Alex Hormozi: Recruiting and Hiring Tips - How to Hire The Best Employees

The video is about the importance of understanding the role of HR and investing in employees, with a case study of a HR director who made a costly mistake in conducting a salary analysis.

This video by Alex Hormozi was published on Jan 28, 2021.
Video length: 30:44.

In this video, Alex Hormozi discusses the importance of understanding the role of human resources (HR) in a company and shares a story of HR gone wrong.

He talks about how an HR director overhired and spent company resources on a salary analysis that resulted in paying out more money from the company without providing any value. Hormozi breaks down the many reasons why this was a terrible idea and outlines what he believes the ideal role of HR should be in a company.

He emphasizes the importance of investing in employees and hiring the best candidates.

• HR is crucial for the success of a company.
• Managers and leaders should understand the role of HR and investing in employees.
• HR gone wrong can be costly for a company.
• The HR director overhired and made a costly mistake by conducting a salary analysis.
• HR should focus on hiring, training, creating a positive work environment, handling employee relations, and ensuring compliance with labor laws.
• Employees are responsible for their own happiness.
• The customer of a company is the company itself, and profit is necessary for growth and survival.
• Operations should support sales, marketing, and product.
• HR should enable sales, marketing, and product and understand their importance.

Recruiting and Hiring Tips - How to Hire The Best Employees - YouTube

The Importance of Understanding the Role of HR

• HR is not just about having an HR department.
• Investing in employees is crucial for the success of a company.
• Managers and leaders should understand the role of HR and investing in employees.
• HR gone wrong can be costly for a company.
• Case study of an HR director who conducted a salary analysis and made a costly mistake.

The Costly Mistake of the HR Director

• The HR director overhired and had six people in her department for a hundred-person company.
• She conducted a salary analysis for every employee in the company, which took 90 days and used up a lot of company resources.
• She determined that 20-25% of the company was being overpaid, 20-25% was being underpaid, and 50% was being paid appropriately.
• She emailed those who were being overpaid that they would stay there and those who were being underpaid that they got a raise.
• This decision wasted company resources, paid out more money from the company, and provided no value.

The Terrible Consequences of the HR Director's Decision

• The HR director wasted company resources and cost the company around $600,000 in profit.
• Those who were overpaid had no explanation for why they were getting paid more.
• After someone gets that email, they can just be told that the HR director was wrong, and they will be kept back where they were.
• The decision seemed like a small thing, but it had a significant impact on the company's profit.
• Managers and leaders should understand the consequences of HR gone wrong and invest in employees wisely.

Recruiting and Hiring Tips - How to Hire The Best Employees - YouTube

The Ideal Role of HR in a Company

• HR should focus on hiring the right people for the right roles.
• HR should provide training and development opportunities for employees.
• HR should create a positive work environment and culture.
• HR should handle employee relations and conflicts.
• HR should ensure compliance with labor laws and regulations.

The Role of HR and Employee Happiness

• It is not the job of HR or management to make employees happy.
• Employees are responsible for their own happiness.
• The job of HR is to find people who fit the company culture and have a positive inclination.
• The goal is to retain and attract talent.
• Human beings choose to be happy based on their own beliefs and thoughts.

The Customer of a Company

• Employees are not the customers of a company.
• The customer of a company is the company itself.
• A company has three stakeholders: shareholders, customers, and employees.
• All three stakeholders must be considered.
• Overpaying employees puts the company in a bad position.

The Importance of Profit

• A company needs profit to grow and weather future storms.
• Profit allows a company to reinvest in new product lines and legal defense.
• The goal of a company is to pay as little as possible for the highest amount of value.
• The price to value discrepancy is what investors look for.
• Paying more for less value is a bad deal.

Pushback on the Importance of Profit

• Some employees or managers may push back on the idea of profit being the goal.
• The entrepreneur values marketing and sales more than other parts of the company.
• Profit is necessary for the company to survive and thrive.
• Overpaying employees for no value is a bad decision.
• The goal is to make good deals, not bad ones.

The Importance of Understanding Operations

• Operations is everything that is non-core to the value of the company, including IT, HR, finance, and legal.
• Operations is everything that must happen to keep the company running but is not a core value driver for top-line revenue or for customers.
• Marketing brings revenue in, and product delivers value that is being exchanged for money, which are core value drivers for the company.
• Operations should support and always enable sales, marketing, and product.
• There are ways that those other components can provide value indirectly.

The Value of Sales, Marketing, and Product

• Sales, marketing, and product are major drivers of value in the company.
• Superstar salespeople may be paid above market value, but they yield a higher outcome than normal salespeople.
• There are different types of salespeople, including B2C transactional sales, B2B consultative sales, and account management.
• One or two salespeople always lead the pack disproportionately.
• Marketing brings revenue in, and product delivers value that is being exchanged for money, which are core value drivers for the company.

The Role of HR

• HR is a supporting role that should enable sales, marketing, and product.
• HR should not be a core value driver for top-line revenue or for customers.
• HR can provide value indirectly by hiring the right people and creating a positive company culture.
• HR should understand the importance of sales, marketing, and product and how they drive value for the company.
• HR should not conduct a salary analysis without understanding the role of operations and the value of sales, marketing, and product.

The Cost of Not Understanding Operations and HR

• A costly mistake was made by an HR director who conducted a salary analysis without understanding the role of operations and the value of sales, marketing, and product.
• The mistake resulted in the company making less money and going down.
• The mistake was corrected by putting sales, marketing, and product as primary and operations as secondary.
• Understanding the role of operations and HR is crucial for the success of the company.
• Investing in employees and creating a positive company culture is important for the growth and success of the company.

Understanding Market Value

• Market value is established by the value an employee provides to the company.
• Employees should be paid based on the economic argument of their value to the company.
• Customer service roles may not provide as much value as other roles, and therefore may not be paid as much.
• HR should understand the importance of making a profit and paying as little as possible for as much value as possible.
• Assessing the value of an individual based on their contribution to the bottom line is crucial.

Providing Value as HR

• HR should protect the company in all ways.
• When considering hiring, HR should ask for a reason why the team is overworked and show hour-by-hour utilization.
• Many people do not work as hard as they claim to and may not actually be overworked.
• HR should put the company first to protect both the company and its employees.
• Thinking like an owner is crucial for HR.

Investing in Employees

• Investing in employees is crucial for the success of a company.
• Training and development programs can help employees grow and provide more value to the company.
• Offering competitive salaries and benefits can attract and retain top talent.
• Creating a positive work environment can increase employee satisfaction and productivity.
• Investing in employees can lead to long-term success for the company.

The Cost of HR Mistakes

• A case study is presented of an HR director who made a costly mistake in conducting a salary analysis.
• The mistake led to a loss of top talent and a decrease in sales.
• HR mistakes can have a significant impact on the success of a company.
• It is important for HR to understand the value of employees and make decisions based on their economic contribution to the company.
• Thinking like an owner and protecting the company should be a top priority for HR.

The Importance of HR and Investing in Employees

• Good HR is essential for finding, developing, and retaining talent.
• Recruiting falls under HR, while developing and retaining are more department-specific.
• Investing in employees is crucial for the success of a company.
• Understanding the value of people is key to understanding the value of a company.
• HR should have a clear objective and problem to solve when making decisions.

The Role of Compensation in Retaining Talent

• Increasing compensation is only necessary if there is a problem with attracting or retaining talent.
• Increasing pay for employees who are already working for the company should only be done if they are valued enough that replacing them would be difficult.
• Low attrition rates can be achieved through a high-performance culture.
• A high-performance culture allows for quick turnover of low-performing employees.
• Having a clear objective and problem to solve is crucial when making decisions about compensation.

The Importance of Understanding the 'Why' Behind Decisions

• Understanding the 'why' behind decisions is crucial for making informed decisions.
• Spending money without a clear objective or problem to solve is wasteful.
• The point of a company is to buy value at the lowest possible price.
• Having a discrepancy between the value of employees and their compensation is necessary for profit.
• Understanding the 'why' behind decisions is crucial for the success of a company.

The Importance of Having a Clear Objective and Problem to Solve

• Having a clear objective and problem to solve is crucial for making informed decisions.
• Spending money without a clear objective or problem to solve is wasteful.
• Understanding the 'why' behind decisions is crucial for the success of a company.
• HR should have a clear objective and problem to solve when making decisions.
• Having a discrepancy between the value of employees and their compensation is necessary for profit.

The Importance of Paying Star Employees

• Star employees are worth paying more to keep them because they provide a disproportionate amount of output.
• Compensation should be based on the value an employee provides.
• Thinking that all employees should be paid the same doesn't make sense.

Understanding the Role of HR

• Making employees happy is not the responsibility of HR.
• Employees are not the customers of the company.
• Undervaluing employees who don't provide top-line value is okay.
• Thinking of employees as units of value is important.
• HR's responsibility is to protect the company.

Aligning with the Company's Goals

• It is important to align with the company's overall goals.
• Good owners put the company first, not themselves.
• The company is the beast that feeds everyone.
• Hard conversations and calls are necessary to keep the company healthy.

Lessons Learned

• It is important to pay star employees more.
• HR's responsibility is to protect the company.
• Undervaluing employees who don't provide top-line value is okay.
• Thinking of employees as units of value is important.
• Aligning with the company's goals is necessary for success.

Watch the video on YouTube:
Recruiting and Hiring Tips - How to Hire The Best Employees - YouTube