https://www.youtube.com/watch?v=cemduJKQl5w

1 00:00:00.000 --\> 00:01:00.000 your employees are not your customers
all right your company is always your customer number one because the
company balances the priorities of everyone the shareholders the
customers and the employees \[Music\] 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 meet up for our leadership and uh
there was kind of you know there's a few kind of i don't 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 glaze over this is probably the first

2 00:01:00.000 --\> 00:02:00.000 podcast i've ever made about you know
hr and human resources but 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 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 and investing in employees looks
like i think it would 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

3 00:02:00.000 --\> 00:03:00.000 so she had taken upon herself um
because she didn't have enough work i i know this but she doesn't know
this it was because she didn't have enough work and she had over hired
she had six people in her department six people in hr can you imagine um
six we had a hundred 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 a salary analysis which is
basically a study of how much everyone in the company um you know quote
should be getting paid 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 et cetera 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

4 00:03:00.000 --\> 00:04:00.000 was being you know overpaid and then 20
or 25 percent of the company was being underpaid and then about 50
percent of the company was being 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 if they were being overpaid uh they were
going to stay there because you're not going to give people you know pay
cuts 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 eight what do you call it a uh at our quarterly and this was
actually her accomplishment for the quarter and i just i just remember
just being so so bewildered befuddled dumbfounded um by the fact

5 00:04:00.000 --\> 00:05:00.000 that 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 and then kind of outline what i believe uh the 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 a hundred
thousand dollars 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 an email i can 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 um and so i think the whole thing

6 00:05:00.000 --\> 00:06:00.000 probably cost me like six hundred
thousand dollars in profit right like i mean like more than she was
going to get paid for years right and it just seemed like it's just 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 rep 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 drake our director's not with us anymore uh was
bringing up her she was kind of giving her uh position on what she
believed her value to the company was and 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 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

7 00:06:00.000 --\> 00:07:00.000 eat piece by piece your job is not to
make employees happy as an owner your job is not to make employees happy
as a manager your job's 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 auschwitz who wrote books about how they were happy
and there are people in america living in the top one percent 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
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 who are going
to fit in with the culture 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

8 00:07:00.000 --\> 00:08:00.000 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 an hr director like well really you know everyone who works
here is my customer incorrect that is not who your customer is 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 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 in
order for a company to grow it has to

9 00:08:00.000 --\> 00:09:00.000 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 or the or 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

10 00:09:00.000 --\> 00:10:00.000 give to get as much pride 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 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 that
first hr director made such a terrible decision was because she
literally just chose to take it literally take our good deals and just
say hey we're gonna make bad deals now and all of our bad deals we're
going to keep as bad deals right it just it just 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 sorry not her but like
you might have

11 00:10:00.000 --\> 00:11:00.000 you might have any character you might
have a man who might push back on this idea and so i just went and the
two different 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 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 that's legal uh
all of those

12 00:11:00.000 --\> 00:12:00.000 comprise 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 top lane
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 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 com 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

13 00:12:00.000 --\> 00:13:00.000 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 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 gonna 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

14 00:13:00.000 --\> 00:14:00.000 salesman more than you value like a
frontline uh customer service person uh and so she's like you know there
was a there was a decision that you know this is this has come up this
you know a zillion times over the years it's like you know i i think you
value these positions more and i always have to unequivocally say i do
yes because people people like and i feel like this is i don't want to
say an employee thing or it's just like they 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 because they are the major drivers of value in the
company all right and so um so for example if you had chet holmes wrote
about this in his book if you have a superstar sales person this is what
i was talking about to the to the whole company i was like if you have a
superstar sales person 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

15 00:14:00.000 --\> 00:15:00.000 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 sales person like you may have gone
through 20 sales people to find an all-star sales person for your
specific company in your specific product right because there are some
sales people who who excel in let's say b2c transactional sales all
right and there's some who who excel in you know a 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
different 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 you know sells more than three times uh you know it would take me
two or three normal quote normal sales people to replace their
production and this is common in most companies most people have
multiple

16 00:15:00.000 --\> 00:16:00.000 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 in in in many conversations this
is one of them it's 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 ten percent more on their base salary so well i hadn't thought
about like that i was like right you need to think like an owner right
you gotta think like an owner what am i losing here right um and to the
same degree the corollary to that uh is like well i feel like you don't
value customer service as much like what if we had an amazing customer
service role this is kind of like the counter example right like well i
feel 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

17 00:16:00.000 --\> 00:17:00.000 in customer service and i was like i
get it so let's say this person disappears tomorrow how much less are we
gonna 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 percent of people per month and that
results in this much money and the aggregate of adding a dollar per hour
example to this person's role still doesn't compare to what everyone
else on the team is saving which would be like what i would consider
market right like if i just brought someone in who's average and this
person is way above average let's say this person saves you know 25
percent 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 we're talking about
if this person stopped and just was gone i was like how much do you
think that the company would

18 00:17:00.000 --\> 00:18:00.000 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 i don't know what the the
harvard business review you know says about making happy employees and
like all this you know whatever hoodoo um 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 to understand and see like that's the point here like
the point is to make a profit the point is to 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 to wrap this up

19 00:18:00.000 --\> 00:19:00.000 if you were you know for 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 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

20 00:19:00.000 --\> 00:20:00.000 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 you have to get 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 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 and i was like
offended um but then i saw how hard these people worked and lawyers
worked you know in in hardcore 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 work more and how much more they got done so
anyways um point is is that people will come and

21 00:20:00.000 --\> 00:21:00.000 try and hire for help when there
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 that's gonna fall under hr right recruiting
absolutely right uh you know developing is gonna be more underneath the
departments and retaining is gonna be a function of really the
department heads and then the compensation packages right but the thing
is is that i want to be clear here if you and this is i'm going to wrap
this back in the original story

22 00:21:00.000 --\> 00:22:00.000 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 wasn't able to answer i was like
why did you did it because she had nothing to do right but that's
actually why she did it but i was like what problem were we solving here
what was the objective of this 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

23 00:22:00.000 --\> 00:23:00.000 that replacing them with someone else
who has a comparable skill set would not the marginal difference would
not be like if if the margin difference is huge right then 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 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 performance don't last uh it's i 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 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 gotta
perform like this is a winner'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 is when you come if
you've ever played on a high performance sports team your whole life at
some point or any kind of team that was high performing

24 00:23:00.000 --\> 00:24:00.000 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 is like
this is how we do it right we wake up at five 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 oh 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 gonna 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 director make this call right and
obviously it was because 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

25 00:24:00.000 --\> 00:25:00.000 attracting talent it's like no i was
like okay so the pay that we are currently offering 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 offering more or that we got headhunters picking off our
people she's like no it's like then why did you just choose to spend 600
000 a year more of bottom line profit why in 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 that
is the point all right you're going to try and pay for the value as
little as you can

26 00:25:00.000 --\> 00:26:00.000 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 anywho uh i share the
story at the beginning because that is you know one of a zillion
failures you know in lessons that i've learned along the way in this 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 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 and output in terms of top line revenue 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

27 00:26:00.000 --\> 00:27:00.000 all my points making employees happy
is not your problem it is their 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 they're 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 the company balances the priorities of everyone the shareholders
the customers and the employees all right 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 top
line value providing right they're not delivering on on on the value
that we're selling or selling the value right that's those are
fundamentally what a company does we

28 00:27:00.000 --\> 00:28:00.000 sell value and then we deliver on the
promise that's it right and if you're not in one of those core things
unless you can make an argument for how you were 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 or attracting or retaining people then
you're paying fine right like you don't need to change the comp and so
finally um that is what i will lead you with or end you uh or leave you
with in this role of hr

29 00:28:00.000 --\> 00:29:00.000 and my many 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're 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
responsibilities to protect the 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 land of i'm supposed to just buy bean bags and have you
know and and keep employees happy um one you're gonna waste money two
you're not gonna know what actually provides value in a business and
three if you're in a different company what what may happen if you don't
have like a candid owner or whatever who wants to like talk real with
you

30 00:29:00.000 --\> 00:30:00.000 um they'll just kind of like put you
in a corner right and then just be like oh yeah yeah yeah you bet yeah
go do that little initiative um but they won't actually see you as
valuable 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 in circle i'm trying to say this the right way you've probably
had people in your life where you've got you've got your friends right
um 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 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 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

31 00:30:00.000 --\> 00:31:00.000 the company feeds them the company is
the goose the company is the is the 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 and
making the hard 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 anywho uh i hope that was valuable for you i hope that made sense
hopefully you don't have to 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 him i think
it's valuable so anyways lots of love catch you soon \[Music\] \[Music\]
\[Applause\]

32 00:31:00.000 --\> 00:32:00.000 you
