*REVEALED* Compensation plans that ACTUALLY WORK...

A good friend of mine in my building had a really interesting way of managing talent to get and drive higher performance and output. This will be a short video um but I wanted to share it with you. So if you're new to the channel, my name is Alexi. I own acquisition. com. We do about $85 million a year. Um 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. Um it's not normal for me to make a video about something like this, but we will be implementing uh something like this in our holding company. And so I think it's super cool because it is reinforced through multiple different psychological uh levers and it's got really cool stuff to it. So let's dive in. One of the things that he shared with me that he did is that he has a level of variable compensation. That's not new. It means that there's some level of performance, check marks, etc. 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 direct like sales for example, it's very easy to have a commission structure, etc. for let's say leadership and executive positions. Uh and so this is important if you're trying to build your you know your solarreneurship into an actual company that has values. You need to have people who are all aligned 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 MBOS which is management by objectives which are for the company and then uh 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. It's they're not going to like get a sale, but we know that they're in charge of all of the, you know, rain making for that particular business line. They might get let's say 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 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 uh 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 have control over. So it might be adding a new uh channel or a new platform or creating some sort of process that we want to automate um or bringing in a new XYZ manager. Right? Those would be things that they have complete control over that we can check box even if the business doesn't do well or it doesn't hit the goals of growth or it just you know marginally grows they can still get half of their variable comp. So if you've got 100 grand, they got that guaranteed and they've got 50 that as long as they do their all their stuff they've got and then they get to participate in the upside of the business if the business overall grows, right? And so that is how we've done it up to this point and it's worked well, right? But what he presented was a different way that I really really liked and a key part of this is that the management by objectives and the things that we set for our team. Okay? So they don't have a choice in it. they just accept it or you know they might try and negotiate a couple terms but that 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 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 let's say we wanted to make uh 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 bucks a monthish, right, of their compensation is kind of in the air, hung in the balance. And so here's the cool thing. 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, you know, 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. 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 it's going to contribute to that goal, then they can make it, right? They have to obviously prove that it in some way furthers the overall uh 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 because it's got to be quantifiable, right? If they set that goal, they can set it as big or 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 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 is $50,000 a year. That's fine. You just take 15% and make it variable. So like they have the potential to earn the whole thing or 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, you know, tied to the bottom line like sales does and are more difficult uh to quantify, right? And so this gives those roles the opportunity to feel like they are 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 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 um I didn't want to keep it from you uh because I think it's really cool uh because there's just so much psychology behind doing things this way. Um, 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? It'll they'll feel like they're making progress and that they are growing challenging themselves. And that at the end of the day is what you want every workplace uh 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, um I think that you're going to build a better business. So, lots of love. Keep being awesome, Mosy Nation. Love you all and I'll see you guys next video.