The Game with Alex Hormozi - Managing Talent To Drive Higher Performance | Ep 355

Episode Date: December 21, 2021

All for one and one for all! Today, Alex (@AlexHormozi) talks about interesting ways to manage higher talent get good performance, and give your team purpose to feel like they’re also contributing to the overall growth of the business!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 on his path from $100M to $1B in net worth.Timestamps:(1:06) - Drive performance: better people, efficient work, psychological levels, compensation(3:50) - Manage talent: skills, higher positions, compensation in each role(5:36) - Set monthly goals: autonomy, personal/business alignment, social pressure for higher goalsFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

really, really interesting way of managing talent to get and drive higher performance and output. Welcome to the game where we talk about how to get more customers, how to make more per customer, and how to keep them longer, and the many failures and lessons we have learned along the way. I hope you enjoy and subscribe. A good friend of mine in my building had a really, really interesting way of managing talent to get and drive higher performance and output. And this will be a short video, but I wanted to share it with you. So if you're new to the channel, my name's Alex. I own acquisition.com.

We do about $85 million a year. And so the reason I wanted to make this video is because at the end of the day, every entrepreneur has the same problem, which is they need better people and they need to get more out of the people that they have. And a lot of that comes from culture and training. But every once in a while,

you stumble upon a process that has teeth. And so I haven't implemented this yet. It's not normal for me to make a video about something like this, but we will be implementing something like this in our holding company. And so I think, think it's super cool because it is reinforced through multiple different psychological levers

and it's got really cool stuff to it. So let's dive in. So one of the things that he shared with me that he did is that he has a level of variable computation. That's not new. It means that there's some level of performance check marks, et cetera, that they have to hit in order to get paid. Makes sense. Now, the way that most companies do this, and I'll tell you that what we've done up to this point for us is that in positions where that are not directly like sales for example it's very easy to have a commission structure etc but for let's say leadership and executive positions and so this is important if you're trying to build your you know your solepronorship into an actual company that has values you need to have people who are all lined and driving hard like owners

towards the same goal and honestly it's much more enjoyable that way and so the way that we have split our things up to this point is that we do something called mbo such as management by objectives which are for the company and then also for the individual. So we usually split them 50-50. So let's say we've got a leader who, let's say like a director of marketing. They're not going to like get a sale, but we know that they're in charge of all of the, you know, rainmaking for that particular business line, right?

And so they might get, let's say, half of their, so they might have a base. Let's just use round numbers. Let's say they're making their targeted earnings is $200,000. We're going to give them $100,000 base and we're going to give them $100,000 of variable compensation, right? Now, of that variable compensation, that half, we split that again in half, half of that, which would be 25% of their total comp, is going to be of whether the company grows overall. So if we hit X, Y, and Z metrics, they'll get, you know, of growth or new sales or profitability, then they're going to get those things, right?

And the other half is going to be on whether they did something personally that they've control over. So it might be adding a new channel or a new platform or creating some sort of process that we want to automate. or bringing in a new XYZ manager, right? Those would be things that they have complete control over that we can checkbox. Even if the business doesn't do well or it doesn't hit the goals of growth or just, you know, marginally grows, they can still get half of their variable count. So if you've got 100 grand, they got that guaranteed and they've got 50 that as long as they do all their stuff they've got, and then they get to purchase being the upside of the business if the business overall grows, right?

And so that is how we've done it up to this point. It's worked well, right? But what he presented was a different way that I really, really, really liked. And a key part of this is that the management by objectives and the things that we set, we set for our team. Okay, so they don't have a choice in it. They just accept it or they might try and negotiate a couple terms, but that's more or less how the compensation structure works. Right. With the way that he sets it up is that every position has a level of variable compensation.

and that level you can determine. You know, you can say you want it to be 10% or you can be 20% or it could be 50%. You know, it depends on the role. But maybe let's say a frontline customer service role, right? Let's say we wanted to make a, you know, let's say 15% of their compensation variable. So if they're targeting, let's say, $50,000 a year,

then that would mean $7,500 would be potential to be variable. So that would be like, whatever, $600 a month-ish, right? Of their compensation is kind of in the, the air hung in the balance. And so here's the cool thing. Hey guys, real quick for those of you guys who are $100 million offers fans, I love you. I added in a lost chapter that has never been released. I'm releasing it now. Transparently, I'm doing that to build hype for $100 million leads, but you will have the unreleased chapter. It talks about your first avatar and how to segment customers to make more money. You can get it by going to acquisition.com forward slash leads.

It's so free in exchange for your email so that I can email you when we launch $100 million leads. so that you cannot miss out on it because last time I sold out for like eight straight weeks really fast. So that is my way of making sure that y'all get first dips. What he does is that he says this is the variable comp and you get to set the goal every month. So it's a 30-day rolling goal and every month they get to set the goal of what they're going to do. They have to show it publicly. So you get some social pressure in there. Right.

You also get autonomy because they're the ones who are picking it. And so here's what's cool is that if everybody on the team has to say what their personal goal is, right? And they get to set it. And if they hit their personal goal, as long as it's aligned with the company goal overall, like it's going to contribute to that goal, then they can make it. They have to obviously prove that it in some way furthers the overall division or department's goal. But as long as it's aligned in that, the extent to which and the amount that they have to hit is got to be quantifiable, right? if they set that goal, they can set it as bigger as little as they want. What happens is that the social pressure of wanting to set good goals automatically self-correct.

So you might think, well, what if they just say they get, you know, a half a percent, you know, improvement or something like that? And then they hit it. Cool. But the thing is, is that people on the team are going to be like, dude, come on. That's the goal. And then all of a sudden they raise it. But they raised it. No one else.

And so they have complete autonomy and ownership over that goal. Now, for you as an owner, what you can do, obviously, is let's say that your targeted earnings for the person's $50,000 a year. That's fine. You just take 15% and make a variable. So, like, they have the potential to earn the whole thing or they have the potential to earn somewhat less. Like, don't worry about the variable comp. The piece is that we have intermittent reinforcement, which is another way of saying variable reward for an employee. They have complete autonomy and they have social pressure and they have some level of competition.

and this is really useful in roles that don't necessarily, A, directly tied to the bottom line like sales does, and are more difficult to quantify, right? And so this gives those roles the opportunity to feel like they're contributing to the overall growth of the company and have something in the balance that matters. So I wanted to share this with you because I thought it was really, really cool. We're going to be implementing stuff like this

in some of our portfolio companies. But I thought it was just incredibly sexy. And I didn't want to keep it from you because I think it's really, really cool. Because there's just so much psychology behind doing things this way. And it just allows everyone to participate and grow as employees within the company. And as a tangential tertiary benefit of this, your churn will go down because people will feel like they're making progress. pretty cool, right? They'll feel like they're making progress

and that they are growing and that they are challenging themselves. And that, at the end of the day, is what you want every workplace to fulfill for your employees. Now, whether they feel fulfilled, you have no control over. But if you can create an environment

that increases the likelihood that they feel that way, given a normal human construct, I think that you're going to build a better business. So lots of love, keeping awesome, Mosy Nation.

Love you all, and I'll see you guys, thanks a video. Bye!