Let’s talk about HR debt with Kerstin Rothermel

Thomas Kohler:
Today’s guest, Kerstin Rothermel.

How big was actually the team you had from at that science, let’s say at a 2500 to 5000 people organization, how big does the people team need to be and how did you structure it? Or should you, or when you learned from it and said, okay, if you would do it in an ideal way, how would you have structured it?

Kerstin Rothermel:
That’s a really good question and I’m not really sure I have the perfect answer for that. Lately there has been a lot of, I would say, scientific approach and a lot of ideas on how to structure an HR team. And I think there is, well, you know, the Dave Ulrich set up with the business partners that got quite a bit of, well, it has changed over time, the perception, if that is a useful idea or not. And then there’s different models where you kind of embed HR more into the organizational areas and the functional areas. I’m not yet sure I have found the perfect solution for that. I think in the end it is very much about the understanding of what we as a people team want to deliver. I think it starts with that. So what kind of an organization do we want to be? How can we support the organization to become successful and to achieve its goals? And then the second question to me is, how do we structure to actually do that best? The people team at bolt at that time was, I would say, structured in a more traditional way.

So first of all, to answer your question, the size of the people organization. In the end, I had a team of 200 people, which was kind of in three big buckets. Bucket number one was the workplace team. So everything around offices, real estate, how can we make sure that our employees feel welcome in the offices.

Thomas Kohler:
But also health and safety I guess it was a big thing, right? With warehouses and so on?

Kerstin Rothermel:
Yes, yes, absolutely. That’s correct. So that was one team. And then we had the talent acquisition team, which was a big team, around 60, 70 people because we did a lot of hires. And then the third bucket was the more traditional, classic HR team where we had HR operations, business partnering, and then more kind of the centers of excellence, like compensation, benefits, people analytics, HR tech teams like that.

Thomas Kohler:
Cool. And did you also need to grow it to grow to 2500 people or was the 200 headcount enough?

Kerstin Rothermel:
It always depends, right? I would say it was, for the time being it was sufficient. Because what I do believe really makes sense is that you are looking into the transactional bits that you need to deliver as a people organization, which is, as I mentioned, payroll, HR operations, like contracting administration, and really figure out a way on how to automate as much as possible. Create good systems, create self serving opportunities for managers and for employees, create good databases. And with that idea of simplifying, streamlining, automating, digitizing, you can move resources from those teams into the other teams where you actually then can step up your game and support employees better, support leaders better. So I think in the end, it’s a bit of shift of resources from the administrative heavy workload areas, automate them, free up resources and bring them into more value adding teams.

Thomas Kohler:
Easier said than done, right?

Kerstin Rothermel:
True. Yeah, no, absolutely. And then it’s always a question of how, I would say, how open is the team to change, because that is quite a bit of change. Do you have the skills in the team to actually do that change and to embrace the change? And of course that takes time. So this is not a, now we’re deciding to do that tomorrow. We’re going to be done. It’s a process. Right.

You need to understand where you are. You need to understand where do you want to be, what is the steps, how do you create those journeys to actually get there? And of course, you need to ensure that people understand what you’re doing, why you are doing it, and you need to ensure that they have everything they need in order to make that change.

Thomas Kohler:
Kerstin and I talked about HR debt and what you need to pay back later in an organization when scaling, if you don’t do things right upfront like title inflation compensation and many other topics, and also about different team constellations and also how to scale from 2500 to 5000 people. Kerstin is also offering a fractional service. So I think what is really valuable is that you can actually at an early stage already, book and hire a person that you maybe actually just really need at a later stage already early on to build up all the things that you don’t get into Hrdept. And I think that’s really a smart model because at a fractional price, it’s also affordable and really adds a lot of value.

Today’s guest, Kerstin Rothermel. I’m really looking forward to this episode because we met now already in several calls and also dinners and have another one in Munich lined up and now we have the chance to really do a podcast and starting about HR debt. And maybe before we go into the topic, give us a bit context about yourself, please.

Kerstin Rothermel:
Sure. So, first of all, thank you for having me. As you mentioned, I’m Kerstin. I am what I would probably say a professional career person. Blutzenhe. Well, Thomas, thank you for having me. I’m Kerstin. I am an HR person for a number of years now.

I think if you count everything, it’s like 20 something years. I have started an HR in a consultancy and then over time worked in very different organizations and industries. I was working in big corporations such as Allianz and Metro Group and Starbucks, and then moved more into, I would say, the SME organizations. And I also joined some of the leading european scale ups. I was working for Flix and I was working for Bolt, always heading the global HR teams there. And yeah, that’s me. So plenty of experience and a lot of opportunities to actually learn and grow within the HR industry and field.

Thomas Kohler:
And I think also a great episode for our listeners to really learn about at a later stage. What can you avoid or what can you avoid at an early stage that in a later stage you don’t pay back the debt, what you build. Right. So when we talk about scaling, what are the most significant patterns, you see where you make a short term decision, but then you later down the road pay back the debt of the decision?

Kerstin Rothermel:
Yeah. Maybe it would be good if we do start with quickly explaining the idea of HR debt.

Thomas Kohler:
Yes.

Kerstin Rothermel:
So, to be honest, I think this is a term I maybe came across a couple of years ago. It described something I have seen earlier on, but I never had a term, a name for it. So HR debt is easy to understand. It’s like any kind of debt. So you’re kind of, you’re borrowing something for today from the future, and that means, for sure, over time, later on, you need to pay back. So that’s the idea of debt. And I do believe that especially engineering teams, they have been using the term of engineering debt, which actually means when they are doing their coding, they are sometimes doing shortcuts because they need to ship a product or be really quick in delivering stuff. So they are compromising on the one or the other topic because they need to be fast.

And then they know that maybe later down the road there will be a bump because of that decision. And then it can take a little detour later on if you actually want to work with that product. So that means you’re borrowing from the future for today because you want to get something shipped fast or get something done quickly. And for HR, it’s very similar. So you’re kind of taking decisions or maybe not taking decisions that help you in being fast or getting things done, but it very certainly will come back later on in the future. It might haunt you, it might create problems. And that’s what we call Hrdit. And I guess in regards to scaling, that was your question.

So how does that work? Well, I guess very often in scaling, in growth situations, there is never enough resources. There is always a lack of resources. So either you don’t have enough time, you don’t have enough money, you don’t have enough skills or the right skills, you don’t have enough people. So you need to figure out, is there a compromise you could do in order to get things done. And that’s when it might be that you are creating an HR debt that maybe later will maybe bite you in a certain part.

Thomas Kohler:
What I think is especially true for title inflation because this is, I think, something where a lot of founders in an early stage just do, okay, I don’t pay the salary I paid with the title because a title doesn’t cost money. Because I think what somebody of the sambar said back then, make everybody VP and then you don’t need to pay high salaries. How do you pay back title inflation?

Kerstin Rothermel:
Well, it’s very easy because a couple of years down the road it might be that you need to bring on senior people, and senior people do come with different titles. So let’s say you need to bring on a VP of marketing. Unfortunately, you already have a VP of marketing, but that person maybe only has two to three years of experience and you’re looking for a person with 1015 years of experience, but they’re on the same title. So that becomes really hard. So what are you going to do? So are you going to demote the person you currently have on the VP title or are you going to inflate the title of the new person you want to bring in? So that becomes really difficult. Right? So in the beginning, as you said, it’s cheap because a title doesn’t cost you anything. But later on it becomes really hard if you want to grow your team and bring in senior people into the organization. But it also can have a different effect, which means when you do have people working with really big titles, I can promise you that over time they will start looking into their salaries and they will start googling their salaries.

And it might be that they do see salaries that are more aligned with the level of experience and expertise that aligns with the VP title, and then they have the impression that they are significantly being underpaid. It kind of comes back in two areas, right. When you bring in new people or when you’re looking into compensation for the.

Thomas Kohler:
Existing employees, what is your perception in. Maybe we can talk about several functions. When you look at a Vp that has a real scope for a Vp, let’s say an organization that has maybe several thousand or at least 1000 employees, and then a Vp has a scope of maybe 100 of people or more, or around 100 people. Can be a bit less, can be a bit more, can be significant more, depending also on the. Versus a VP in an, let’s say, early stage company where they could also be a team lead. I saw this often in the market. But maybe also your perspective is interesting there. In terms of compensation, what are some typical salaries VPs get in a real VP drop?

Kerstin Rothermel:
Oh, wow. That’s a very difficult question because it also depends on the function, right. We all do know that even if you are on a same title, that your salary can differ greatly from another VP role in a different function. So, for example, a VP of engineering, I dare to say, will be higher paid than a VP of people. Right. So it’s always a question of demand and supply and skills and how rare they are on the market. But I guess it also depends on the industry. So it’s really hard to say.

But I guess the difference between a VP who, who comes with the, I would say the remit and the experience of a VP and a person who is maybe only a team lead or maybe even a solo team member, that can be a couple of 2030, 50 thousands of difference in yearly salaries. Easily.

Thomas Kohler:
Yeah, easily. Easily. I saw from recent searches in our data that in sales, for instance, a lot of founders make the mistake of making the first sales hire ahead of sales or even a VP sales. And you actually don’t need that. You need that way later down the line. And the salaries really differ there. If you just, for instance, in the series, a higher VP sales or later on, and the VP as a later stage company, let’s say C series D in sales can earn on target easily 300 to €500,000.

Kerstin Rothermel:
Absolutely.

Thomas Kohler:
Early stage, it’s maybe 120 what you get as a base and then maybe… Yeah, maybe even OT or there is no OT structure and then they just pay a high fixed salary because they just somehow need to get the hire done. Right. And need to pay on expectations.

Kerstin Rothermel:
Yeah, absolutely.

Thomas Kohler:
And also for then bigger management scopes. Right. Like even if you are hiring into the C suite of very core functions of the business, there can also be salaries in scale ups of 300, 400 €500,000 base and then stock options with several millions of euros. Even in scale ups versus when you hire into the C suite. Maybe in a serious a company, everybody get maybe paid a direct level salary of a scale up.

Kerstin Rothermel:
Absolutely. And I guess that’s overall a challenge. But I guess that’s also a challenge that probably can’t be solved because let’s say C suite. Right? What is a C spid member? Well, it’s kind of the person that owns a specific function and that can happen in an organization with 200 employees, but also can be an organization with 200,000 employees. Right. It just kind of describes, it’s the most senior person in such a function. But I guess when you look into what we discussed earlier, when we’re discussing around director or VP title and you are in a setup where you are only leading yourself or leading individual contributors, then I would say that a VP title probably is a bit too high and it would help more to call that role ahead of, because then it’s easier to actually later on in a growth or after a growth stage, you can bring in a higher caliber of employee.

Thomas Kohler:
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And what I even saw that sometimes in the UK, a head off is even larger scale in terms of scope than, for instance, a director. Right?

Kerstin Rothermel:
Yes, yes. I think that’s also the difficulty with this head off title, because even a c level person is the head of that function. Right. So sometimes the head of, especially in continental Europe or Western Europe is used as a title, but it’s also a description of a person who is heading a function.

Thomas Kohler:
Yes. And the director can even be like a managing director. As a director, you then have approval to sign off something.

Kerstin Rothermel:
Yes, we know it’s complicated.

Thomas Kohler:
It’s complicated, it’s complicated. So it’s just important to set it in the right perspective, context. And that, I think know what you’re doing and also other people know what is expected and why certain things are set up in a certain way. I think a problem is what you should be aware of if there are people or candidates in the process that just want to go after a certain title, because then this could get really toxic later on.

Kerstin Rothermel:
Absolutely, absolutely. And I think we just touched upon something that might develop into another HR debt. So not just the titles, but also kind of describing what is the expectation for a role. And I have also seen that quite often that in the early stages, there is not a clear concept of what is the expectation in a role. And as long as you don’t have that, it becomes really hard to find the right candidates for this role, but also to really manage expectations on what is the tasks in this role and how do you actually perform compared to the expectation?

Thomas Kohler:
That’s hard.

Kerstin Rothermel:
Where you need to do a bit of groundwork early on to avoid this lack of clarity, for example.

Thomas Kohler:
But that’s hard to do, especially if you’re first time in a role or if you have first time roles or roles that are just assigned with one person, for instance, let’s say customer support or sales. Yeah, you maybe have 10, 20, 50 sellers, but just one person in accounting, for instance. When do you start and how do you prioritize that? And how is the process of writing down roles and also basically describing the entire organization on what is expected of everyone?

Kerstin Rothermel:
I would always start small. Start early, but start small. I think sometimes there’s the tendency either to wait too long before you start working on that or kind of over engineering it, and then it becomes a very long and maybe not always value adding process. So whenever you kind of create a new role, start with five bullet points. What is the intent of this role? What is this person going to do? And this is your job description. And if you’re going to hire from the outside anyhow, you need the job description. Right. Because you need to tell candidates, what is this role about? So I think I would always start super small.

And from there, over time, you can add, and you can add complexity. You can add additional information. When your organization becomes a bit larger, you start. That’s a big word. But you start leveling roles where you say, what’s the scope of responsibility and accountability? What’s the accountability level of a manager, of a director, of a head off, as I just discussed. And then you’re kind of calibrating the roles so that it makes sense. Right. And it’s bit like a puzzle where you have many pieces and you’re just putting them together.

Thomas Kohler:
Yes. And it changes over time.

Kerstin Rothermel:
And that’s otally fine because it will always be that way. Right. Things are changing. And I do believe when you are building, especially in a scale up, in a period of growth or in a period of change, things do change. You just need to be prepared that continuously you’re kind of revisiting what you have done and you’re just checking it off and you’re saying, that made sense six months ago. Does it still make sense? Do we need to adapt it? Do we need to change it? If so, let’s do that now. Oh, let’s do that later. But then you’re kind of always in control of what is happening.

You never know what the future will bring, and I think the last years have taught us that. But you just need to be consistent in how you do things. You need to revisit, you need to adapt, you need to change, and then you should be fine.

Thomas Kohler:
And when did you actually join Bolt? At what stage? What headcount size?

Kerstin Rothermel:
I think that’s a very good question. I think I joined Bolt when there were around 2,500 Employees.

Thomas Kohler:
And then you scaled up to five, 5000 plus something like this at that stage. What are the things you do in the people function? And what was your setup?

Kerstin Rothermel:
Okay, interesting one. I think there was a couple of HR debts that we had to pay back and that we had to manage. So in a stage where I joined Bolt, there is a lot of, I would say there was a lot of internationalization that already happened. So bolt at that time already was a global organization with a number of different business lines. So there was already a lot of complexity in the system. And I guess from an agile standpoint, there is always two, I would say, lines of work where I look at it’s first of all the people organization per se to kind of understand what kind of work do we do and how do we do that. So this is a bit like the definition of the HR operating model. What kind of value do we want to add to the organization and how do we do that.

And in the early stages of organizations, I think HR very often starts from a more transactional administrative approach. And then over time there is more complexity coming into the system, but there’s also more appetite coming from the stakeholders that HR is doing more than just kind of contracting or payrolling or doing this transactional bits and pieces. So you need to, at a certain point, I think you need to reinvent the HR or the people organization. And this is what I always call the HR transformation, the transformation of the HR organization. How do we do things? Can we standardize, simplify, digitize processes? Do we need additional teams? So, for example, in bold, we started to build up a people analytics team because we wanted to have more visibility on what is really happening organizations. So we created a lot of data and really kind of looked into the data. So that data helps us to take better decisions, not just a reporting tool, looking back, but especially looking into the future and figuring out what do we see, how can we address it, what can we do about it. So that’s kind of the transformational bit for the HR organization. And then it’s also how do you actually support the organization per se to reach business goals? And there is a lot.

Thomas Kohler:
How big was actually the team you had from at that science, let’s say at a 2500 to 5000 people organization, how big does the people team need to be and how did you structure it? Or should you, or when you learn from it and said, okay, if you would do it in an ideal way, how would you have structured it?

Kerstin Rothermel:
That’s a really good question, and I’m not really sure I have the perfect answer for that. Lately there has been a lot of, I would say, scientific approach and a lot of ideas on how to structure an HR team. And I think there is, well, you know, the Dayfellrik setup with the business partners that got quite a bit of, well, it has changed over time, the perception, if that is a useful idea or not. And then there’s different models where you embed HR more into the organizational areas and the functional areas. I’m not yet sure I have found the perfect solution for that. I think in the end it is very much about the understanding of what we as a people team want to deliver. I think it starts with that. So what kind of an organization do we want to be? How can we support the organization to become successful and to achieve its goals? And then the second question to me is how do we structure to actually do that best? So the people team at bolt at that time was, I would say, structured in a more traditional way.

So first of all, to answer your question, the size of the people organization. In the end, I had a team of 200 people, which was kind of in three big buckets. Bucket number one was the workplace team. So everything around offices, real estate, how can we make sure that our employees feel welcome in the offices.

Thomas Kohler:
But also health and safety I guess it was a big thing with warehouses and so on.

Kerstin Rothermel:
Yes, yes, absolutely, that’s correct. So that was one team. And then we had the talent acquisition team, which was a big team, around 60, 70 people, because we did a lot of hires. And then the third bucket was the more traditional, classic HR team where we had HR operations, business partnering, and then more kind of the centers of excellence, like compensation, benefits, people analytics, HR tech teams like that.

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.

Cool. And did you also need to grow it to grow to 2500 people or was the 200 head count enough?

Kerstin Rothermel:
It always depends, right? I would say for the time being it was sufficient because what I do believe really makes sense is that you are looking into the transactional bits that you need to deliver as a people organization, which is, as I mentioned, payroll, HR operations, like contracting administration, and really figure out a way on how to automate as much as possible. Create good systems, create self serving opportunities for managers and for employees, create good databases. And with that idea of simplifying, streamlining, automating, digitizing, you can move resources from those teams into the other teams where you actually then can step up your game and support employees better, support leaders better. So I think in the end it’s a bit of shift of resources from the administrative heavy workload areas. Automate them, free up resources and bring them into more value adding teams.

Thomas Kohler:
Easier said than done, right?

Kerstin Rothermel:
True. Yeah, no, absolutely. And then it’s always a question of how, I would say how open is the team to change, because that is quite a bit of change. Do you have the skills in the team to actually do that change and to embrace the change? And of course that takes time. So this is not a now we’re deciding to do that tomorrow. We’re going to be done. It’s a process. Right.

You need to understand where you are, you need to understand where do you want to be, what is the steps, how do you create those journeys to actually get there? And of course, you need to ensure that people understand what you are doing, why you are doing it, and you need to ensure that they have everything they need in order to make that change.

Thomas Kohler:
What is your thought on how to call HR people function? Some say no, HR is something from the past. You cannot call it like that. Some call it people and culture, some call it people in organization. What is your view on that?

Kerstin Rothermel:
I think it’s a wording topic, but sometimes words are important. So I do like the change from HR to people. I’m not really 100% sure about the people and culture bit, because that, to me, kind of says that culture is the responsibility of the people organization, which I do not believe that this is true. I do believe that culture is something that everyone in the organization is responsible for. Starting with the CEO and then trickling down to every single individual in the organization. I think the people team for sure, drives that, supports it, and is also accountable to a certain extent. But I like it better if culture is not within the name of the people team. So people or people and organization.

I kind of like the organizational bit because I think organizational development and how we operate as an organization, that’s a big topic that very often is still overlooked. And if you put it into the people, the people team, it gets the attention that it needs. I think in many organizations it’s just getting started, but there is a lot of work that needs to be done.

Thomas Kohler:
I would like to continue the conversation with several questions, drilling down into how to structure people teams in different sizes, maybe, and also in different scales of a business and maybe businesses in terms of what they’re doing. And then I would close the podcast with one open question, which we maybe can answer in the next episode. That would be really interesting for me. You worked with at Bold, and you worked at flicks, and I think Flix has a co founding team, and I think Bold was a single founder. And for me, it would be really interesting to then maybe open the next episode to say, what’s the difference in an executive team when you work with a single founder versus a founding team?

Kerstin Rothermel:
Oh, wow. Okay. Yeah, yeah. Let’s listen to that.

Thomas Kohler:
Yes. And until then, I really look forward to the next episode and see you at the dinner on Monday.

Kerstin Rothermel:
Fantastic. Looking forward to that. Ciao, Thomas.

Thomas Kohler:
Bye.