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

Last updated: Jun 14, 2023

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

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

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

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

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

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

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

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The Importance of Understanding the Role of HR

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

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

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

The Ideal Role of HR in a Company

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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