The Game with Alex Hormozi - Brutally Honest Business Advice about People Management | Ep 732

Episode Date: August 19, 2024

"Every business needs three big functional leaders. Acquisition... delivery... and operations (keeping everyone out of prison)." In this episode, Alex (@AlexHormozi) shares thoughts on key leaders in your business, how to find them, hire them, and have hard conversations with them.Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned and will learn on his path from $100M to $1B in net worth.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

So in this podcast, I want to talk about people, which is not a topic that I normally do. This is normally Layla's hat, but I was feeling moved by the spirit today. So we're going to talk about how to find them, how to hire them, and how to have hard conversation with them, and the three-legged stool of business that you require, the three main rules every business needs. So it's a lot of stuff. It's jam-packed. Enjoy. There are three legs to the stool.

And so every business needs three big functional leaders. You need one person who's in charge of getting customers, acquisition. You need a second person who's in charge of delivery and getting those customers exactly what was promised. And then third, you need someone to run the internal operations of the business. This is the day-to-day. This is everything we do to support the other two functions. So this is IT, legal, HR.

These are the things that are required to keep you out of prison. And so you have to have contracts. You have to pay people on time. You have to have CRM that collects all this information. And this one functions as a vendor to the other two heads. heads. So think about this. That person should never be making the big decisions in the business. They should be supporting the decisions that allow us to get more customers or deliver on those customers better. Which if you think about it, those three legs of the stool roll up to the only

three things that you can do to increase enterprise value in a business. You can get more customers, you can make them worth more, get more customers acquisition, make them worth more delivery, and you can decrease risk in the business. And so that is where the operations comes in. If I know that everything's completely dialed, we have no massive risk that we're supposed to, and we can get as many customers we don't or please, and our LTV continue to scale, that is a valuable business. And so it makes sense to have people who are in charge, one throat to choke, one chest to poke, who's in charge of that function.

And in the beginning, you may be all three. But as you develop as the entrepreneur, you have to think which of these three hats is more central to my best skill set, and then you can start finding the people who will complement you. And so I'll give you my rule of thumb here, is that if you're not learning, from these people in the interview process about what they can do better than what you're doing, you need to hire better. Now, if you're early days and you don't have the cash

to bring something like that in, then you gotta learn a lot, and that's part of entrepreneurship. But at some point, you want the people that you bring in to be better at the thing than you, which if you really think about it, means that every business pretty much trickles up to the same thing when taken to its natural extreme, which means you're gonna have a head of acquisition,

who might have a sales director, a marketing director, you're gonna have some sort of head of ops, who's going to have IT, legal, HR, recruiting, all rolling up to them. And you're going to have some sort of customer delivery or product person who's going to have fulfillment, product, experience, UX, engineering, if you have software, that are rolling into them.

If that is what the ultimate end of every business is, then guess what your day-to-day looks like in a really big business? The same in just about every business. And so the idea that you need to keep jumping from thing to thing to thing, when the ultimate expression of that business is going to be the same for you at the end, kind of seems stupid.

If I don't like something about the business, it's like, I just need to get out of it. I just need to get above it. And so you can just develop the business, bring someone else in who does like that thing, and then you can have that person reporting to you. And then at that point, you're doing what every entrepreneur does, which is they have a team of people who report to them about the things that they're doing on a daily basis. And so don't get too bent out of shape about, this is my opinion here. This is Alex, this is advice from me. Don't get too bent out of shape about the passion thing. Like, love the game. And whether that's selling dry cleaning or selling software or selling books or running a portfolio, at the end of the day, it's more or less the same. You're going to have a team of people that you like, that share your values, that share

your mission, and that you're walking alongside together with. And so if you can maintain that frame, it will decrease the relative excitement for the woman in the red dress because you know that when it's taken to its natural end, it'll be the same as the natural end of the current business you're in. The person with the highest standard should be in charge. So you can think about this at every level of the business. And so let's say you have a department for media buyers, or you have a department for content creators, or you have a department for salespeople, or you have recruiting.

At every level in the company, the person who has the highest standard, the lowest tolerance, should be the person who's in charge. And that goes all the way up to the top of the business. If there's ever someone in your business who has a lower tolerance or has a higher standard for excellence than you, that person should be in charge and not you. And so I use this as a wonderful litmus test to figure out who do I think should be promoted within a company or division or department or even on a tiny team. Who should be the lead of that team?

The person who has the highest standards? And so when I think, okay, I've got all these customer support reps, who here has the highest standard for what they believe a customer service experience should look like? That's the person you want in charge. And so it's not tenure, it's not it's not how much you like them, it's not what they look like it's who has the highest standard. And so when I was starting up, I made a lot of these mistakes. I would promote people that I liked a lot. I promote people who'd been there longer because I felt it felt bad that this guy had been here for 18 months and this person

had only been there for two months and then I'm going to promote that person over the 18 month person. But guess what? When you have one of those hard situations, guess what you get to do? You get to talk to the 18 month person and you get to explain exactly why the other person got the promotion and what they need to do so that they can get promoted in the future. And if you have a winner, that person will step up. And if you have a winner, and if you you have a loser, that person will step out. And that's okay. Whenever you're hiring, make sure that the person raises the average bar. And so this is, this is one I stole from Basos. This is not mine. But it's such a, I love decision-making frameworks. Because one of the

hardest questions I get asked, and it's on a repeated basis is I don't know who to hire, right? Or I don't know what good for this role looks like. And so I'll give you two filters for that hiring process. Number one, is during the hiring process, am I learning more from them than they're learning from me? Now, if you take three interviews, guess what? You might have just three bad candidates. Just like if you take three sales calls and you might not close any of the three, it doesn't mean that you should change anything.

It might just mean that you got on the phone with three bad customers. And just as likely, three bad candidates. So you want to talk to 10 or 20 candidates. And then what happens is if you talk to 20 candidates, you'll very quickly see who are the people who really know their stuff and who doesn't. And so I look for the quantity and quality of metrics that they discuss about their position in terms of how they influence success. And so it's how do you define success?

And then what are the things that you will do? What are the actions you take that will influence or increase the likelihood that this successful event occurs? And so if someone can't describe to me, this sounds very basic, in what ways do your actions contribute to this outcome? Now, if you want to the 201 version, this is for leadership enough, you say, how does that outcome drive outcomes in the larger business? If they can't connect those dots, guess what?

They probably won't connect them in your business either. Now, once you have an idea of, okay, I've talked to 20 people, I, there's, you know, three of them actually seem like they knew their stuff. They gave me good quantitative, qualitative, qualitative matches. They could tie their behaviors to the outcomes they want, and they could track that outcome to the overall business. Okay. Now I just ask the question, of the people that I'm considering, which of them raises the bar of the team? And it's the team that they're joining. So I'm not expecting a frontline customer service rep to raise the bar of the executive team.

It's a different skill set, different level of employee. But if that frontline customer service rep is going on a team of 10 reps, then that person needs to raise the bar. We were interviewing for one of our portfolio companies, and so we recruit for our portfolio companies because we have a bigger brand than they do. And so we can put really high-level talent in using my brand to grow their business faster. So it's a way of me growing the enterprise value of a business without purposely using my face to grow it. So I don't become keyman risk. I just leverage my face to get the best talent into those companies. and that's why they grow so fast, pro tip.

So we were looking at a media buyer for one of our portfolio companies. And I think they passed a number of candidates and they were like, this is the final guy, we want you to talk to them, so I said fine. So I talked to the candidate, and the guy was great. Nothing wrong with them,

seemed, you know, had decent experience. And when I got off the call, I got the recruiter from my team was like, hey, so what did you think? Should I pass him along or should we hire him? And I was like, I don't think so. He was like, why? He's like, he met all the requirements.

He had the experience. He seemed like a nice guy. And I thought about it more. And I was like, name the other people on that team. So he named all the other people. And I said, is that guy better than any of them? And he was like, no. And I was like, then we're making the company worse.

And so that person has to raise the bar of that team. Because think about the equal opposite. If every person that comes in lowers the bar of the team, you eventually dilute the company to a bunch of people who suck. But if you maintain that bar, which is that this person has to increase the average of the team, then over time a company only improves and gets better. And as that person now is in the team, the whole team's bar now raised a little bit. And so we bring someone else in, the bar goes up. And if you're like, wait, that means that I have to keep hiring better and better people.

You damn straight, you do. That's the whole point. And a mentor of mine said this, and I just love this quote, he said, your best talent has yet to come. Your best talent is in the future. You haven't met them yet. And so in me thinking about this, and I can pass that same advice along to you, is that the best employees, the best teammates, the best partners, or in your future, now your past. When you're dealing with that team, there's five reasons that someone is not doing what you want them to do.

And this is super helpful for these hard conversations. And I usually draw a diamond here, but I'll just do it visually. Here's the condition. Someone hasn't done what you want them to do. Reason number one, they didn't know that you wanted them to do it.

So you didn't communicate it clearly or you didn't do it in a written fashion. Whatever it was, there was a miscommunication. They didn't know that you wanted them to do it. Okay, now let's say they knew that you wanted them to do it. The second reason is they didn't know how to do it. If they didn't know how to do it, then it means that they need to be trained on the steps in order to recreate that thing.

Now, once you train them, if they know that you want to do it and they know how to do it, then they might not know when you wanted to do it, which means you needed to add a deadline or a timeline with the thing that you asked them to do. So it's like, oh, I knew that. I just didn't know you needed it by Tuesday. Okay, great. So we're working our way around. The fourth reason that someone won't do it is because they know that you wanted them to do it,

they knew how to do it, and they knew when you wanted them to it, but they just didn't want to do it. So they weren't motivated. And with motivation, obviously a massive topic, a lot of it comes down to the reward cycles and punishment cycles associated with the work that they do. And so it's how can I incentivize them properly and not necessarily monetarily? You can incentivize someone by praise and by giving them kudos. You want to know something that really incentivizes people, freedom and reinvesting in them.

If you want your team to love you, give them autonomy and invest in them. If you do that, they're like, holy cow, I get so much investment in these people. Basically what you want is you want reciprocity to still be, like if the only reason someone does something is for the paycheck, you're going to miss out on the vast majority of human effort, which is discretionary effort. So let's say it takes this much effort to not get fired. Someone usually has 10 times that amount of effort available to them that they put to their hobbies, they put to their other things, they put to their shower time, they put to music

or whatever else, but they're not putting it to their role and reinvesting in it. But if you invest in them and you try and up-level their skill set, either as a human being or as a professional or both, then they become more valuable in your business. And I think about it this way. It's like, well, what if I invest in them and they leave? Well, it's what if you don't and they stay? So that's the fourth reason. So they know that you want to do it. They know how to do it. They know when they want it done by and they're motivated to do it. Well, why still are they haven't done it? They have something blocking them. And so an easy analogy here is I could have the best chef in the world in the most amazing kitchen and I would

say, hey, make me an omelet. And if he knows how to make an omelette and he knows and he knows I want it right now in front of me. And he's motivated to do it because he's on television, but he's like, I don't have eggs. There's nothing, he's not going to shit an egg out, right? There's nothing he's going to do. And I'll tell you a real world example of this. So my media team, we're spending a lot, so we have a big office and we built a huge, a bunch of studio stuff invested almost a million dollars into this building just on the media side to make it awesome for them. But a lot of the guys are spending their time at home, editing stuff. And I was like, dude, what the hell? I think we've made this a pretty sweet place. Like, why not?

You know what it was? The bandwidth on upload speed was low at the office. And so their houses were higher or faster upload speeds. And so it was making them way less efficient, which kudos to them for being more efficient by being at home. But then I was like, okay, well, this is obviously a constraint. And so then we spent 120 grand to get Google Fiber drilled through the floor, not through the floor, like from the road to get brought into the building. And now we've upload speeds of 1.2 gigs a second. And so now we're way faster than they were at home. And guess that? What? The media team's here. And so that was the thing that was blocking them. And so here's the cool thing about this framework. Is that if you have a hard conversation with somebody or you perceive it to be a hard conversation because they're not doing something that you want them to do, you can say, I think there's five reasons that someone doesn't do it. Let's walk through them together. And that way you can attack the reason rather than the person.