From big to no budgets: Spending 500k on parties vs 1k cost per hire with Lynn Schäfer

Thomas Kohler:
Today’s guest, Lynn Schäfer.

Lynn Schäfer:
I’m an absolute enthusiast and passionate about talent management. So really thinking about talent in a strategic way, but not one size fits all, but for each context, define who and what is talent. How can we retain people? How can we develop talent? Because things and times have changed. We have wars. People think much more crucial about where they want to spend their working time, what they want to do. They want to feel valued. So I really think this is an extremely interesting time to be in HR. But yeah, I would always recommend to have a talent perspective, look at it from a talent lifecycle approach. Yeah. And always happy to connect if somebody has further questions.

Thomas Kohler:
Lynn and I met at a McKinsey event and she was previously at McKinsey, then at Bertelsmann, at some startups, and now is doing HR. And people work at a startup early stage grew it from 15 to 50 people with not spending any budget and also taking all the experience and best practices she has from her 20 years experience as a career. And I think it’s really outstanding as a founder or CEO to make a decision to bring somebody that experienced early on instead of hiring an HR working student. And then when another problem comes up, adding two, three more, hiring somebody experienced fractional part time. And we talked about what you can do with that experience in an early stage environment in the episode.

Today’s guest, Lynn Schäfer. And we will talk about what you can do as an HR people person without big budgets, even if you also saw what you can do with big budgets, because you have been in corporates, in consulting, and now in a more early stage company. And I think this will be a very practical episode where we really talk about some insights, what you did with low budget. So that’s really cool to see these different perspectives because maybe first of all, we just talk about yourself.

Lynn, I’m welcome and happy to have you on board and on the show. We got connected through Eva on an event from McKinsey. And how small the bubble is is always cool to see. But maybe we start with a short introduction about this off.

Lynn Schäfer:
Yeah, happy to do so. Thanks, Thomas. So my name is Lynn. I’m the head of people and culture at home in Stromi, which is a Berlin based a startup for smart home and renewable energy. We’re roughly 45 people based in three locations in Germany and you already mentioned that previously. I had the pleasure and honor to really like, I think since 2001 work in the HR field. So I’m really super passionate about HR talent management topics. I worked at Bertelsmann, at McKinsey in several startups just to round that up in terms of working experience.

But also I have this academic passion because I did my PhD on talent management and I founded together with my professor at that point of time at ECB Business School, the first european talent management institute where we did a lot of research on these topics. And finally, I’m also in the advisory board of a smaller consulting company and network, which is called subject Resol, where. Yeah, we help companies finding a meaningful workplace and purpose.

Thomas Kohler:
Yeah, that’s interesting. How do you define a meaningful job or workplace?

Lynn Schäfer:
Yeah, yeah. So the company is called subject resol. And soulful organization is defined as those that embody a deep sense of purpose, that foster human connections, that prioritize the wellbeing and the growth of the employees actually over its stakeholders. So it’s a lot about trust, about connection, authenticity, freedom, responsibility. Maybe you’ve even heard of democratizing organizations, holacracy. So those are, for instance, concepts that sulfur organizations cope with.

Thomas Kohler:
Which environment do you prefer more, the consulting side, the corporate side or the startup.

Lynn Schäfer:
At the moment? I love being in a startup because it’s so vivid, it’s so agile, you have so much impact. And after years of research and academia where we also had a lot of impact because we did a lot of research together with companies, but still now being in the position that I can decide today and implement tomorrow and get direct feedback from all the employees. And we are also currently in the financing round, which is super interesting, I would definitely say the startup world at.

Thomas Kohler:
The moment because it’s so dynamic. Right. So you can. Exactly, yeah, you need to do everything and you then also want to do everything.

Lynn Schäfer:
Yeah, yeah. So it’s, yeah.

Thomas Kohler:
In case you like my show, please subscribe. I would really appreciate it. Maybe walk us a bit through your journey in the startup world, because we discussed that you did a lot of things with really zero or no budget. And I think that’s something where a lot of startups are facing now at the moment, especially in the people field, and maybe we can first get a bit of context of what your setup is, what your environment looks like, and then also maybe what are the challenges you have or had and how you solve them.

Lynn Schäfer:
Yeah, very happy to do so. Maybe I can expand a little bit to describe the context I’m currently working in. So when I joined Homey and Stromi back in beginning of early 2022, the company faced severe turmoil and fluctuation, up to 40%. For instance, in the tech department, they were roughly 15 people. So really small startup. And when I joined, of course, we sat together with the CEO’s and we discussed what is the business strategy and how can HR ultimately support to achieve this business strategy. So we identified topics such as retention, which means they told me, my CEO’s, they told me, Lynn, what about team spirit? We have to increase the employee satisfaction, we have to decrease the turnover. But of course, on the other hand side, it’s not just about well being and fun, but the company has to grow.

So help us prepare for the growth phase and help us in developing an organizational design where we can actually grow. At the same time, implementing and standards professionalized. We didn’t even have an HR software by then, so this was the starting point. And what we then did is we focused very much on developing.

Thomas Kohler:
And one question, an hypophysis. Did the founders hire you? What did they want to get out of you?

Lynn Schäfer:
Yeah, I mean, they didn’t have an HR person before. There were 15 people, and they did it themselves. So. So they said, we definitely want to grow. We want to become bigger, and we cannot do it on our own. Plus, they experienced so much turmoil that they said, these are severe challenges we face, and we need to have somebody professional to support us. And of course, they could have hired an agency, a consultant, a more junior person. But when we talked, they said, okay, the things you’ve done in your previous experiences, they will probably help us much more than hiring a junior recruiter. And that’s why we sat together, yeah.

Thomas Kohler:
That’s actually smart. And I think not. Companies think that far already, because often it’s the case that exactly what you say is happening, even maybe just a work student, and then they expect everything from it.

Lynn Schäfer:
Yeah.

Thomas Kohler:
Which really cannot happen. Right. Also not. They cannot look at previous experience. And I think especially in the early stage, you need to build stuff very cautiously and also relevant. Right. Because you don’t have resources. You need to focus and everything. What you need to do should really add value immediately. So tomorrow, as you said.

Lynn Schäfer:
Yeah.

Thomas Kohler:
And what did you do then?

Lynn Schäfer:
Exactly. So the first priority was to build and invest in a company culture. They didn’t have company values at that point of time. And what we did is we embarked on a cultural journey together with everyone. And by everyone, I really mean the mini jobbers, the interns. We did this online, offline iterations with the management team, because we really thought about what is our identity, what our value, how do we want to work together and build a foundation to work together and to create an attractive employer brand? Because that is, from my perspective, your homework you have to do before then investing in recruiting and growing. Otherwise you don’t have something to convey in your employer brand. If you just, if you just recruit and are perfect and excellent in recruiting, but you have a retention problem, that then in the end you work for nothing.

Thomas Kohler:
What was the process on defining those values then?

Lynn Schäfer:
Yeah, so it was really because it was Corona we met online, and then we had several workgroups where we said, what are the three criteria you want your value in working together with different people? So we had different groups and then they exchanged on what? What do they value in a collaboration? What has to be the standard, the basis for actually working cross departmental, cross functional. And there were things such as togetherness, transparency, working on an eye level trust. And so we, in several iterations then, together with the management team and the CEO’s, developed our, we have four, for instance, values then, like performance, togetherness, transparency and impact. And then in several other workshops, at team events, we then did workshops. How do you actually live that in customer service, in your daily work, in product and in HR, for instance. In HR, we then said, or I then thought about, how can I implement these values in our recruiting process, in our hiring process, in our onboarding, by implementing bodies, by telling them, how do we actually work together? Yeah, things like that.

Thomas Kohler:
And did you also then do something like job sharing, that different people from different jobs looked into the other departments on what does it mean in terms of value representation, that everybody has a cohesive picture? Or was it more separated?

Lynn Schäfer:
No, we try to really collaborate cross departmental also in these workshop groups, but also at the same time, because the feedback from the employees was that learning and development didn’t have a priority prior to when I started. So they really said, in order to get a hold of this retention problem, also, let’s please invest in learning and development. So at the same time, we invested in learning and development by implementing several initiatives, plus this, what we call homey exchange. So that we said, we really want to foster the cross departmental and cross regional collaboration because we have these three office locations. In Germany, the company pays for accommodations for travel up to one week. So people from product work together with customer service and different other combinations. Yeah.

Thomas Kohler:
Cool. And what else did you then do? Because I think what is really outstanding, that you already do this very systematic in the future, in an early stage, looking into the future, that this really makes sense. I can now share an example where I did something similar in my first job, very early stage, junior, everybody, first time founder, first time interop. We did it in a different way, so how not to do it. Two people in a room, isolated, thinking about all the problems we had in this organization and thinking about what do we want to anticipate in the future and write it down. And then we had ten values, way too much, that were just written down, put on the wall saying, hey, these are our values. Nobody was engaged. People even felt offended.

What was written here and there, because they interpreted in a way where we wanted anticipate some behavior, like, let’s foster ownership and blah, blah, blah. Right. And they just did not like it because it did not feel like a startup anymore. And we also not really included the employees. I think back then the company was around 30, 40 people. This went fundamentally wrong. And then ultimately, after some iterations, including a broader group of people and approaching it a bit more, let’s say collaborative, I would say we ended with three values, and then it ultimately also got accepted, was able, we were able to integrate it in the hiring process, also on how we collaborate and also how the company is leading. And then at some point, I would say this worked.

And now, after five, six years, I sometimes see the company. And then last time I clicked on the website, it’s still the same. So it stuck. And I think it’s really the fundamental of what is defined there. So that’s also cool if you do it that way, right?

Lynn Schäfer:
Yeah, this was really the first. Exactly. So this was really in my first weeks where we started this value cultural value process. And of course, we also initiated several other measures. For instance, we also implemented a company referral or talent referral program because I didn’t have any budget. So we said, I cannot pay any headhunters and pay for like 30% retention or retainers. So that’s why we initiated this referral program. And we said, we really want to.

We want to incentivize if employees recommend somebody. And so, I mean, if you look at the academia and several studies, there are lots of companies who already do this, and the average is between 500 and 1500 euros. That company, actually, in terms of monetary benefits, pay their employees. A side note, I know when I worked at McKinsey, we didn’t have any monetary incentives. So when we reached out, referred somebody, and that person actually started, somebody got an email from the general manager of Germany at McKinsey at that point of time, because they said, no, working at McKinsey is so great, we don’t need any monetary incentives. Accenture, at that point of time, already had €2000. But when we initiate, or when we implemented it, we said between €500 for interns, for instance, up to €3000 for head offs or very senior positions. And this is one of our most successful recruiting channel. So we hired 50%. 50% referrals and plus talent pools. And this we initiated at the same time.

Thomas Kohler:
And how do you differentiate referrals from talent pools?

Lynn Schäfer:
Yeah, so talent pools, for instance, I actually, as mentioned earlier, I did my PhD on talent management, and I’m a huge fan of candidate or talent relationship management, which means where you have this underlying assumption that by building talent pools and looking at candidates from a more lifecycle approach, which means, for instance, candidates can go to uni, then they can graduate, they have their first jobs, maybe they will quit the company again because they want to do an MBA or they want to go elsewhere, but they can also come back and become rehires or boomerang employees. And this just totally pays off because the candidates in these pools, you have better quality, better access, better time to hire. And in our case, because at McKinsey, I had a budget of nearly half a million to spend on doing parties with ex interns and candidates where we had the cv. So. And of course, I don’t have software. I have an excel file, which I pulled out. And then for candidates where we, for instance, had in customer service, okay, we have a job application, we have a job posting, and there were much more candidates who were really cool. We then said we already filled our positions, but we’re growing.

So do you want to stay in contact? Do you want to become part of our talent pool? And then as soon as we have a new position, we just get back to you in contact, or with ex interns who said they want to go back to uni, they want to do their masters, let’s stay in contact. And then maybe afterwards, you will join again.

Thomas Kohler:
How do you hire the other 50%?

Lynn Schäfer:
Those were pure referrals in terms of employees who were really committed, engaged, and recommended a person, and then that person was hired, and then they got this referral.

Thomas Kohler:
Yeah, that was the referral side. Right. But then the other 50%, which were non referral, non talent pool. How did you hire these people?

Lynn Schäfer:
Yeah, normal application processes, job postings, university marketing, which was a very big source also, which means we had target universities where we also went to presentations in that reason, very local, and then hired them through these processes.

Thomas Kohler:
What’s your cost per hire then? Do you know it?

Lynn Schäfer:
That was, the cost per hire was, I mean, if I don’t include my salary, that was 0.0, probably because I didn’t have any budget. I think in the second year, I had budget for hey jobs, and then I paid for a hey job ad, but I didn’t pay for any job ads at that point of time. It was my working time, but we didn’t have budget to spend on paid efforts. So I only used LinkedIn, indeed, those things that are for free, our own website, university marketing, and then this very big source of referrals and talent pools. And just to give you another example, from our talent pools, we had lead times of, from time from where I contacted them and time where they actually sent the signed contract from less than five days.

Thomas Kohler:
Wow. So we interviewed already with you.

Lynn Schäfer:
No, no, no. We did the interviews. We did two rounds of interviews, for instance, in customer service. Then they got the contract and then they signed. Yeah, but they were really, because they were in this talent pool, they were already interested. And then we were also very quick in organizing interviews, of course. And what we also had, which was really, really special, is that candidates who interviewed with us, where we already mentioned, we have this referral program in our recruiting process already. We marketed it.

We already got candidates who then said, oh, I think I have another friend, I will just contact them. And then we had, I think, three or four candidates who joined us through this or already in the pre working mode or in the recruiting process. Yeah.

Thomas Kohler:
Okay. But then when we calculate the cost per hire, roughly, then it would be.

Lynn Schäfer:
Yeah, then it’s more. Absolutely.

Thomas Kohler:
It’s like maybe 500 to €2000, but not more, I guess.

Lynn Schäfer:
No, less. Less, less. Because in customer service, for instance, where we had the highest rate of referrals, it was 500 or €1000. Yeah.

Thomas Kohler:
In case you have any feedback or anything you want to share with me, please send me an email on thomas@pplwise.com or hit me up on LinkedIn. And in case you really enjoy the show, please subscribe. I would really appreciate it. What else did you integrate? And maybe also what was the, what is the current state of the organization and where you took it?

Lynn Schäfer:
Then, of course, I mean, you can. We did, as mentioned, we did university marketing. We set up talent pools. We had this referral program, and in the end, these measures, they really paid off. I can give you some examples. So, of course, after setting up our cultural values, investing in learning and development, having an organizational design and team events, we also measured our employ net promoter score and our engagement index. And those were like roughly 50 over 50, which is really good in terms of employee net promoter score.

Thomas Kohler:
Just for the context. Right. Scale from -100 to plus 100. And I think above 35 is really good.

Lynn Schäfer:
Yeah, absolutely. Yeah. So we’re at 41 at the moment. In terms of employee engagement, we are roughly at eight from ten, which is also good. I mean, we are a small startup. When you look at Kununu, which is like an employer rating platform, the international pondant, it’s glassdoor. But for Germany, the Kununu score is 4.5100% referral or recommendation rate. So employees are really happy.

And this because you asked, what is the current state? So we are now, we grew up to, from 15 to 45. We are currently in a financing round. We will most likely grow even bigger. And we have three teams. As mentioned, these scores and the engagement indexes, they demonstrate from the time we implemented them that the employees are quite happy. And of course, there are always times where there are changes, there are more challenges, but we definitely try to invest in a very open environment, support each other. Yeah.

Thomas Kohler:
And you did all of this part time?

Lynn Schäfer:
Yes, exactly. I started with 60% and now it’s 70%. Because I also. I’m also not doing pr. We also. I’m helping a little bit in the financing round because at the moment, we don’t have a head of HR. Head of. Sorry, head of finance.

Yeah. So it’s. I mean, in the startup context, you basically do everything and everyone is doing everything. And if the, if one person is on vacation, of course, I’m also doing. I’m watering the flowers and stuff like this. Yeah.

Thomas Kohler:
I think the earlier stage, the organization, the more generalistic people that are just also absolutely hands on are needed. And the bigger you get, the more specialization need at some point. And I think it also makes sense there to think about this fractional model, because I think that’s really something big for the future, because work will be way more individualized and I think customized. And therefore you need to have the specialized expertise plus flexibility when you need it on demand. And I think that’s a prime example for a smart decision to, instead of just hiring two, three junior people early on, and just adding another one if something comes up, hiring somebody like you, who is really experienced with around 20 years of experience from different environments and then say okay, maybe it doesn’t make sense to hire you full time or we could not even afford it. But instead of staffing junior staff, we staff a fractional senior employee and the values are aligned. The I would say mentality approach to say let’s go hands on is also aligned. So let’s move. I think that’s really cool.

How would you design a business case for decision making for maybe startups in an early stage at around 15 to 20 people that need to make the first HR people recruiting hire to go down the route what you did for me and Siromi, how would you design a business case? On the hindsight to make it more easy to decide for your solution or for your setup?

Lynn Schäfer:
I mean hiring an HR person is crucial. Hiring a non junior person is definitely worthwhile. Having CEO’s that already are convinced that HR and people and culture is important is fundamental. And then once you have this person, of course everything needs to be aligned and derived from the business strategy. So I mean in the end I also have to make sure that it’s about numbers. We are very er, but driven. I need to also look at the KPI’s, but I mean it’s not a lengthy HR strategy process. So you need to be fast, you need to be pragmatic and I know these things.

Of course in my case it helped that I have this knowledge from academia, from McKinsey and stuff, but it costs nothing. You can apply it without any budget. And as mentioned, I didn’t even have budget to spay on hey jobs or on a job ad in the first year, so. Exactly. So I mean in terms of HR case, in our case, what are the major challenges? In our case it was retention and growth. So first, make sure you have a company culture, values, and then second, what channels are most important? How can you, without any budget get your people? And it can be that another company would more invest, for instance in youth recruiting or more blue color workers and then recruit. Totally different. But for a startup being active in the tech scene as an energy provider, our biggest departments were tech and customer service. So that’s why we chose employee referral systems, talent pools and stuff.

Thomas Kohler:
Yeah, makes sense. Any final words?

Lynn Schäfer:
Yeah, I mean I’m an absolute enthusiast and passionate about talent management, so really thinking about talent in a strategic way, but not one size fits all, but for each contact, define a context, define who and what is talent. How can we retain people, how can we develop talent? Because things and times have changed. We have wars. People think much more crucial about where they want to spend their working time, what they want to do. They want to feel valued. So I really think this is an extremely interesting time to be in HR. But yeah, I would always recommend to have a talent perspective, look at it from a talent lifecycle approach. Yeah. And always happy to connect if somebody has further questions.

Thomas Kohler:
Cool.

Lynn Schäfer:
Yeah.

Thomas Kohler:
Thanks, Lynn. It was really great to have you on my show and I also refreshed and learned a lot.

Lynn Schäfer:
Yeah. Great. Thanks. Thomas.