*REVEALED* Compensation plans that ACTUALLY WORK…
Summary
- As an entrepreneur, you always need better people and want to get more out of your current team.
- Culture and training are crucial, but sometimes you come across a process that significantly boosts performance.
- My company, Acquisition.com, does about $85 million a year, and we're working to implement a new performance management strategy.
- We've used Management By Objectives (MBOs) for both company and individual targets, typically splitting variable compensation 50/50 between these goals.
- For example, a Director of Marketing with a targeted earning of $200,000 might get $100,000 as a base salary and another $100,000 in variable compensation.
- Half of this variable portion depends on company growth, while the other half is based on individual objectives they have control over.
- The new approach I'm adopting allows employees to set their own 30-day rolling goals for their variable compensation.
- Employees publicly declare their goals, adding social pressure, and these goals must align with the company's overall objectives.
- This system grants autonomy and ownership, as peers may encourage setting more challenging goals due to the social dynamics.
- The variable rewards system applies well to roles that aren't directly tied to sales, helping employees feel they're contributing to company growth.
- Implementing this strategy should reduce employee turnover by giving them a sense of progress, challenge, and growth.
- Creating an environment that fosters employee fulfillment can ultimately lead to building a better business.
Video
How To Take Action
I would suggest starting with setting up Management By Objectives (MBOs) for your team. To make it simple, split your team's earnings into a base salary and variable compensation. For example, if someone's target earnings are $50,000, consider giving them a $25,000 base and $25,000 that they could earn as bonuses.
Half of the bonuses should be tied to the company's growth, so everyone has a stake in the success. But the other half should be for personal goals. Make sure you're making this fair and depending on their role in the company.
Next, let's make these goals special. Let everyone pick their own 30-day rolling goals for their bonuses. They'll share these with the whole team. This brings in some healthy pressure and makes people feel more in control.
Make sure these goals they set help the company too. They must be clear, so it's obvious if they hit them or not. Be prepared to see team members challenge each other to set tougher goals. That's good; it means they care and are taking ownership.
This approach isn't just about money. When people can set their own goals, they feel like they're growing and making progress. That's huge. It means they're happier, stick around longer, and everyone does better work.
Remember, your biggest goal is to create a place where your team feels they can grow, take on challenges, and feel a part of the company's success. If you can do that, your business will definitely get stronger.
Quotes
"Every entrepreneur has the same problem which is they need better people and they need to get more out of the people that they have"
– Alex Hormozi
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"It's much more enjoyable to have people who are all aligned and driving hard like owners towards the same goal"
– Alex Hormozi
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"We have intermittent reinforcement which is another way of saying variable reward for an employee"
– Alex Hormozi
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"Your churn will go down because people will feel like they're making progress"
– Alex Hormozi
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"If you can create an environment that increases the likelihood that employees feel fulfilled… I think that you're gonna build a better business"
– Alex Hormozi
