WEBVTT

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Your employees are not your customers, all right? Your company is always your customer number one

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Because the company balances the priorities of everyone the shareholders the customers and the employees

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Welcome to the game where we talk about how to get more customers how to make more

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Procustomer and how to keep them longer and the many failures and lessons we have learned along the way

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I hope you enjoy and subscribe

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What's going on everyone? I

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Wanted to I'll probably make a couple of podcasts about my day yesterday, but it was our

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Quarterly meet up for our leadership and there was kind of you know, there's a few kind of I don't want to say teaching moments

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But moments where I was kind of able to transfer some of my you know more updated beliefs about how a company should run

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That they were like man, I wish we'd record this like that would have been such a good podcast and so

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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

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in some of those meetings and so

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The first one was about the role of HR now

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Before all of the entrepreneurs were listening to this, you know have their eyes

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Glazed over this is probably the first to podcast. I've ever made about you know HR and resources

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But I think it's incredibly important and it's not just about if you have an HR department

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So for many of you might only have a handful of employees

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At or you're a manager out of companies, so if you know entrepreneurs if you have a manager or serious managers or leaders in the company

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I think for them to understand

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What the role of human resources and investing employees looks like I think it'd be valuable

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So I'm going to start with a story of HR gone wrong

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And then kind of go from there and kind of dissect it as like a little mini case study

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Or to the best of my ability and so

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To expound upon the many lessons and failures that I have had in running the business

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A few a year or two ago

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we had an HR

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Director and

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They I'll just tell you what happened. So

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She had taken upon herself

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Because she didn't have enough work. I know this but she doesn't know this it was because she didn't have enough work

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And she had over hired she had six people in her department six people in HR. Can you imagine?

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Six we're a hundred person company like six people like it's just so many people

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So she had a lot of people and no one had any work to do and so

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She took it upon herself to do a

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salary analysis which is basically a study of how much everyone in the company

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You know quote should be getting paid

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based on you know the role their experience with the markets playing and where they live right and

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And this took like 90 days for her to do this for every single person in the company and so she used up

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You know a lot of company resources three four or five employees, etc

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for this period of time

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To do the study

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And the results of the study was that she had determined that you know, I don't know 20% or 25% of the company

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Was being you know overpaid and then 20 or 25% of the company was being underpaid and then about 50% of the company was being paid

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You know appropriately and so the conclusion that she came to was well

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I'm gonna email everyone and just say if you know if if they were being overpaid

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They were gonna stay there because you're not gonna give people you know pay cuts

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If they're adequately paid they'll stay where they're at and if someone's being underpaid

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Will email them and say hey, you just got to raise congratulations, right?

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And so this may have been the single stupidest thing I have ever seen someone do in my entire life

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um

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But

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That was the decision that was made and so

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This was reported to me at a at a what do you call it a

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At our quarterly and this was actually her accomplishment for the quarter and I just I just remember just being so

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so

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bewildered but funneled dumbfounded

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By the fact that that this person the human being had thought that this was a good use

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Of company resources and so I'm gonna break down the many reasons why this is not a good idea

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This was a terrible thing

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And then kind of outline what I believe the the ideal role of HR is in a company. So the reason this was terrible

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was

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So she literally used company resources probably a hundred thousand dollars of payroll resources to create this solution

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That then just paid out more money from the company

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um

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Which is just my wallet. It's just my bank account right and just paid out more money for no reason

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And did it in a way that anybody who got paid more had no explanation

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For why they were getting paid more and provide no value

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So she literally wasted money doing it wasted money for that point going forward in the company because after someone gets an email

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I could just be like oh by the way she was wrong. Sorry about that and then we're just gonna get keep you back where you were

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um

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And so I think the whole thing probably cost me like six hundred thousand dollars in profit right like I mean like

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More than she was going to get paid for years right and it just seemed like it's just a small thing like

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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

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We're you know if you report directly to the CEO of the owner you have to understand this right and so um yesterday at our quarterly

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Our current HR director

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That director director's not with us anymore

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Was bringing up her she was kind of giving her position

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On what she believed her value to the company was and and I ended up kind of giving a talk about this in general

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And this so this is for my current HR director

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This is not about our conversation or anything like that

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But this is just in general for everyone

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So I wrote some notes down because I think it was really important

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And so uh one of the things that I hear a lot is

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My role is to make employees happy all right, so I'm gonna just hit piece by piece

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Your job is not to make employees happy as an owner your job is not to make employees happy as a manager

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Your job is not to make employees happy as an HR director your job is not to make employees happy

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Employees job is to make employees happy

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Human beings are responsible for making themselves happy

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There are people in Auschwitz who wrote books about how they were happy and there are people in America living in the top one percent

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Of earners of the whole world who are miserable and depressed

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All right

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Your job is not to make people happy people choose to be happy based on their own beliefs about their circumstances and what their thoughts are

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Independent from the actual things that are happening to them. So first off it is not your responsibility

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It is your responsibility to try and find people who are going to have a positive inclination who are going to fit in with the culture

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Uh, so that we can keep an atmosphere that does

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Retain and attract talent, which is the next thing to get to but your job is not to make people happy all right

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Number two

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One of the things I heard

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Is that employees are my customer right if you were a

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Manager or your nature director like well really you know everyone who's who works here is my customer

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Incorrect

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That is not who your customer is your customer is the company all right and now I'm going to be clear about this

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The company has three stakeholders

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You've got shareholders the people who own the company you've got

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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

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Now the reason this is an important delineation

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Is that if you have a HR director who is like employees first

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Then you have the type of stupid stupid

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Decision that I just discussed in the very beginning which is literally just paying out

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profit

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For no value

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All right, and this is an important point that I need to cover which kind of leads naturally to the next thing is that

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In order for a company to grow it has to have

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profit

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In order for it to weather storms that it does not see that are going to come in the future

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It needs to have profit to be able to reinvest in new product lines in legal defense in whatever could possibly happen

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And when you just choose

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To buy things for no value which is essentially what it is when you just overpay

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Then you put your company in a bad position. So let me explain

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So an investor looks at any kind of asset and

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Company the assets of the company are the humans right are the or the it's human capital

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It's the actual value they get from people especially if you're in a service business right and so you have the value

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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

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Is to pay as little as possible for as the highest amount of value and that may mean people uncomfortable

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But the point of all businesses is to give to get as much

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Pride they want to have as big of a discrepancy as possible

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So if I'm an investor and I'm buying stocks

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I want to buy the most valuable company that I can for the least amount of money right

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It's a price to value discrepancy right and the bigger that discrepancy the better it is now

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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

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It's a bad deal

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All right, and so the reason that that first HR director made such a terrible decision was because she literally just chose to take it

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Literally take our good deals and just say hey, we're gonna make bad deals now and all of our bad deals

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We're gonna keep as bad deals right it just it just it just it just I it made no sense whatsoever and so

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That's that is what we're like that is the goal here right and

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And

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Finally when I was talking to our HR director about this she pushed back on this she was um not

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Well, sorry, not her but like you might have you might have any HR director

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You might have a manager might push back on this idea and so I just went and the two different two different scenarios came up

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Um that we were walking through

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And one of them is well, you know, uh you as the entrepreneur, you know

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You always value the marketing the sales more than the rest of the company

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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

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Um, and I want to be 100% clear. I do value marketing sales and product more than operations

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Here's why

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Not that long ago

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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

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You have to delegate blah blah blah and so there was a period of time where I put operations on a pedestal

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And it was like no guys we need to just do what operations wants us to do

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And to be clear for definition operations is everything that is non-core to the value of the company

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All right, that is IT that is HR that is finance

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Um that's legal

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Uh all of those comprise

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Uh operations all right and to be clear about what that means is it's everything that must happen

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To keep the company running but is not a core value driver for top line revenue or for customers

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All right, and so marketing brings revenue in product delivers value that is being exchanged for money

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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 your

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Or your um, or you're selling the stuff that is being delivered those are core value to the company

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everything else absolutely must happen

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But um in general they're not the main value drivers now that being said there are ways that those other

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Those other components can provide value indirectly

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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

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If you're clear on that

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You will be more valuable to your owner and if you're interviewing for a position

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And you talk the way that I'm telling you right now to talk to an owner

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You will probably get the job and probably stay there because they will know that you'll understand what you're talking about

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So the example she said well um

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You know, I feel like you care more about you know sales and marketing and I said yes. I do and here's why

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um

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And by the way when I did that operational thing and put operations first the company started going down

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Um, and we started making less money and it was painful and horrible and I had to basically jump back in and be like

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I'm so sorry about that. That was not a good idea

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We are keeping the value we provide and marketing and sales

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Primary and operations is secondary to that. It is a supporting role

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So if sales says hey, we need contracts

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uh, you know to be changed because this is the new offer or whatever

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Then operations has to say all right. We're going to go figure that out right and that is the point

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The point is that operations should support and always enable sales marketing and product all right

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So she said well um, I feel like you know you value you know like a star salesman

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More than you value like a frontline customer service person

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And so she's like, you know, there was a there was a decision

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That you know, this is this has come up is you know, it's a million times over the years. It's like

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You know, I think you value these positions more and I always have to unequivocally say I do

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Yes, because people people like and I feel like this is I don't understand the employee thing or it's just like

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They feel like it's like a bad word for me to be like no, no, no

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I do care about more about marketing sales and product period

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period

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Because they are the major drivers of value in the company. All right, and so

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So for example if you had a chat homes word about this in his book

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If you have a superstar salesperson, this is what I was talking about to the to the whole company

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I was like if you have a superstar salesperson and that person, you know

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Is being paid quote above market right above market value

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There's two ways of seeing market value. There's market value

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Which is like what is the rest of the market paying for this right and then

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What am I getting in return for this specific person so for like if you have an all-star salesperson

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Like you may have gone through 20 salespeople to find an all-star salesperson for your specific company and your specific product

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Right because there are some salespeople who who excel

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In let's say beta C transactional sales all right, and there's some who who excel in you know

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Longer style B2B consultative sales and there are some salespeople who excel in account management and kind of upselling and kind of like the farming and

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Continuing to grow and account right those are all sales. They're just different and so I could find a salesperson

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Right, but that person might not perfectly fit my company and I might not yield the same outcome

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Amos in Asian quick break just to let you know that we've been starting to post on LinkedIn and want to connect with you

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All right, so send me a connection request and note letting me know that you listen to the show and I will accept it

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There's anyone you think that we should be connected with tag them in one of my or layless posts and I will give you all the love in the world

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All right, so let's get back to the show

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And so if I have for example somebody who's selling really well and sells three times you know sells more than three times

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You know it would take me two or three normal quote normal salespeople to replace their production

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And this is common in most companies. Most people have multiple salespeople

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There's one person to oh, you know one or two people always like lead the the pack disproportionately right

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And that

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that person right

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If in many conversations, this is one of them is like well if that person came up to you for example

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And said well, I want a 20% pay raise or a 10% pay raise

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She was like I disagree with that and I was like I think that's stupid that you disagree with that

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I was like makes the economic argument if we lose that person and then we lose half of our sales

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How can you tell me that was not worth 10% more on their base salary?

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So I thought about like that. I was like right you need to think like an owner right you got to think like an owner

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What am I losing here right?

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Into the same degree the the core layer to that is like well

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I feel like you don't value customer service as much like what if we get an amazing customer service role

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This is kind of like the counter example right like well

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I feel I feel like you're willing to you know pay these people more than you are willing to pay these people

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And it's like yes, I am because they provide more value

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And I was like okay, I hear where you're coming from

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What if this person does an amazing job in customer service?

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And I was like I get it. So let's say this person disappears tomorrow

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How much lesser are we gonna make?

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So probably not a lot. I was like right

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And so if you wanted to you know come to me with a you know customer service person and say

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This person you know saves

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X percent of people per month and that results in this much money

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And the aggregate of adding a dollar per hour example to this person's role still doesn't

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Compared to what everyone else on the team is saving

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Which would be like what I would consider market right like if I just brought some in whose average and this person's way above average

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Let's say this person saves

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You know 25% of the whole team saves is from this one person

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Then I'd be like okay, well, there's a number value to that and

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You know we can incrementally add a certain amount

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That would mean it was worth keeping right

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And

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I was like but in this example that we're talking about if this person stopped and just was going

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I was like how much do you think that the company would make less

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Choose like it probably wouldn't change the revenue and I was like right

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And for that reason that is how market values established and so for everyone

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It's like this is the real world all right like I don't I don't know what the the

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The Harvard Business Review you know says about making happy employees and like all this you know whatever who do

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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

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You get paid based on the value that you provide and a good owner understands that right and so

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When we're you know we're having these discussions

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Um, I think that it was it was good for our whole company to to understand and see like

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That's the point here like the point is to make a profit the point is to pay

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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

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Right and so you know to wrap this up if you were you know for for for HR in general human resources

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It's like well then how do I provide value you provide value

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By one protecting the company at in always all right

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And the way that you do that is first when people come to you and say hey, I want to hire sound so your first answer should probably be no

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Give me a reason why your team is so overworked that they can't just work more right

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Show me your hour-to-hour utilization that you have like and I'll tell you right now

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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

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That they are overworked because they literally do not understand what work is

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All the time I know this for effect there's some of you listening to this right now who spend your entire day not working trying to work

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Spend all day getting fuck all done

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Because you're in your head and you literally have an inability to focus

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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

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like

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You have to get you just have to get things done you know and so many people don't get much done in their whole day

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And then say hey, I need help when it's really like they

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Aren't actually overworked they actually just don't know how to work right and mind you this is not

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This is a lesson that I learned because I was younger once and I will start working at a law firm as an intern

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And I remember a senior partner jokingly said to me. She was like you don't even know what work is yet

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She's like you haven't even learned how to work and I and I was like offended

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But then I saw how hard these people worked and lawyers worked there you know in hard hard law firms

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They work their asses off and I was like huh

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It's probably right right and I started observing the habits of the people work more and how much more they got done

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So anyways

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Point is is that people will come and try and hire for help when there really isn't it's not necessary

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And so that does not protect the company

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It also doesn't protect the employees because if the company is at risk everyone's at risk right so you have to put the company first

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Right

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And so that's thinking like an owner

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So that's number one number two is that you have are active in recruiting the best talent

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All right, because everyone knows that the value of the company is going to be based on the value of the people

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Who not the what right a good who will figure out the what and so really good HR is really good recruitment

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It's talent right it's finding the talent developing the talent retaining the talent now obviously not all that's going to fall under HR right recruiting

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Absolutely right

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You know developing is going to be more underneath the departments and retaining is going to be a function of really the department heads

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And then the compensation packages right but the thing is is that I want to be clear here

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If you and this is I'm going to wrap this back in the original story

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When you know the HR director the former HR director did this big salary analysis and she said hey

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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

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Why did we do this

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And that's the hard question that you know obviously wasn't able to answer I was like why did you did it because you had nothing to do right

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But that's actually why she did it but I was like what what problem were we solving here

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What was the objective of this

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And the answer there there was not right because

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The only reason that you would want to move compensation is for one of two things either you cannot attract talent

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Or you cannot retain talent so what I mean by that is like

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The only reason to really increase someone's pay if they are already working for you is because you

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Value them enough

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That replacing them with someone else who has a comparable social

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Would not the marginal difference would not be like if if the margin difference is huge right then you'd you'd be

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Incentive eyes to retain them right and you as a company in this type of example have a problem retaining employees

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We at gem launch do not have that problem we we have incredibly low attrition we fire people like crazy

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but people don't quit um

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and

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That's because we have a really high performance culture like people don't last you know what I mean like it's

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Like sorry low performers don't last

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It's I heard this from Greg Cardone, but I really liked it. It's like gem launch is a dangerous place to work

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Like if you if you come in and you get on the train like you will learn more from

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Me and us and running a company and learning how to grow things

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than ever before but

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You got to perform like this is a winner's environment and if you are a winner

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You will love it here and if you are not a winner you will not I mean you won't be here very long

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Right because the thing is is when you cut if you've ever played on a high-performance sports team in your whole life

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At some point or any kind of team those high-performing those are winning team

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Usually there's a culture that if someone is new and comes in they either assimilate or are rejected

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And the stronger that core team is is like this is how we do it right we wake up at five

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We go over our scripts we roleplay we do game day review from the day before on sales calls blah blah blah

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We you know etc and someone knew is like oh man. That's you guys are waking up early. I'm not really about that life

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Like like the team will be like dude get this guy out of here like he's gonna take the team down and so

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having that culture

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Allows you to spit people out quickly, but it also allows you to retain now. This is my point

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earlier, which was

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Why did this HR manager you know director make this call right and obviously is because she wasn't thinking right

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But there was no problem that she was trying to solve which is I was like

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This is this was a hard time for her I can imagine because it was in front of the entire company. I was like

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Do we have a problem attracting talent

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It's like no. It's like okay

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So the pay that we are currently offering is we're having no issue finding

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talented people to work for these positions at these price points

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It's like no, it's like okay

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Do we have a major problem in attrition are we losing employees left and right

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Two competitors who are paying more offering more or that we got headhunters picking off our people

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It's like no

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It's like then why did you just choose to spend 600 thousand dollars a year more of bottom line profit

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Why

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In the answer she had none right and so

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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

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That is the point. I don't care what anyone else says that is the point

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All right, you're gonna try and pay for the value as little as you can because that discrepancy is where the profit is

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Right speaking 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

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Right

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That's what it is and so

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Anyhow I share the story at the beginning because that is you know one of a zillion

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Failures, you know in lessons that I've learned along the way in this in this game and

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You know if you have a star employee

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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

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They're usually worth like three or four employees five employees in output right

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I'm probably worth a lot of employees in output in terms of top line revenue this business

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So I could disproportionately pay

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Is it fair? I think yes, it is fair. I think you should always be compensated based on the value they provide

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I think that's the ultimate fairness

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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

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All right, so I want to make sure I hit on my points making employees happy is not your problem

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It is their problem. It is their responsibility now you can equip them with tools and skills about mindset and whatnot

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But like ultimately the accountability of who needs to make who happy you need to make yourself happy

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A job is not supposed to make you happy because there are people who are endlessly happy and quote terrible jobs

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And they're people who have amazing jobs and kill themselves

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So it has nothing to do with you number one number two

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Your employees are not your customers, all right your company is always your customer number one

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Because the company balances the priorities of everyone the shareholders the customers and the employees, all right

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I'm a quote middleman

363
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Between the employees and ownership that is not true. You protect the company. All right. These are false beliefs. These are not true

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all right

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You know undervaluing

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people who are not

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Value you know top line value providing right they're not delivering on on on the value that we're selling or selling the value

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Right that's there's a fundamentally what a company does we sell value and then we deliver on on the promise

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That's it right and if you're not in one of those core things

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um

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Unless you can make an argument for how you were directly

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uh

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Providing value then you will probably get paid less and that's okay and that's okay right

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um

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Fundamentally thinking about all

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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

377
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Right that is and that's okay

378
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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

379
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If you're not having any issues or attracting or retaining people then you're paying fine right like you don't need to change the cop

380
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ah

381
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And so finally um, that is what I will lead you with or end you uh or leave you with um in this role of HR

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And my many many lessons along the way um, I hope you enjoyed this and click subscribe and all of that good stuff

383
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But uh, I have I have some passion with this because it's I've made these mistakes so many times and I've seen these mistakes

384
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Made on my behalf and so if you are a manager if you're an HR director

385
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Take this to heart

386
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You work for the company

387
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The company is your only customer and your responsibilities to protect the company

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Just like everyone else's responsibilities to protect the company

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And if you can think like that you will think like an owner and you will move up in your company

390
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If you live in a la la land of

391
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I'm supposed to just buy bean bags and have you know and and keep employees happy

392
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um

393
00:29:13.120 --> 00:29:14.960
One, you're gonna waste money

394
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Two, you're not gonna know what actually provides value in a business and three if you're in a different company

395
00:29:20.080 --> 00:29:24.480
What'll what may happen if you don't have like a candid owner or whatever who wants to like talk real with you

396
00:29:24.960 --> 00:29:25.920
um

397
00:29:25.920 --> 00:29:31.280
They'll just kind of like put you in a corner, right? And then just be like oh, yeah, yeah, yeah, yeah, yeah go do that little initiative

398
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Um, but they won't actually see you as valuable

399
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Because it means because you don't get the game like you don't get it you have to understand it um and then

400
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People like you'll you'll get into the encircle

401
00:29:46.640 --> 00:29:48.640
I'm trying to say this the right way

402
00:29:49.120 --> 00:29:51.120
You've probably

403
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Have people in your life where you've got you've got your friends right um

404
00:29:57.680 --> 00:30:04.320
And you're like she gets it or he gets it right you talk to your friends like nah she gets it right she gets how this like how we see the world

405
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Right the thing is is that

406
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Most business owners see the world the same way

407
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And that's why they are the owners of the business

408
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And that's why they started the business and that is probably what businesses grown

409
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And so it is your best interest to align

410
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With the company overall because a good owner will put the company first

411
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Not themselves because ultimately they the company feeds them the company is the goose the company is the is the is the is the is the

412
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Is the beast that feeds everyone it is the thing that plows the field it is the mule that everyone is fed off of

413
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And so we have to keep the mule healthy and that is by having discrepancies and making the hard conversations and making the hard calls and being real with you

414
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Which is what i'm hopefully trying to do right now, which is that is the point all right

415
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So anyhow, uh, I hope that was value before you. I hope that made sense hopefully you don't have to pay them any lessons

416
00:30:54.080 --> 00:31:01.920
And failures that I have and if you have a major manager or a manager who you know hires and argues for compensation things like that

417
00:31:03.040 --> 00:31:06.400
Send this to him. I think it's valuable. So anyway, lots of love. Kisses soon