Alex Hormozi: *REVEALED* Compensation plans that ACTUALLY WORK...

The video discusses a compensation plan that involves variable compensation and setting personal goals for employees to increase performance and output.

This video by Alex Hormozi was published on Dec 15, 2021.
Video length: 07:02.

In this video, Alex Hormozi shares a compensation plan that he learned from a friend which can help entrepreneurs manage talent to drive higher performance and output.

The plan involves a level of variable compensation that is split into two parts: one based on the company's overall growth and the other based on personal goals that the employee sets every month.

The employee has to publicly show their personal goal, which creates social pressure and autonomy, and if they hit their personal goal and it aligns with the company's overall goal, they can earn their variable compensation.

• Alex Hormozi shares a unique way of managing talent to drive higher performance and output.
• He discusses a process that has multiple psychological levers and is reinforced through them.
• He shares a compensation plan that involves variable compensation and setting personal goals for employees to increase performance and output.
• The compensation plan creates social pressure and autonomy for the employees, aligns personal goals with the company's overall goal, and increases performance and output by motivating employees to achieve their personal goals.
• It creates a culture of ownership and alignment towards the same goal.

*REVEALED* Compensation plans that ACTUALLY WORK... - YouTube

Introduction

• Alex Hormozi shares a unique way of managing talent to drive higher performance and output.
• He discusses a process that has multiple psychological levers and is reinforced through them.
• He talks about the need for better people and getting more out of them.
• He shares a compensation plan that involves variable compensation and setting personal goals for employees to increase performance and output.

Variable Compensation

• Alex talks about a level of variable compensation that is not new.
• He explains that most companies have a commission structure for direct positions like sales.
• For leadership and executive positions, they split the compensation 50/50 between management by objectives (MBOs) for the company and the individual.
• He gives an example of a director of marketing who has a $200,000 targeted earnings, with $100,000 base and $100,000 variable compensation.
• Half of the variable compensation is based on the company's growth, and the other half is based on personal goals that the individual has control over.

Setting Personal Goals

• Alex talks about a level of variable compensation that is determined by the role.
• He gives an example of a frontline customer service role where 15% of the compensation is variable.
• He explains that every month, employees get to set their personal goals for a 30-day rolling period.
• They have to show it publicly, which creates social pressure and autonomy for the employees.
• If they hit their personal goal, as long as it aligns with the company's overall goal, they can make it.

*REVEALED* Compensation plans that ACTUALLY WORK... - YouTube

Benefits of the Compensation Plan

• The compensation plan creates social pressure and autonomy for the employees.
• It aligns personal goals with the company's overall goal.
• It creates a self-correcting mechanism for setting good goals.
• It increases performance and output by motivating employees to achieve their personal goals.
• It creates a culture of ownership and alignment towards the same goal.

Variable Compensation and Personal Goals for Employees

• Employees are given a goal and then it is raised, giving them complete autonomy and ownership over the goal.
• Targeted earnings for an employee can be made variable, giving them the potential to earn the whole amount or somewhat less.
• Intermittent reinforcement or variable reward is useful for roles that are difficult to quantify and not directly tied to the bottom line.
• This compensation plan allows employees to feel like they are contributing to the overall growth of the company and have something at stake that matters.
• Implementing this plan can lead to increased employee participation, growth, and decreased churn.
• Creating an environment that increases the likelihood of employee fulfillment can lead to building a better business.

Watch the video on YouTube:
*REVEALED* Compensation plans that ACTUALLY WORK... - YouTube