So the way you structure your pay plan in
your company, whether it's to your hourly employees, or your salaried employees, or
your executives or salespeople, will determine how much of your talent you retain and how
much you increase loyalty in your company. This may not be the most exciting video, but
this is a very, very, very important video for you to store. It doesn't matter how many employees you have
working for you right now, whether you're just getting started and only have a handful
or it's 20, or it's 50, 100, you got a couple thousand salespeople that are working for
you, and executives, it's something you definitely want to pay very close attention to. So let's get right into it. In this video I'll cover with you different
ways you get paid, to your employees, and I'll also talk to you some strategies on what
you can do on what's the best to combine with what. I get asked all the time how do I offer equity. Do I give this person a salary? Do I give this person hourly? When do I pay them? I want to bring this guy on board. Do I bring him on board now? We'll cover all that stuff together with you
in this video. Okay, so let's start off. Simplest way is hourly employees. Now who are hourly employees? Hourly employees are typically people who
have a very simple, low-skill level job to do. For instance, when I worked at Haagen Daz,
I had to learn how to make banana splits. Or a sundae. That's an hourly job. You're making $3.25 an hour is what I was
getting paid. If I'm working at Burger King, and I'm making
a Whopper, no onions, okay, great, a Whopper, no onions. Two buns, boom. This is a very easy skill set, right? This is all I'm doing. That's an hourly, $4.25. If I'm working at Bob's Big Boy, and I'm the
bus boy, all I'm doing is taking all the stuff and I'm bringing it. These are all the jobs I had, right? This is an hourly. So it's low skill, and it's just transactional. Low skill, transactional, and it's a very
great platform for you to identify people that want to make transitions to the next
level. It's a very, very good filtering system here. And by the way, whatever I tell you in this
video, it's very important for you to abide by your state laws or your country laws wherever
you're from. So I'm just telling you simply stuff that
I've done, but you've got to make sure you're paying very close attention to your state's
human resources laws that you've got to follow. So, going back to it, filtering system from
here [hourly], where people go to the next level. It's also a great opportunity to see who the
hardest-working people here are, at the hourly level. Front desk clerk, you know, we've had somebody
who got started as a front desk clerk, and then all of a sudden, she was so amazing that
she's been with me for 11 years now. And she started making $800 a month, initially,
or $400 a month, she was working two days a week. And the next thing you know, she moved her
entire family and her husband here to Dallas from LA, husband comes, two kids come, but
she started off here [hourly]. Simple. Salary. Salary is somebody that's more than hourly. It's somebody that you're telling them we
want you to get a promotion. You are now a salaried position person here
in the company. And sometimes salary is going to work more
than 40 hours a week. If I have a job that I'm working salary, you
would never catch me working 40 hours a week. And here's why. If you're watching this and you're working
only 40 hours a week, as a salaried, I like to go above and beyond, because I kind of
want to get to the next level and the next level and the next level. And I want to have leverage when I'm negotiating
my salary or whatever I'm doing. And by the way, my own employees watch these
videos. I teach my own employees how to ask for a
raise from me. Every one of them who's asked for a raise,
I've prepped them. Here's how you ask for a raise from me. . . . And they'll come, and they'll present
PowerPoint, "Pat, I believe I deserve this." Tell me why. Bop, bop, bop, bop. No, I disagree. Yes, I agree. One time somebody said I deserve this, and
I even gave more than they thought they deserved, and one time somebody asked me for something,
and I told them no. They didn't get anything and I asked them
to leave. So it's both ways. But it's transparency. So salary is the next level. Then you have profits. What's profits? Somebody who's getting paid salary, plus profits. Why is this important to give somebody salary
plus profits? Because salary plus profits allows somebody
to scale. Like they are willing to work a little harder
and push a little harder on a Saturday, or the effort is paying attention to more details
and they're rallying everybody, because there's a profit to participate in. This could be profits/bonus. So you can change this profit to bonus. I'm participating in a tier level bonuses
and profits. Let me explain here. If you hit xyz, you're going to get a $5,000
bonus. If you hit ABC, you're going to get a $10,000
bonus. But if you hit this, we're giving you a $25,000
bonus by the end of the year. And then, it comes down to how you put the
ABC bonus together. It could be that you're going to get judged
on how you create the bonuses, because the bonuses come down to how creative you can
be in that area to get them to pay attention to areas that matter the most to increasing
the value of the company, if that's what you're looking for, increase the revenues of the
company if that's what you're looking for, increase the subscribership of your company,
whatever you're looking for. This is a very important thing to put. Now, if I go back to the salary, the difference
between hourly and salary is salary has a skill set. Hourly doesn't necessarily. There is a skill here [salary]. There's actually a measurable skill set that
this person is bringing to the table. And then you have equity. When do you give equity? Well, equity is eventually if you want your
best executives to come on board and work with you. I'm a fan of equity. Some CEOs don't like equity. Some CEOs prefer to give profits. Some employees don't even want equity, because
equity to them is long-term. I like equity because equity gets me to know
if this person's a long-term person or a short-term person. If I offer equity or a person's asked me,
Pat, I want a piece of the company, don't get offended by that. That's a compliment. I want to be with you long term. It's like a girl saying, when are you going
to put a ring on my finger? That's what equity means, if someone says
it to you, take it as a compliment. Don't get upset and message me at 2:00 in
the morning saying, Pat, what do I do? This person is asking for equity. I think he's going to leave me. They're not going to leave you. They're simply just asking you, what can I
do to participate in the bigger victory long term, with this company because I love this
company, I want to participate long term. No problem. So that's the equity part. Right? And you'll determine who to give that to. I'll explain that in a minute. And then it's sales. Sales is very simple. Sales is king. Without sales, nothing exists. Without sales, nothing exists. I put the crown up here. These guys run the entire show. Google without pay per click does not exist. Okay? Facebook, without advertising and boosting,
doesn't exist. It doesn't exist. That's sales. Sheryl Sandberg brought sales to Facebook. If there is no sales, Keller Williams doesn't
exist, without their sales people. Gary Keller has built an incredible organization
with nearly, I want to say they're the largest real estate brokerage house in America. And he wrote this book called The One Thing
- phenomenal book. There is nothing with Keller Williams if there
isn't sales. Nothing. Sales is king. In every company, sales is king. So your commissions structure and sales needs
to be set up in a way that you will be judged on how you set up your commission structure
with your company because if you don't do it right, then you could potentially incentivize
bad habits. That's on your comp plan. We made this mistake before myself in the
past. This is why now a lot of people call and say,
Pat, can I come with you and meet with you and have you help us put a structure or comp
plan? I don't have time to do it. But please help us. I don't have time to do it. But just go back to yourself and think about
the way you set up your comp plan, what behavior do you want me to get that again goes back
to increasing the value of what? The company. Remember how I talked about bonuses here with
profits? Remember how I said what behavior do you want
from your salaried employees to get them to do above and beyond. Same exact thing here. What behavior do you want for commissions
for them to do very well. And then their comp plan, when it comes down
to sales, I don't like caps on how much money I can make. Some companies put caps. I'm not a fan of caps. I sit on a few boards and some of these guys
want to. . . I don't think this person needs to make
more than $400,000. What if they make more than $400,000 a year? What if a sales person makes a million dollars
per year? What if a sales person makes two million dollars
per year? That's totally fine. Don't put a cap on sales. My suggestion, don't put a cap on sales, and
I know the logic behind some people who say, I want to put a cap on commission sales is
because I don't think if these guys make too much money, they're going to leave me and
be a competitor of mine. Sometimes if they don't enough money they
may leave you and go be a competitor of yours. So what if that happens? I don't want to put a limit on this [sales]
side. So sales is king. The tough thing with sales is king is I had
a company that brought me in and I spent a full day with them, and it was very, very
painful to be around them because they're asking how can we grow the company? And this is a multi-billion dollar company. How can we grow the company? But, oh, we don't want to change our comp
plan. But tell us how to grow the company. I said, first of all, your comp plan is set
up in a way to only favor the sales people that have been there for 25 years, and they're
not working. They're not getting off their asses. You're not moving this company. Your entire incentive plan is to get those
guys to just manage your best salespeople are not selling. That is a terrible compensation plan for your
salespeople. But no, if we do this, they're going to leave
us for another company. Let them leave! They're not going to leave. They're afraid of working. They haven't worked a 60-hour work week in
10, 15 years because your comp plan makes them lazy. Comp plan produces lazy people. And comp plan produces leaders. Comp plan produces manages. And comp plan produces leaders. So it's very, very important. There is an art to how you set up your comp
plan. Properly, where they're not breaking the rules,
but they're growing your business. So we may come back to that here in a minute
and talk about it. So now let's talk about it. You may say, Pat, so what do I do when I'm
hiring somebody and I kind of want to be able to know this person is saying do I do salary
plus equity. Do I do this? What do I do in this area? Let me kind of give you an idea. If somebody says, Pat, I want equity. No problem. I've had negotiations with many of my employees. Pat, I want equity. Great. So I want equity. I want salary, and I want profits. It doesn't work that way. If you want equity, long-term victory, great. I like that. Welcome. Your salary is probably going to be low and
you're probably not going to participate in profits. Initial stages. Obviously, at the end of the day when the
company starts profiting, millions on top of millions, on top of millions of dollars,
it's a mathematical formula. You're going to participate in profits, if
your department's doing their part. Great thing about capitalism is it's all math. It's all math. Money flows. Money flows through, and everybody participates
if you can prove I'm having meetings with different department of ours. I think every single department had grown
by 130%, every one of them had grown by 130% or more, give or take, except for one. And I told that one person, we were talking,
I said you don't have no leverage. Your department is a department that has not
grown. It's a measurable number. And, you came back, you're right, I've got
to work on it. Great. He's going to go back and work on it. Feedback was given. I'm being proactive instead of being reactive. You're just waiting for us to tell you what
to do and you're no longer being proactive. You used to be, and you're taking a hit. And quite frankly, this behavior cannot continue. You're effecting the entire team. Fair enough. So you've got to have that conversation. It's not just a one-way highway, a both-way
highway. So if you want low salary, you want low profits,
we'll give you equity. If you want equity, you're going to have this
[profits]. Or somebody says, well, I want a decent salary. But I don't care about equity. I want to participate in bonuses this year. Okay. So instead of getting a $40,000 salary, you
want a $50,000 year salary, but you want to be able to bonus $20 grand this year. No problem. We can work that out. But zero equity. Great. Which means that at any point, this person
can leave and go elsewhere, or this person may have some issues, tax liens, they may
have a unpaid child support payments that they want to pay off. Or they have certain debt they owe to somebody
that they just want to pay it off. And they have to fix it now. And you don't know the whole story, and they
don't want to open up and tell you about it, quite frankly. That's fine. They're motivated by the bonuses, right? So red, there's no equity. They don't care for equity. Great. This person [salary] may come and say, I want
high salary, I don't care about bonuses, I want to participate in equity. So what's the difference between this [equity]
and this guy? Because this guy wants equity, but he's getting
low salary. This is when it gets interesting. So in the world of sports, there are salary
caps. Let's just say it, right? And you know, there's always this collective
bargaining agreement that they have in NFL and NBA and all this stuff and they come together
and any time you hear when there is a what do they call it, a lock out? When no one's playing and they're renegotiating,
the collective bargaining agreement there's a NBA lockout or something where they're not
playing. Hey, they're not playing 30 games, okay? Because we're renegotiating - there's strike,
and there's a lock out. So sometimes, as an athlete, sports team,
you may be sitting there saying, well wait a minute, I'm the Cavs, LeBron's contract
is coming up with Miami, listen, let's pay him. Who cares? Right? Sometimes, you're the Lakers, Jerry Buss,
and you've got a Magic Johnson that's coming down from Michigan State, and you know he's
going to be a player and Larry Byrd is coming and he's going straight to Boston from Indiana
and you're bringing Magic Johnson who's a rock star, you know, you've got to kind of
participate. And Jerry Buss eventually gave Magic five
percent of the Lakers and put him as a VP of Operations, just vice president and afterwards
some kind of role he played. And so he got equity. Why? Because Jerry Buss locked in Magic Johnson. Magic Johnson only played for one MBA team. It was the Lakers. Right? Sometimes you've got to lock in a Kobe Bryant. Sometimes you've got to lock in your players. In the NFL, they call it franchise tag. So a lot of times quarterbacks will get franchise
tag. You can't leave them or trade or all that. So the company pretty much has you. It's like saying a non-compete, that you can't
leave and go to another team. Great. So why would you consider at a point of doing
salary and equity, at the same time, and both high numbers? Because that talent may be a solid talent
that's coming on board. Now keep this in mind. I had somebody that I brought on board that
had very, very strong talent. But I had a very serious conversation. I said, Look, I can't afford a high salary. I can't even afford to give you profits right
now, this year. But I'll give you long-term opportunity here
[equity]. And I wanted to kind of read the person and
the person agreed. And they came on board. And then from there on, the simple question
that I ask is, this person, how much value did they increase of the company? Think about it. So the moment LeBron James went to the Cleveland
Cavaliers, this sport franchise went up $300 million. So you're paying LeBron $30 million a year,
LeBron increased the value of your team by $300 million. Was it worth it? Think about that for a moment. The moment LeBron left Cleveland the first
time, they lost $300 million, in value. So this is numbers. See, when I come, I'm bringing value to you. So sometimes in the marketplace, when a Sheryl
Sandberg is on the market, and she's a free agent, and Mark Zuckerberg wants her, he brings
Sheryl Sandberg to handle the operations side, the COO to start making money and all this
other stuff for him. Sheryl Sandberg today is worth $1.5 billion. Do you know what her salary was? Can you take a wild guess what her salary
was when she first came to Facebook. I bet you won't get it right. It's not $10 million. It's not $5 million. It's not a million. It's not a half a million. Her first salary was $300,000. $300,000. But she got stocks, $30 million. I want equity. I want to be able to take this company to
the next level. She did, her $30 million turned into one and
a half billion dollars. Whatever the number is right now. Right? Why? Because she understood, I don't care about
salary. I don't care about profits. I'm going for the big play. So you're realizing sometimes in the market,
you have some talent that you got to work that out with. Now, for the most part, most companies don't
give sales people equity. I like to do it. I like to do it. And we have a certain program that we do that
for. Why? Because I think sales, a great sales manager,
a sales leader, let me restate that, not necessarily sales manager, a great sales leader is very
hard to find. Very, very hard to find. And you've got to value your sales leaders. You've got to value your great sales leaders. You've got to value them. A sales person can come and go. A sales leader? They know how to teach other people how to
become sales leaders themselves. It's very difficult to find that. So, this is an idea for to be thinking about
when you're hiring somebody. How do I combine what? And by the way, a lot of times when you're
looking at this, I'm going to my last points here with you, a lot of times when you're
going into this, you've got to know your own numbers. For instance, if I'm giving equity to somebody,
I'm giving equity to someone that's irreplaceable. If you're watching this yourself, and you
are on the hiring end, so you're the employer, and you're thinking about hiring an employee
or promotion or hourly or equity or an executive, or a sales person, you've got to ask yourself,
if this person irreplaceable? So what is irreplaceable? They have certain relationships that you need. There are certain contacts that you need them
to be with you long term. There are certain skill sets that they have
that you need them to be here. There are certain capital they're bringing
to the table that's a non-measurable capital. It's not necessarily money, but they increase
the value of the company. Right? You need to understand, that person is irreplaceable. If you're on the complete opposite end, and
you're maybe an hourly or salary, and you're kind of wondering what is your edge going
to be when you're asking for profits or equity, well you've got to ask yourself the question,
are you irreplaceable? Because if you're irreplaceable, then it's
very easy. Value can be determined if you're irreplaceable. If you're replaceable, what do you want to
have? You have no leverage. So you've got to make sure you're irreplaceable. I literally sit down with my team and I tell
them, you need to become irreplaceable, and you'll increase the value you have with me,
with the company, long-term with us working together. If you're not irreplaceable, what are we doing
here? What are we doing here? You've got to be irreplaceable. So now, strategies. Strategies to be thinking about. #1: Know what you can afford. I had a guy ask me the other day, Pat, there's
this person I want to hire and man, he's so great, I love him, but he's got kids, he's
got a wife, and you know, at his last company they paid him 180 a year, but I know we've
got a great opportunity. I want to bring him on board, and you know,
his last company was a part of, when they were bought, he made a half a million dollars,
and he's coming to me, he would completely change the life of a company if he came on
board. I said, Okay, how much did your company make
last year? Well, we grossed $1 million. Okay. What'd you net last year? $50,000. I said, what can you afford to pay this guy? I can afford $50,000. I said, you can afford $50,000? I said, "What else can you give him?" That's it. I said, what's the projectory of your company? Did you go from $100,000 to half a million
to a million? No. What was the projectory? Have you been going like this? No, we've been going kind of like this. That's not a, a person to come and say to
go they're going from hundred , half a million, a million, two million, 10 million, 40 million,
this is great. Right? I want a piece of this. And three years my buy out's going to be $4
million. I'm interested. Right? But if it's like this [slow growth], you don't
have an argument to get that guy as a talent. He's going to say, "What are you talking about?" And you can't give him $50,000 while his expenses
, he's 36, 37 years old, he's got a wife, kids and a mortgage. He's not going to do it at $50,000 a year. So you need to know your numbers. You may bring him in, on your advisory board,
and have him stick around on the advisory board, and you work your tail off so he sees
the projectory and you say, hey, you want to come and be the president? Now I can afford 150. I'm coming in. Because he's fallen in love with the company
now. Makes sense. That's a completely different story. You need to know your numbers. Two, always keep a look out for free agents. Always. Always keep a look out for free agents. We've got the insurance commission coming
up next week. I've got so many messages from people telling
me, Pat, you know, what can I do to be part of a VP with your company? I want to work from the home office side. I think I can bring value to your marketing
side or the operations side, all this other stuff. I'm always looking for free agents. I'm always looking for great free agents. I mean, amazing free agents. Why? Because free agents, it's free agents. When LeBron is on the trading block, you've
got to pick him up. This doesn't happen all the time. When he gets some killers on the trading blocks,
you've got to make sure you go pick those guys up. So always keep a lookout for free agents in
the marketplace. #3, know the market for the position you're
hiring for. For instance, I had somebody that came to
me and said, well Patrick, you know, I want to one day make $300,000 a year with you. I love this guy. I said, "Really?" He said, yes. I said, that will never happen. Why not? Because the market for what you're doing,
is this. Oh, well, I'm going to go somewhere else. I said, no problem. Take the next two months, and you start looking. This is not today. This is years ago. Take the next two months and start looking. And he goes looking. And he comes back, and I said, so what happened? Well, I got a lot of offers. Great. Did anybody offer you 300? No. Oh, really? Yes. So what's the number? Well, you know. I said, I know the number for your position. And I just took the printout, this is your
number. This is exactly your number. This is exactly your number. Stuttering, stuttering. Did you talk to other people? Yes. This is your number. I'm willing to pay you this, which is more
than this. You'll be the highest paid person at this
position. But this is your number for this. And he said, oh, okay, great. All this small conversation and everything
was done with. And we've not had a single issue ever since
then. So you need to know what the market value
for the position you're hiring for, the regular person, the low-skill level, not as much expertise,
and the big shot guy, the market value's going to be higher for this person, but it's still
not dramatic of a difference you're talking about. So study your market value for any position
you're hiring for. Next, be willing to customize pay, depending
on talent. Like, this whole thing is, you're going to
get judged based on your creativity, on what you can do when you bring some talent on board. And I'm not talking about sales. I get a lot of sales people that will come
inside and they'll say to me, Well, Patrick, let me tell you, when I'm coming on board,
you've got to do this, this, this, this for me, because I'm this, this. Great. I rarely, rarely do that, with anybody that
comes from the outside. And why? Here's why. Because sales people, who end up becoming
your best sales people are the ones that came and not asking for anything, home grown. They grew, you better make sure you take care
of those guys. Because if you don't, I will. I'm just telling you right now. Somebody else in the marketplace will be more
than glad for that person, if they are loyal, talented people that want to work hard, they
just want a company that takes care of them. You don't take care of your best sales people,
somebody else will. But learn how to customize it. Just try it out. Take this whole thing yourself, and write
it on a sheet of paper and tell yourself, you know what? What if I did this and I did this and I did
that. What if I give them a bonus. what if this guy's a sales person. Let me see what I can do with the compensation
plan. What if I did something with our sales guys
and they were able to participate, little bit bonus. What if I got my hourly guys and figured out
who it is and got rid. . . and increased some of them, told them what they need to do. Just play with this. This is very fun. This is great because also, you're putting
a game plan for yourself on how to get people advancing and how to get talent to your place. And last but not least, which is very simple,
set up a comp plan that incentivizes and motivates people to be loyal to you and motivates people
to increase their longevity with you, if that makes any sense. Depending on how you set up your pay structures,
you're going to get my loyalty and you're going to get my determination to stay with
you long term. It's the first thing I told you when I opened
this video up. I talked about that with you. So, if you do that, and you're giving me equity,
and maybe there's a five year vesting period for me to stick around for five years, but
five years later I'm going to participate in . . . you're getting me to realize and
say, I want to be in business with you long term. And at the same time, you'll also realize
which ones of the people you have in your company are long-term people. Anyways, with that being said, again, I told
you this was not going to be a very, very exciting topic but it is a topic that many
of you that run multi-million dollar a year businesses ask me about regularly, and that
you're having challenges with it, so you know, you can post any comments or questions you
may have on this on the bottom. I'll try my best to get back to you. And if you haven't subscribed to this channel,
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