The Sweet Spot (ALEX HORMOZI)

Summary

• I recently discussed with a company I have invested in about setting up effective management metrics for scaling the business.
• Andy Grove's book "High Output Management" has taught me about the importance of paired metrics for managing roles within a company.
• For each position, it's not just one key metric that matters, but usually two metrics that need to be balanced.
• These paired metrics typically involve balancing speed or output against quality or accuracy.
• For a salesperson, balance total number of sales against refunds or backouts to ensure not just volume, but also sales quality.
• In customer service, balance the speed of ticket resolution or total number handled against customer satisfaction or NPS scores.
• For a marketing role, monitor the total number of applications against the number of qualified applications, to measure efficiency and quality of leads.
• A physical products business should balance inventory levels against shortages to manage cash flow and supply appropriately.
• In finance, balance taxes against avoiding audits or penalties, ensuring compliance without excessive conservatism.
• The concept of paired metrics, which I'll name later, helps pinpoint the sweet spot of optimal performance for roles in your business.
• To scale a business in the service space, focus on training people, establishing culture, and monitoring the right metrics for sustained performance.
• For example, in a photography-based business, an image editor's metrics might be the total number of images edited versus the number of callbacks or corrections needed.
• Clearly defining these paired metrics for your team will lead to more money, higher profits, a happier team, and more clarity in their roles.
• Training your team on these metrics and finding a balance is key to maintaining high-level performance across the organization.
• I give credit to Andy Grove for his insightful approach to management, and I believe these strategies can help you make more money and build a stronger business.

Video

How To Take Action

I would suggest implementing Andy Grove's idea of paired metrics to really push forward your business. Start by thinking of the two key things you need to balance for each role. If you're in customer service, for example, you could track how fast you fix problems (like answering questions or solving issues) and also measure how happy this makes your customers. If they're really happy, chances are you're doing a good job.

For a sales role, watch both your total sales and returns or complaints. You want loads of sales, but if too many people are unhappy and returning things, you need to find out why and fix it. Same goes if you're working with products; keep an eye on how much stuff you have and how often you run out. The goal is to sell lots without running out or having too much that just sits there.

If someone you work with messes up, it's your job to show them how to do better. Teach them about these two key things they've got to juggle and help them understand how to do both really well. That way, they'll know exactly what's important and you'll see your business grow, make more money, and your team will be happier because they know what success looks like.

Just remember, it's all about finding the sweet spot. Not too much of one thing, not too little of the other. This way, you get the best performance from yourself and your team. And training – that's the secret ingredient. Train your team, get your culture strong, and keep those metrics in check. That's how you win.

Quotes by Alex Hormozi

"it's about managing a dichotomy of being am I being micromanaging or am I delegating too much"

– Alex Hormozi

"if you think about every piece of your business right now, all of the people that report to you, there's typically a metric that you're trying to push but something you're trying to also conversely not have happen"

– Alex Hormozi

"total number of sales against refunds or back outs"

– Alex Hormozi

"it's in your culture and your training that gets them up and going; culture keeps them going"

– Alex Hormozi

"use it, make more money, have higher profits, have a happier team"

– Alex Hormozi

Full Transcript

i'll make this a short one for you i just got off a call uh with a company that i have a vested interest in um and so uh we were talking about how to set up the management metrics in place for the business as we're trying to scale it and so one of uh one of the things i picked up from andy grove in uh shoot what is called high output management i think um is paired metrics and um it was it was just a great epiphany for me and so i'm going to share it with you so the way that any growth who's the founder of intel very smart dude manages each of the roles within the company is that he tries to put paired metrics in place so it's not just number of sales or just closing percentage or just insert one thing here right most times and this is just myself included i would usually should be like this is the one key metric that i want to look at right this is the one thing that matters for this position but if you think a little bit more about it it tends to be two that are in parallel all right and so what it does is help you helps you manage the balance or the dichotomy between uh the performance and roll and typically it'll be between speed or output in terms of total volume and quality all right and so the way that you balance this within any position would be for example if you're talking to a salesperson it would be total number of sales against refunds back outs all right if you're looking at a customer service position it might be uh speed of ticket resolution or total number of tickets handled and uh customer satisfaction or uh nps or like a promoter score right uh so that would be a balance between two different metrics that you're that you're looking at and then that way because at the end of the day you you never really want to because a lot of times in business it's not about either extreme it's about managing a dichotomy of being uh am i being micromanaging or am i delegating too much right like is either of them wrong no you want to follow kind of right in that middle path and in different times you might lean towards one area or the other area more but when you're looking at each component of the business you can look at balance metrics and so um i'll break down more examples because i think it might be useful for you so if you're looking at a marketing position it's going to be total number of applications against qualified applications right so it's like okay this is the total volume i got but how many were qualified right um the next would be the sales guy which i just went over like total sales volume or closing percentage against backouts all right the service position uh total number of uh responses and or tickets uh handled or customer complaints resolved or speed of resolution against uh the quality score right um on the back end let's see i'm trying to think of other positions that you can have for this uh i mean like right now obviously i'm blanking because i'm live um but if you think about every piece of your business right now all of the people that report to you there's typically a metric that you're trying to push but something you're trying to also conversely not have happen and so if you can define both of those things for the person then you can push as hard as you can um on the top the top side right the speed or the volume metric and balance it so another example is if you're in a physical products business it would be inventory against shortages right you don't want to have tons and tons of inventory because that's not good you have lots of cash that's sitting there it's not good for the business it's dangerous for the business but if you just say hey i want you to just keep our inventories as low as possible right then you're going to start having shortages right and so you want to balance inventory against shortages and then that's the metric that you're reporting on for that position right so for me that would be my finance department who's managing that component of our business in the supplement side right um uh taxes versus audits right or i you know any kind of issue that you have the irs and so with each of these things that have you have the positive thing what you're going for against the negative thing you're trying to avoid and so um i want to call this the sweet spot which clearly i didn't and i'll name it later um but that's the managing the dichotomy in management using parallel metrics um will get you so much closer to the sweet spot of optimum performance for each of these roles and also going through the mental exercise for yourself will help you to find those things for each of the roles in your business and ultimately the only thing that's going to allow you to scale the business uh if you're in the service space which many of the people are listening are is initially it's going to be your ability to to to train people and onboard people right so it's in your culture and you're training your training gets them up up and going culture keeps them going right um and then the keeping them going is making sure that you're monitoring the right things for them so you can get the outcome that you really want right and so um i just had this uh call with the founder of that business that i'm now invested in um and we were talking about how we're setting that business up to scale so that each of the roles that we have um get balanced out and so for there we have uh image editors so we can see the total number of images they're edited it's a photography based business um against the number of callbacks or corrections that need to happen and so you can see this in virtually every position that exists within your business but if you simply look at that name them and explain it to the person then they'll understand everything that you want and then you'll ultimately make more money and then they will feel like they have more clarity and if they don't understand how to do those things then you train right and that's the entire that's the whole game is you train them you give them the two metrics you walk the middle and then that is how you maintain uh high level performance over an organization so um shout out to andy grove for being smarter than me hopefully that was useful for you for me that was a huge takeaway uh when i was going through his book um and so use it make more money have higher profits have a happier team have a happy wednesday lots of love catch you soon [Music] you