In this video, Alex Hormozi, owner of acquisition.com, shares his insights on effective management strategies for entrepreneurs. He emphasizes the importance of understanding the three reasons why team members may not perform as expected: lack of motivation, training, or clarity in communication. Hormozi advises managers to focus on leading indicators—actions that directly influence desired outcomes—rather than lagging indicators, which are results of past actions. By identifying and acting upon the primary action that triggers subsequent actions, managers can achieve their goals more efficiently and avoid the common pitfall of focusing on outcomes without a clear action plan.
Best management hack that took me years to learn.
This quote introduces the central theme of the discussion, which is about sharing a significant management hack that Alex Hormozi has learned over the years.
Welcome to the game where we talk about how to get more customers, how to make more per customer, and how to keep them longer, and the many failures and lessons we have learned along the way. I hope you enjoy and subscribe in this video.
This quote explains the broader purpose of the video series, which is to provide valuable insights into various aspects of business management and growth.
So by the way, my name is Alex Ramosi. I own acquisition.com. We about $85 million a year.
Alex Hormozi shares his identity and credentials to build trust with the audience, indicating that the advice he is about to give comes from a place of experience and success.
There's only three reasons that they're doing that. Number one is that they are not motivated to do what you want them to do, which is they do not know why. The second one is that they do not know how to do what you want them to do. And the third is that they do not know what you want them to do.
This quote outlines the three fundamental reasons employees may fail to perform as desired, framing the problem in terms of motivation, training, and communication.
The solve for that is telling them the vision of what you want in your company. ...which means they lack training and process that you have not taught them. ...which is either you have miscommunicated or you have poorly communicated, or you have not communicated via the medium or channel that they best understand.
The quote provides specific solutions to address each of the three issues identified in the management triangle, emphasizing the importance of vision, training, and clear communication.
So either the person doesn't know what you want them to do, they don't know how to do it, or they know both of those things and just not motivated to do it because they don't know why. Or they have weird character traits and you can let them go.
This quote recaps the reasons for underperformance and introduces character as a potential issue, implying that not all problems can be solved with management tactics.
But here's an interesting one, and this is the one that if you can shift all of your management tactics from what most people do, which is manage towards outcomes, to this special little widgety widget, then you will be successful.
The quote teases a significant shift in management strategy, suggesting that moving away from a focus on outcomes to another approach can lead to success.
"vice based business, or rather any kind of recurring based business, which all businesses are recurring to one degree or another, but if you'd like to have a more recurring based business, then one of the things that you're going to track is churn, which is the percentage of customers that leave month over month over month."
This quote emphasizes the significance of churn as a metric in businesses that rely on recurring customers, suggesting that all businesses have some form of recurring aspect.
"And they say, sounds good, Alex, that's a great idea, because if we reduce our churn, we're going to make our customers worth more and we'll not have to acquire as many. Or if we acquire the same amount, we'll be a bigger business than we were last year, just if we do the same thing."
This quote outlines the logical reasoning behind wanting to reduce churn, highlighting the benefits of increased customer value and business growth without needing additional customer acquisition.
"The problem is that it is a lagging indicator."
The quote succinctly states the issue with focusing on churn reduction as a primary goal, indicating that it does not provide immediate actionable data for proactive business strategies.
"And so I'll tell you a quick story about this, and hopefully it'll drive it home. So I had. And this is what's fucking crazy, is like, I still do this stuff and my own business, and I still mess this up. So I'm leaving this to you because I can tell you, when we accomplish our goals, it's because we are focused on leading indicators rather than ladding indicators."
Alex Hormozi shares a personal anecdote to illustrate the importance of leading indicators over lagging indicators in achieving business goals, admitting that even experienced business owners can overlook this principle.
"So the outbound team sets their goal. They say, we want to do this. And I said, no, guys, we need to make this a leading indicator. So what are we going to do to do this? And so the manager said, we need to hire five more outbound reps. I was like, that is a wonderful leading indicator because if we hire five more outbound reps, then we're going to make more dials, which is going to make more calls, which is going to blah, blah, blah, blah, blah, right?"
Alex Hormozi explains the process of shifting the focus from a lagging indicator (outbound sales) to a leading indicator (hiring outbound reps) and the expected positive chain reaction this would cause in terms of increased calls and sales.
"Guess what happened. Didn't happen."
This quote reveals that despite the strategic shift to focus on a leading indicator, the desired increase in outbound sales did not occur. The quote does not provide an explanation, indicating an incomplete narrative.
In order to get more calls, we're going to need more bdrs, right? And so we need to hire five more bdrs.
This quote emphasizes the direct relationship between the number of BDRs and the ability to make more sales calls, highlighting the necessity of hiring as a first step in the sales strategy.
Anyone? Guess mozanation, real quick, if you are a business owner that has a big old business and wants to get to a much bigger business, going to 5100 million dollars plus, we would love to talk to you.
Alex Hormozi is inviting business owners who are looking to grow their already substantial businesses to even greater heights, indicating that his team at Acquisition.com specializes in such scaling.
When you pick the leading indicator, it can't just be the thing that happens before. It has to be the thing that happens first.
Alex Hormozi stresses the importance of identifying the initial action that triggers the sequence leading to the desired outcome, rather than just any preceding action.
And the third time when I heard the same freaking goal again, I was like, we're not making this mistake again.
Reflecting on past failures to achieve goals, Alex Hormozi resolves to focus on the correct leading indicators to ensure that the necessary actions are taken to meet objectives.
Lagging is what most people do is when they put the objective metric. And that's silly, because no one can accomplish a metric. They can accomplish tasks, they can accomplish actions.
Alex Hormozi criticizes the common mistake of using lagging indicators, such as final metrics, as goals, and emphasizes the importance of actionable tasks that lead to those metrics.
"And so this might be one of the most important things that happens in a company is figuring out and determining what is the true first action, primary action that is required to accomplish what we would ultimately like, which is an increase in x, right."
This quote emphasizes the significance of discerning the initial, most crucial action that will lead to the desired outcome in a company's strategy.
"And so the thing is, we have to continue to pull the thread until you identify what the actual weak link is in the chain of dominoes."
Alex Hormozi stresses the need for continuous analysis to discover the fundamental weakness or pivotal point that, when addressed, can initiate a cascade of successful outcomes.
"But it was because we were focused on the wrong thing. We were focused on lagging indicators, or not the primary indicator."
Alex Hormozi explains that their lack of progress was due to concentrating on the wrong metrics, which did not directly influence the desired outcome.
"And as soon as you can identify that, and that is the job of the owner, that is the job of the CEO, is to have the discernment to say, no, that's not the thing. This is the thing. And this is what we're going to focus on."
Alex Hormozi underscores the crucial role of leadership in recognizing the true primary action necessary for goal achievement and steering the company's focus towards it.
"If you have had a goal and you've written it quarter over, quarter, month over month, you've written the same number and you have not accomplished it and you are not making progress towards it, then it is likely because the goal that you are setting is one outcome based, and two, the actions that you believe are required to accomplish that goal are not the primary action, but simply preceding actions that are still not the source of the creation of the outcome."
Alex Hormozi points out that a lack of progress towards a goal often indicates a misalignment between the goal itself and the actions believed to be necessary to achieve it. He suggests that the actions focused on may not be the root actions that generate the desired outcome.