. This means you can focus on specific roles, or a specific strategic project (say, performance management, or leveling) without distraction, but still allowing for a little course-correction here and there.
If planning is key to generating positive outcomes, but in the early days the focus is on tactics and execution, how should companies approach people strategy?
I would love to see more companies get their leadership teams to open up during the early stages of the business growth about their philosophies when it comes to scaling and growing a team.
These philosophies and shared values will inform a lot of those strategies. For example, if everyone believes continuous feedback is important, then a part of that strategy should involve structured and regular 1:1s. If the team believes that a network of teams is fundamentally more productive and efficient than a traditional hierarchy, then it’s important to design the org accordingly and work out the communication pathways. No way is fundamentally wrong apart from the way that is left purely to chance.
I see the People leader as the facilitator for this - able to analyse, disseminate, persuade and build a strategy which works for the business.
Having that people leader report directly to the CEO and getting them involved in executive planning is the key to making that happen.
You can plan and act by the book, but as a founder or business leader if you are not able to identify early what’s not working, you’re likely going to struggle later. My question is, how do you capture signals that things are heading in the wrong direction?
“Everyone has a plan until they get punched in the face”
A great Mike Tyson quote that applies to startups. You can make a great plan, but be caught off guard quickly. The following list is not exhaustive, but some of the common red flags we see are:
- A lack of founder humility - When someone tells me that everything in their organisation is working really well and they have no problems with their people because they have solved them all, that’s the number 1 red flag.
- Not soliciting feedback from your team - if you don’t know what the problems are, you can’t fix them.
- A founder or management team stuck in the weeds - shows lack of capability or resources or both.
- Management is the only layer for progression in the business - this is a traditional, but dangerous approach, instead you need to create progression outside of management.
- People you want to keep are leaving - the best people have options, and from experience, they’ll often leave earlier than you think.
- Your onboarding process is a slide deck and a T-shirt - go deeper, much deeper on plans and process to make someone feel engaged.
- You’re firing a lot of people during probation - This one is lower down, but another red flag as your hiring process is likely off.
Are there any resources on the subject that would you recommend our readers to check out?
Too many to mention, so I’ve put together some of my past and present favourites:
- Trillion Dollar Coach (Eric Schmidt, Jonathan Rosenberg) - Many founders think they won’t get value from external sources. However, if even Steve Jobs and Larry Page benefited from coaching, then a plucky but inexperienced founder definitely can! One of the best books for defining the “What” and then clearly describing “How” to do it.
- It Doesn’t Have to Be Crazy at Work (Jason Fried, DHH) - A polemic and thought provoking book on the status quo of work, if a touch ranty, it’s a great read from the founders of Basecamp.
- Serve To Lead (Compilation) - You wouldn’t think the army is a place to look to solve these things, but this collection of stories and experiences is a fascinating insight into building autonomous units within wider orgs, but also the outcomes of People Debt when the stakes are life or death.
- Misbehaving (Richard Thaler) - Richard Thaler is one of my favourite authors, and this work, comparing the fields of economics and behavioral economics has helped form a lot of my own approaches to work.
Blogs and Podcasts:
- One-on-ones are my most valuable meetings; here’s how I run them by Mathilde Collin - how to get value out of 1:1s in a practical manner
- ‘Give Away Your Legos’ and Other Commandments for Scaling Startups by Molly Graham - one of the best pieces on growing as a manager
- How to avoid Trapdoor decisions when scaling - Harry Stebbings / Claire Hughes Johnson - how to grow without breaking everything
- From Start-up to Scale-up, and how the Chief People Officer gets you there by Anthony Payne - a great guide on the importance of your people team. On “Culture” – “You keep using that word, I do not think it means what you think it means” by Matt Buckland - the word culture has become hollow and meaningless in startups.
Where can people connect or find out more about you?
Note: thanks also to Kristian Bright (Partner at People Collective) for contributing to this.
If you have experience revolving around startups, people and culture, ping us on Twitter @HumaansHQ or drop me an email at email@example.com. We'd love to learn from your journey and share your learnings.
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