Global HR

What Every HR Leader Needs to Know About ‘People Debt’

January 18, 2023
November 7, 2023
Halah Flynn
Lattice Team

This article features ideas from “Highs and Lows on the Journey to Holistic HR,” the first episode of our webinar series, For the Love of People. For more episodes, visit our library of on-demand webinars.Last year’s hypergrowth created a problematic hiccup for most HR teams: rapidly scaling company size at an unsustainable speed to meet growing consumer demand, and then backtracking quickly on headcount due to the looming recession. The result? Mass layoffs across tech, financial services, real estate, and other industries, leaving workplace survivors burned out and confused about their futures. Not exactly a recipe for business success.When companies try to build up their operations too quickly, it’s quite easy to forget about the infrastructure necessary to support the actual people doing the work. Sidelining this crucial infrastructure creates disorganised and disengaged teams, leaving employees without the tools, resources, and guidance necessary to do their best work. This is the concept of “people debt,” according to Matt Bradburn and ZeShaaun Shamsi from The People Collective — an HR consulting agency that supports companies by helping them scale their people strategies.

What is People Debt?

People debt occurs when companies fail to create the infrastructure necessary to support employees to do their best work. As you grow your company, many leaders will naturally be focused on product development and serving customers as their business scales. But with a sole focus on the external outcomes, the people within the business become underserved, resulting in “people debt.” Bradburn said people debt can take many shapes:

  • Lack of clarity around growth plans for professional development
  • Minimal understanding of how to interview job candidates
  • Little-to-no managerial training to support direct reports

“Paying back that debt is so critical, before you reach that certain scale, otherwise it can slow your growth down quite dramatically,” Bradburn said.

Tips for Preventing (or Paying Back) People Debt

“Like tech debt or financial debt, not all debt is bad. But you just need to be mindful about how manageable it is for you, because it comes at a risk and cost,” Shamsi said. Leaving employees to fend for themselves is not the path to future-proofing your business from a recession, nor is it a healthy foundation for a high-performing culture. Below are just a few of People Collective’s strategies for preventing the debt from piling up, as well as figuring out how to pay it back.

1. Holistic HR strategies are about more than buzzwords.

The term “holistic” can feel vague and buzzy, and Bradburn said it’s being misused across the industry. It may be worth considering in a more realistic light. Being holistic is an iterative process, and the key is building the right amount of scale for your business at your current size — don’t try to build out an overly complicated program to unroll all at once.A holistic approach means asking, “What are all the pieces that we need to think about at the foundations for our current stage? Then, as we grow, let’s revisit all those pieces, see what the team needs, what’s going to fit our commercial structure, and then build on that,” he explained.

2. HR teams need visibility into all parts of the business.

Shamsi said that when HR is enabled to grasp the full business strategy, they can build a better HR strategy that helps the company achieve its goals.“By default, people might think of the parent-child dynamic, where executives are the parents, and we’re the children,” Shamsi said. “But everyone’s an adult, so we need to move from parent-child to adult-adult. And you do that by giving people context and clarity.”Without context about each team’s headcount needs, spending priorities, or skill gaps, HR strategies for performance management and career paths may fall flat, and result in failed implementation at the manager level. On the flip side, HR teams can give executives more context about their strategies to help leaders connect the dots between people success and business outcomes.

3. Communication is the key to doing more with less.

When executives and HR communicate consistently and clearly, they can help managers succeed at introducing frameworks and training to their teams more effectively. “It’s not what people get paid — that’s 50% of it. The other 50% comes from having a clear compensation philosophy that’s being communicated well,” Bradburn said. In other words, a pay-for-performance strategy is only useful if employees know it exists, and if managers are trained to have meaningful conversations with their employees about pay.“People teams can be conduits of proactive, informative, internal communications,” Shamsi said. But only if the above conditions are met.

4. Regularly evaluate your strategies to meet the moment.

Shamsi and Bradburn both ascribed to a perpetual state of learning, and said it should be reflected in the work all HR professionals are putting out into the world. “You should be embarrassed by work you did a year ago,” Bradburn said. “Because that actually shows how you’re all learning, how you’re all growing.”“You can look back and say, ‘Now I know more than that, and I can build on it,’” Shamsi said. “If I’m still at the same point after two or three years, then I’m not being inclusive of diverse perspectives and other experiences to supplement that [knowledge].”Reflecting on current strategies to pinpoint mistakes is a key part of making more informed decisions as your business needs evolve. “It’s not about retaining a great company at scale, it’s about building constantly to improve the company culture at the organisation as we scale,” Bradburn. —For more advice, watch the full episode to hear Bradburn and Shamsi’s take on the biggest mistakes HR teams make when securing executive buy-in, advice to their younger selves, and more. Register for the next episode in our webinar series, For the Love of People, or visit our library of on-demand webinars.