Recruiting and Hiring Tips - How to Hire The Best Employees

What's going on everyone? Um, I wanted to I'll probably make a couple of podcasts um about my day yesterday, but it was our uh quarterly meetup for our leadership. And uh there was kind of, you know, there's a few kind of I don't want to say teaching moments, but moments where I was kind of able to transfer some of my, you know, more updated beliefs about how a company should run um that they were like, "Man, I wish we'd record this. Like, that would have been such a good podcast. " And so, um, I want to try and do my best and kind of cover some of those points with you here so you can almost be like a fly on the wall, um, in some of those meetings. And so, the first one was about the role of HR. Now, um, before all of the entrepreneurs who are listening to this, you know, have their eyes, uh, glaze over. Um, this is probably the first podcast I've ever made about, you know, HR and human resources. Um but uh I think it's incredibly important and it's not just about if you have an HR department. So

for many of you might only have a handful of employees um or you're a manager at a company. So if you know entrepreneurs if you have a management or series of managers or leaders in the company I think for them to understand um what the role of human resources and investing in employees looks like I think it'd be valuable. So I'm going to start with a story of HR gone wrong. um and then kind of go from there and kind of dissect it as like a little mini case study uh or to the best of my ability. And so um to expound upon the many lessons and failures that I have had uh in running the business um a few a year or two ago um we had an HR uh director and uh they I'll just tell you what happened. So, she had taken upon herself um because she didn't have enough work. I know this, but she doesn't know this. It was cuz she didn't have enough work. Um and she had overhired. Uh she had six people in her department. Six people in HR. Can you imagine? Um six. We had a 100 person company. Like six people. Like it's just so many people. Uh so she had a lot of people and no one had any work to do. And so, um, she took it upon herself to do a salary analysis, which is basically a study of how much everyone in the company, um, you know, quote, should be getting paid, uh, based on, you know, the role, their experience, what the market's playing, and where they live, right? And, um, this took like 90 days for her to do this for

every single person in the company. And so, she used up, you know, a lot of company resources, three, four, five employees, etc., um for this period of time to do the study. Uh and the result of the study was that she had determined that you know I don't know 20% or 25% of the company um was being you know overpaid and then 20 or 25% of the company was being underpaid and then about 50% paid you know appropriately. And so the conclusion that she came to was, well, um, I'm going to email everyone and just say, uh, if you know, if they were being overpaid, uh, they were going to stay there because we're not going to give people, you know, pay cuts. Um, if they're adequately paid, they'll stay where they're at. And if someone's being underpaid, uh, we'll email them and say, "Hey, you just got a raise. Congratulations. " Right? Um, and so this may have been the single stupidest thing I have ever seen someone do in my entire life. Um, but that was the decision that was made. And so, um, this was reported to me at a, uh, at a what do you call it? A, uh, at our quarterly. And this was actually her accomplishment for the quarter. And I just remember just being so bewildered, befuddled, dumbfounded um by the fact that this person, this human being had thought that this was a good use of company resources. And so I'm going to break down the many reasons why this is not a good idea or this was a terrible thing. Um and then kind of outline what I believe uh the ideal role of HR is in a company. So, the reason this was terrible uh was that um so she literally used company resources, probably $100,000 of payroll resources to create this solution that then just paid out more money from the company. Um which is just my wallet. It's just my bank account, right? And just paid out more money for no reason and did it in a way that anybody who got paid more had no explanation for why they were getting paid more. and provide no value. So, she literally wasted money doing it. Wasted money for that point going forward in the company because after someone gets that email, I can't just be like, "Oh, by the way, she was wrong. Sorry about that. " And then we're just going to get keep you back where you were. Um, and so I think the whole thing probably cost me like $600,000 in profit, right? Like I mean like more than she was going to get paid for years, right? And it just seemed like such a small thing like ah it's just the company, right? And so this is where you know if you're a manager in a bigger company or you direct you know if you report directly to the CEO or the owner you have to understand this right and so um yesterday at our quarterly uh our current HR director uh that HR director is not with us anymore uh was bringing up her she was kind of giving her uh position on what she believed uh her value to the company was and I ended up kind of giving a talk about this in general. And this so this is uh for my current HR director. This is not about our conversation or anything like that. Um but this is just in general for everyone. So I wrote some notes down because I think it was really important. And so uh one of the things that I hear a lot is my role is to make employees happy. All right. So I'm going to just hit piece by piece. Your job is not to make employees happy. As an owner, a manager, your job is not to make employees happy. As an HR director, your job is not to make employees happy. Employees job is to make employees happy. Human beings are responsible for making themselves happy. There are people in Awitz who wrote books about how they were happy. And there are people in America living in the top 1% of earners of the whole world who are miserable and depressed. All right? Your job is not to make people happy. People will choose to be happy based on their own beliefs about their circumstances and what their thoughts are. um independent from the actual things that are happening to them. So, first off, it is not your responsibility. It is your responsibility to try and find people who are going to have a positive inclination, fit in with the culture uh so that we can keep an atmosphere that does retain and attract talent, which is the next thing I'm going to get to. But your job is not to make people happy. All right. Number two, uh one of the things I I heard um is that employees are my customer. Right? if you're a manager or your HR director like well really you know everyone who's who works here is my customer incorrect that is not who your customer is the company all right and now I'm going to be clear about this the company has three stakeholders you've got shareholders the people who own the company you've got uh customers the people who pay the company and then you've got employees the people who run the company all three stakeholders have to be considered now the reason this is an important delineation is that if you have an HR director who is like employees first then you have the type of stupid decision that I just discussed in the very beginning which is literally just paying out profit for no value. All right. And this is an important point that I need to cover, which kind of leads naturally to the next thing is that [sighs and gasps] in order for a company to grow, it has to have profit. In order for it to weather storms that it does not see that are going to come in the future, it needs to have profit to be able to reinvest in new product lines, in legal defense, in whatever could possibly happen. And when you just choose to buy things for no value, which is essentially what it is when you just overpay, then you put your company in a bad position. So let me explain. So an investor looks at any kind of asset. And a company, the assets of the company are the humans, right? Are the it's human capital. It's the actual value that you get from people, especially if you're in a service business, right? And so you have the value is what you get and price is what you pay, right? And the goal, I want to be very transparent about this, of the company is to pay as little as possible for as the highest amount of value. And that may make people uncomfortable, but the point of all businesses is to give to get as much price. They want to have as big of a discrepancy as possible. So, if I'm an investor and I'm buying stocks, I want to buy the most valuable company that I can for the least amount of money, right? It's a price to value discrepancy, right? And the bigger that discrepancy, the better it is. Now, if it's the reverse, you're paying more for less value. That is a bad deal. It doesn't matter what you're paying, it's a bad deal. All right? And so the reason that first HR director made such a terrible decision was because she literally just chose to take a literally take our good deals and just say, "Hey, we're going to make bad deals now and all of our bad deals we're going to keep as bad deals. " Right? It just it just I it made no sense whatsoever. And so that's that is what we're like that is the goal here, right? And finally when I was talking to our HR director about this, she pushed back on this. She was um not well sorry not her but like you might have an HR director, you might have a manager who might push back on this idea. And so I just went and the two different scenarios came up um that we were walking through and one of them is well you know uh you as the entrepreneur you know you always value the marketing the sales more than the rest of the company. Uh, and I I could see that there was, you know, some being at odds with that, right? Like I don't know if I agree with that. Um, and I want to be 100% clear. I do value marketing, sales, and product more than operations. Here's why. Not that long ago, there was a period of time where I had mentors who were like, you need to put operations first, right? This is part of scaling. You have to delegate blah blah. And so there was a period of time where I put operations on a pedestal and was like, "No guys, we need to just do what operations wants us to do. " And to be clear, for definition, operations is everything that is non-core to the value of the company. All right? That is IT, that is HR, that is finance, um that's legal, uh all of those comprise uh operations. All right? And to be clear about what that means is it's everything that must happen to keep the company running but is not a core value driver for topline revenue or for customers. All right? And so marketing brings revenue in. Product delivers value that is being exchanged for money. That's fundamentally what a company does. It's got stuff and it sells it. Right? And as long as you're delivering the stuff or you're um or you're selling the stuff that is being delivered, those are core value to the company. Everything else absolutely must happen. But um in general, they're not the main value drivers. Now, that being said, there are ways that those other comp those other components can provide value indirectly. And that's what I'm going to cover in this because I think being an HR director or being a manager in a company and being in one of those roles, if you're clear on that, uh you will be more valuable to your owner. And if you're interviewing for a position and you talk the way that I'm telling you right now to talk to an owner, you will probably get the job and probably stay there because they will know that you understand what you're talking about. So the example, she said, "Well, um, you know, I feel like you care more about, you know, sales and marketing. " And I said, "Yes, I do. And here's why. " Um, and by the way, when I did that operational thing and put operations first, uh, the company started going down. Um, and we started making less money and it was painful and horrible and I had to basically jump back in and be like, I'm so sorry about that. That was not a good idea. We are keeping the value we provide and marketing and sales primary and operations is secondary to that. It is a supporting role. So, if sales says, hey, we need contracts uh, you know, to be changed because this is the new offer or whatever, then operations has to say, all right, we're going to go figure that out, right? And that is the point. The point is that operations should support and always enable sales, marketing, and product. All right. So, she said, "Well, um I feel like, you know, you value, you know, like a star salesman um more than you value like a frontline uh customer service person. " Uh and so she's like, you know, there was a decision that, you know, this is this has come up, you know, a zillion times over the years. It's like, you know, I think you value these positions more. And I always have to unequivocally say I do. Yes. Because people like and I feel like this is I don't want to say an employee thing or it's just like they think feel like it's like a bad word for me to be like no no I do care about more about marketing sales and product. Period. Period. Because they are the major drivers of value in the company. All right. And so um for example, if you Chad Holmes wrote about this in his book, if you have a superstar salesperson, this is what I was talking about to the whole company. I was like, if you have a superstar salesperson and that person, you know, is being paid quote above market, right? Above market value. There's two ways of seeing market value. There's market value, which is like what is the rest of the market paying for this, right? And then what am I getting in return for this specific person? So for like if you have an all-star salesperson like you may have gone through 20 sales people to find an all-star salesperson for your specific company and your specific product right

because there are some sales people who excel in let's say B2C transactional sales all right and there's some who excel in you know longer style B2B consultative sales and there are some sales people who excel in account management and kind of upselling and kind of like the farming and continuing to grow an account right those are all sales they're just And so I could find a salesperson, right? But that person might not perfectly fit my company and I might not yield the same outcome. And so if I have, for example, somebody who's selling really well and sells three time, you know, sells more than three times uh you know, it would take me two or three normal quote normal salespeople to replace their production. And this is common in a in most companies. Most people have multiple sales people. There's one person who you know, one or two people always like lead the pack disproportionately, right? and that uh that person right if and in in many conversations this is one of them is like well if that person came up to you for example and said well I want a 20% pay raise or a 10% pay raise she was like I disagree with that and I was like I think that's stupid that you disagree with that I was like make the economic argument if we lose that person and then we lose half of our sales how can you tell me that was not worth 10% more on their base salary like well I hadn't thought about like that I was like right you need to think like an owner, right? You got owner. What am I losing here? Right? Um and to the same degree, the correlary to that uh is like, well, I feel like you don't value customer service as much. Like, what if we had amazing customer service role? This is kind of like the counter example, right? Like, well, I feel like you're willing to, you know, pay these people more than you are willing to pay these people. And it's like, yes, I am because they provide more value. And I was like, okay, I hear where you're coming from. What if this person does an amazing job in customer service? And I was like, I get it. So let's say this person disappears tomorrow. How much less are we going to make? So probably not a lot. I was like, right? And so if you wanted to, you know, come to me with a, you know, customer service person and say this person, you know, saves X% of people per month and that results in this much money. and the aggregate of adding a dollar per hour for example to this person's role still doesn't compared to what everyone else on the team is saving which would be like what I would consider market right like if I just brought some in who's average and this person is way above average let's say this person saves you know 25% of the whole team saves is from this one person uh then I'd be like okay well there's a number value to that and uh you know we can incrementally add a certain amount uh that would mean it was worth keeping right Uh, and I was like, "But in this example that we're talking about, if this person stopped and just was gone," I was like, "How much do you think that the company would make less? " She was like, "It probably wouldn't change the revenue. " And I was like, "Right. " And for that reason, that is how market value is established. And so for everyone, it's like this is the real world. All right? Like I don't know what the the Harvard Business Review, you know, says about making happy employees and like all this, you know, whatever. who do. Um, but in the real world, you get you don't get a trophy. All right? Not everyone's first. Not everyone makes the most amount of money. You get paid based on the value that you provide. And a good owner understands that, right? And so when we, you know, we were having these discussions. Um, I think that, uh, it was, it was good for our whole company to understand and see like that's the point here. Like the point is to make a profit. pay as little as possible for as much value as possible, right? And assess the value of the individual based on what they contribute to the bottom line, right? And so, you know, to wrap this up, if you're, you know, for for HR in general, human resources, it's like, well, then how do I provide value? You provide value by one, protecting the company at in all ways. All right? And the way that you do that is first when people come to you and say, "Hey, I want to hire so and so. " Your first answer should probably be no. Give me a reason why your team is so overworked that they can't just work more. Right? Show me your hour to hour utilization that you have. Like, and I'll tell you right now, and I've said it in the past, a lot of people don't work that hard. All right? And a lot of people will say that they are overworked because they literally do not understand what work is. all the time. I know this for a fact. There are some of you listening to this right now who spend your entire day not working, trying to work, spend all day getting [ __ ] all done because you're in your head and you literally have an inability to focus. That is not a company's fault. That is your lack of ability in being disciplined and learning the skills of learning how to work. like you have to get you just have to things done you know and so many people don't get much done in their whole day and then say hey I need help when it's really like they aren't actually overworked they actually just don't know how to work all right and mind you this is not this is a lesson that I learned because I was younger once and I started working at a law firm as an intern and uh I remember a senior partner jokingly said to me she was like you don't even know what work is yet. She's like, "You haven't even learned how to work. " And I was like offended. Um, but then I saw how hard these people worked and lawyers work, you know, in hard law firms, they worked their asses off and I was like, "Huh, she's probably right. " Right. And I started observing the habits of the people who work more and how much more they got done. So, anyways, um, point is that people will come and try and hire for help when they're really isn't it's not necessary. And so, that does not protect the company. It also doesn't protect the employees because if the company's at risk, everyone's at risk, right? So you have to put the company first, right? Um and so that's thinking like an owner. So that's number one. Number two is that you have are active in recruiting the best talent. All right? Because everyone knows that the value of the company is going to be based on the value of the people, the who, not the what, right? A good who will figure out the what. And so really good HR is really good recruitment. It's talent, right? It's finding the talent, developing the talent, retaining the talent. Now, obviously, not all of that's going to fall under HR, right? Recruiting, absolutely, right? Uh, you know, developing is going to be more underneath of the departments and retaining is going to be a function of really the department heads and then the compensation packages, right? But the thing is that I want to be clear here. if you and this is I'm going to wrap this back in the original story when you know the HR director the former HR director did this big salary analysis and she said hey this is our big success we're just paying people more and we got nothing back in value as a company right um I was like why did we do this and that's the hard question that you know obviously she wasn't able to answer I was like why did you she did it because she had nothing to Right? But that's actually why she did it. But I was like, what what problem are we solving here? What was the objective of this? And the answer there was none, right? Because the only reason that you would want to move compensation is for one of two things. Either you cannot attract talent or you cannot retain talent. So what I mean by that is like the only reason to really increase someone's pay if they are already working for you is because you value them enough that replacing them with someone else who has a comparable skill set would not the marginal difference would not be hu like if the margin difference is huge right then you'd you you'd be incentivized to retain them right and you as a company in this hypothetical example have a problem retaining employees we at Gym Launch do not have that problem we have incredibly low attrition. We fire people like crazy, but people don't quit. Um, and that's because we have a really high performance culture. Like, people don't last. You know what I mean? Like, it's uh like, sorry, low performers don't last. Uh, it's I heard this from Grant Cardone, but I really liked it. It's like gym launch is a dangerous place to work. Like, if you come in and you get on the train, like, you will learn more from me and us and running a company and learning how to grow things uh than ever before. But, uh, you got to perform. Like, this is a winners's environment. And if you are a winner, you will love it here. And if you are not a winner, you will not. I mean, you won't be here very long, right? Because the thing is when you come, if you've ever played on a high performance sports team in your whole life at some point, or any kind of team that was high performing, that was a winning team, usually there's a culture that if someone is new and comes in, they either assimilate or are rejected. And the stronger that core team is like this is how we do it, right? We wake up at 5. We go over our scripts. We role play. We do game day review from the day before on sales calls. Blah blah blah. We, you know, etc. And someone new is like, "Ah, man, that's you guys are waking up early. Like, I'm not really about that life. " Like, like the team will be like, "Dude, get this guy out of here. " Like, he's going to take the team down. And so, having that culture uh allows you to spit people out quickly, but it also allows you to retain. Now this is my point uh earlier which was uh why did this HR manager uh director make this call right and obviously it was cuz she wasn't thinking right um but there was no problem that she was trying to solve which is I was like this is this was a hard time for her I can imagine because it was in front of the entire company I was like do we have a problem attracting talent like no I was like okay so the pay that we are currently offering ing is we're having no issue finding talented people to work for these positions at these price points. It's like no. It's like okay, do we have a major problem in attrition? Are we losing employees left and right to competitors who are paying more or offering more or that we got head hunters picking off our people? She like, no. It's like, then why did you just choose to spend $600,000 a year more of bottom line profit? Why why? And the answer she had none, right? And so it's making sure that we understand the why we're doing things, right? The point of the company is to buy value at the lowest possible price. That is the point. I don't care what anyone else says. All right? You're going to try and pay for the value as little as you can because that discrepancy is where the profit is, right? Just being real. That's where the profit is. You need to have a discrepancy in order to have a profit so that the company can continue to run, right? That's what it is. And so, anywh who uh I share the story at the beginning because that is, you know, one of a zillion failures, you know, and lessons that I've learned along the way in this game. And um you know if you have a star employee I think a lot of times it is worth paying them more to keep them because you get like everyone knows like if you have a star employee they're usually worth like three or four employees five employees in output right I'm probably worth a lot of employees in output in terms of topline revenue of this business. So I get disproportionately paid. Is it fair? I think yes it is fair. I think you should always be compensated based on the value they provide. I think that's the ultimate fairness. I don't think it's like, "Oh, he's a human. I'm a human. We should get paid the same thing. " That doesn't make sense to me. All right. So, I want to make sure I hit all my points. Make employees happy is not your problem. It is their responsibility. Now, you can equip them with tools and skills about mindset and whatnot, but like ultimately the accountability of who needs to make who happy. You need to make yourself happy. A job is not supposed to make you happy because there are people who are endlessly happy in quote terrible jobs and there are people who have amazing jobs and kill themselves. So it has nothing to do with you. Number one. Number two, your employees are not your customers. All right? Your company is always your customer. Number one, because a company balances the priorities of everyone, the shareholders, the customers, and the employees. All right? Um I'm a quote middleman uh between the employees and ownership. That is not true. You protect the company. All

right? These are false beliefs. These are not true. All right? um you know undervaluing uh people who are not value pro uh you know topline value providing right they're not delivering on on the value that we're selling or selling the value right that's those are fundamentally what a company does we sell value and then we deliver on the promise that's it right and if you're not in one of those core things um unless you can make an argument for how you're directly uh providing value then you will probably get paid less and that's Okay. And that's okay, right? Um, fundamentally thinking about all uh employees as units of value and ascribing a price to them, right? Which is what you pay them and trying to always understand that you're always going to try and pay as little as you can for the most amount of value, right? That is and that's okay. That's that that's okay. That's the point, right? The only reason that you would pay more is if you have trouble attracting or retaining people. If you're not having any issues attracting and retaining people, then you're paying fine, right? Like you don't need to change the comp. [sighs] And so finally, um that is what I will lead you with or end you [snorts] uh or leave you with um in this role of HR um and my many lessons along the way. Um I hope you enjoyed this and click subscribe and all of that good stuff. But uh I have some passion with this because it's I've made these mistakes. so many times and I've seen these mistakes made on my behalf. And so if you are a manager, if you're an HR director, take this to heart. You work for the company. The company is your only customer. And your responsibility is to protect the company just like everyone else's company. And if you can think like that, you will think like an owner. And you will move up in your company. If you live in a la la la la la land of I'm supposed to just buy bean bags and have, you know, and and keep employees happy. Um, one, you're going to waste money. Two, you're not going to know what actually provides value in a business. And three, if you're in a different company, what'll what may happen if you don't have like a candid owner or whatever who wants to like talk real with you, um, they'll just kind of like put you in a corner, right? And then just be like, "Oh, yeah, yeah, you bet. Yeah, go do that little initiative. " Um but they won't actually see you as valuable. Uh because it means because you don't get the game like you don't get it. You have to understand it. Um and then people like you you'll get into the incircle I'm trying to say this the right way. You've probably had people in your life where you've got your friends, right? Um and you're like she gets it or he gets it, right? You talk to your friends, it's like, no, she gets it, right? She gets how this like how we see the world, right? The thing is that most business owners see the world the same way and that's why they are the owners of the business and that's why they started the business and that is probably how the business has grown. And so it is in your best interest to align with the company overall because a good owner will put the company first, not themselves because ultimately they the company feeds them. The company is the goose. company is the is the beast that feeds everyone. It is the thing that plows the field. It is the mule that everyone is fed off of. And so we have to keep the mule healthy. And that is by having the discrepancies and making the hard conversations calls and being real with you, which is what I'm hopefully trying to do right now, which is that is the point. All right. Um so anyh who, uh I hope that was valuable for you. I hope that made sense. Hopefully you don't have to pay the many lessons uh and failures that I have. And uh if you have an HR manager or a manager who you know hires and argues for compensation, things like that, send this to them [sighs] if you think it's valuable. So anyways, lots of love. Catch you soon and bye.