Speaker A
I think that people have talked about culture in a lot of different videos and books and the first thing that they do not answer is what a culture even is.
Alex Hormozi defines company culture as the spoken and unspoken rules of reward and punishment, and argues high-performing teams are built by eliminating mediocre performers.
Key Takeaways
- Culture equals the rules of reward and punishment, spoken and unspoken, that shape behavior across an organization.
- Firing underperformers is the most powerful way to shape a high-performance culture and raise the team's standard.
- Judge people by their output rather than their explanations or potential, and act quickly on mediocre performance.
- Leaders must accept short-term emotional discomfort to protect and build long-term high performance.
What the video covers
- Culture is defined as the rules that govern reinforcement (reward and punishment) in a business, mostly unspoken and learned through observation and firsthand experience.
- Leaders act as 'chief reinforcement officers': they must model and reward desired behavior and punish undesired behavior, since culture forms 24/7 across teams.
- Who you fire is the strongest cultural signal, more powerful even than promotions.
- Culture is defined horizontally: the bar should be raised within each department or function, not by demanding identical skill levels across seniority.
- The worst performer on a team effectively sets the accepted standard, so removing underperformers raises the bar and motivates strong employees.
- Mediocre middle performers, who are slow and produce work that needs rework, limit businesses more than obvious losers, who are usually removed quickly.
- High-performing teams are built through elimination, like elite military units, and the first 90 days of onboarding can function as a filter.
- Leaders should lower their tolerance for mediocrity, giving only a few chances rather than many, and judge people by output rather than explanations.
- Managers should be rewarded for letting go of mediocre people, and companies should reinforce this behavior systematically.
- The biggest barrier is the emotional discomfort of cutting people, but delaying such decisions is what holds entrepreneurs back.
Chapters
- 00:00Defining What Culture Really Is
- 01:15Culture as Reward and Punishment Rules
- 02:26Firing as the Strongest Culture Signal
- 03:28Raising the Bar Horizontally Within Teams
- 04:35Building Elite Teams Through Elimination
- 05:33Why Mediocrity Is the Real Problem
- 06:28Judging by Output and Avoiding Excuses
- 07:56Overcoming the Emotional Pain of Cutting People
- 09:56Conclusion and Resource Offer
Full Transcript — Download SRT & Markdown
Speaker A
And so they don't even define the thing that they are trying to help you quote build. And so I'll start by defining what culture is and then I will give you the 8020 of what it looks like to build
Speaker A
one in a way that yields high performance. So, culture is the rules that govern reinforcement, aka reward and punishment, uh, in a business. Now, what does that mean? Is it just this big list of rules? Well, sort of. And
Speaker A
they're often spoken and unspoken, mostly unspoken. And people learn them the way that they learn everything, which is through action firsthand and observation secondhand. And so if someone shows up to a meeting late and it is someone's first week and no one
Speaker A
says anything, they learn through observation that showing up is okay. If I show up, nothing happens. That is a rule. If then, right now, if they then show up and they are scolded, then they find out an additive
Speaker A
to that note, which is if that person shows up late, nothing happens. If I do, I get in trouble. or my boss cares and that boss doesn't. And so what happens is we develop this lattice work of understanding of like where do I get
Speaker A
rewarded and where do I get punished and then our our our behavior orients around that and then when that happens systemically we then describe the systemic behavior as the culture of the business. These are the spoken and unspoken rules of what gets rewarded and
Speaker A
what gets punished in the business. And so if we think to ourselves, okay, this is the list of rules and people learn through observation and through doing themselves and getting feedback, then to create a culture, it would mean that we
Speaker A
would need to model the behavior that we want and reward as, you know, chief reinforcement officers, uh, if you're the person who owns the business, the behavior we want and punish the behavior that we don't want. Seems pretty
Speaker A
straightforward. The issue is that it happens 24/7 365 and it's happening in teams that you were not involved in which is why you have to start cascading down through leadership uh the same behaviors to the leaders who then cascaded down. Now, one of the
Speaker A
things that uh I'll give you the the shortcut, the 8020 on making this work, if you want to have a high performance team, the biggest signal that you can give even more than promotions, and promotions are very big, is who you
Speaker A
fire. Now, I want to be really clear about this because I think it's so important. I'm not saying have a fire everybody culture. I mean you can if you want but it's more so the minimum bar and so the culture of a team is defined
Speaker A
horizontally not vertically so really important. So, it's not that if I say, "Hey, you need more A players." It means all of all of your employees need to be like you or like your executive team.
Speaker A
That would be ridiculous, right? Like to to demand the same level of skill from somebody who's earlier on in their career or, you know, you know, maybe a frontline, you know, employee that's customerf facing uh compared to, you
Speaker A
know, a more seasoned executive would be ridiculous. And so, that is not what I'm saying. And so, I think people confuse this.
Speaker A
We want to raise the bar horizontally within each department or function. And so let's say that we have customer service because it's simple simple one that most people understand. If we have a customer service team and we want to
Speaker A
improve the culture, um, one of the easiest things that you can do is remove the people who suck because the culture is built from the bottom up. Meaning the the worst person on the team is what you have signed off on as acceptable and
Speaker A
that becomes your bar. Like think about how real that is. Like, and I'll say this as somebody who has a company that has like a lot of winners and high performers. Like, every time we let go of mediocre people, the team is stoked.
Speaker A
They're like, "Dude, they sucked. Thank God." And like, "I'm glad you saw it. I was going to say something." And the thing is is like, I want to beat them to the punch because then they have trust and confidence in our ability to make
Speaker A
decisions, right? If the team feels like you wait forever to let people go, it's very disheartening. Like there's nothing more demotivating to a winner than being forced to work with a loser. And so if you think about the great teams that
Speaker A
exist, you think about like the, you know, the SEAL teams versus, you know, the general army, there's nothing wrong with being in the general army obviously, but special ops and the most elite teams, they get there through elimination. They take it they take this
Speaker A
gigantic amount of people and then they remove or they deny people and when people are you know they cut them you have to go through this whole thing they cut them now we can't have people run through you know how I don't know how
Speaker A
many weeks you know boot camp is whatever but like however many weeks it is I can't run someone through that right and then find out now you can make the argument that the first 90 days of onboarding can function that way which I
Speaker A
think is a good way to think about it um but we have to be willing to make cuts and so it's like we need to lubricate within the organiz organization, the ability for managers and leaders to let go of mediocre people. Cuz the thing is
Speaker A
is you're never actually suffering from losers cuz like the true losers you'll get out because they're so painful. I mean, some of you guys don't, but I would say the decent business owners will at least get the losers out. The
Speaker A
people who are limiting your business though are the mediocre middle that are clogging all the pipes by just being slow, having mediocre work that has to get reworked by somebody who's a winner and who actually cares. And it's the
Speaker A
clock in clockout behavior that is is is what is what creates mediocre organizations. And to be fair, that's the vast majority of organizations. And right now, there's probably people in your business that end up thinking like just blah, just NPCs, just they just
Speaker A
they're just there, right? And you know what? You know, God bless them. They could do whatever they want. It's just just don't do it in my business, right?
Speaker A
And so, we have to create lubrication. We have to create rewards for people for letting go of bad people. I've had enough rewards in my life for letting go of mediocrity that I try to sniff it out. But we have, you know, 200 plus
Speaker A
people who work at acquisition just at the cold go. It's like I can't meet everybody. So I have to consistently reinforce that we need to raise the bar.
Speaker A
But the bar when we raise the bar, the actual action of raising the bar is lowering your tolerance for people doing mediocre work. And that means that it you don't give nine chances, right? you give a few and then after that that's it
Speaker A
right and so if you want to create Harvard you have to have a 1% acceptance rate or whatever the percent acceptance rate is now the difficulty with Harvard analogy versus the kind of boot camp analogy is that once someone's into
Speaker A
Harvard they basically don't get kicked out so we kind of need to have it at two levels and I would make the argument that I'd rather have a slightly easier way in because I think that our ability to judge other humans uh
Speaker A
from one or two conversations and maybe you know a document is limited, but our ability to judge their output by what they do much much better. And I would also encourage you to shy away from allowing someone to explain away a lack
Speaker A
of output because like anybody who's good at selling, which some of the most mediocre people are, is they're able to sell their excuses. And one of my favorite sayings from Napoleon is that he would prefer lucky generals. So he
Speaker A
was like, even if I had two generals and one of them is unlucky and one is lucky, he's like, I'd rather have the lucky one. And so if some person always just seems to have things that go wrong, it's
Speaker A
usually not that luck is actually against them. It's that they they don't understand how to create the conditions for success and they don't know how to maximize their own likelihoods.
Speaker A
And so if you want to create, you know, Seal Team Six or a super high performing team, number one, uh you get there by not letting people stay. And I'm just telling you right now, let's say you've got a 10erson sales team and four of
Speaker A
them are like not doing that well and they're kind of petering along. I have yet to have an exceptional salesperson.
Speaker A
Every A I've ever had, I know within 14 days, seven really. 14 is being generous. And so if we're saying we only want A's, not B's, then you have to get rid of B's. Now it's going to seem heartless because
Speaker A
it's like they barely even gave me a chance. But the thing is is like assuming someone has you know gone through training right if you have any kind of training you could just see the output and so I
Speaker A
would say I got asked yesterday you know a lot of wealthy entrepreneurs who are older than you what would you say is the most important lesson you've learned from those people and I thought about it for a second I was like to a
Speaker A
man there's one single direction that is 100% correlated with the directional growth of the company which is the tolerance of the entrepreneur for mediocrity and the quality of the team they surround themselves with. And those things are inversely correlated or
Speaker A
rather directly correlated. Meaning you will have very high quality people if you do not tolerate mediocre people because nothing turns off highquality people like lowquality people.
Speaker A
And as you continue to win more, you will be able to attract better people, which also means that what was once good is now mediocre, which means that people need to grow with you or they need to get out. And I know that this is harsh,
Speaker A
but I don't think you're listening to my stuff because you want to have your ears tickled. Um, and so that would it's like if I look back at the difference between me now and me 15 years ago, the biggest
Speaker A
difference is who I would determine or who I would label as good enough. And it makes sense that earlier on I wasn't able to attract better talent and so my bar had to be lower. But as you win more
Speaker A
and you have a better track record, you can attract better people which means that you need to recalibrate. You need to adjust. And so I would ask myself the question, has the quality of my team improved since I
Speaker A
started? And if the answer is yes and your business has grown, then we think to ourselves, how high will my bar be in 5 years? And would 5 years from me now look at this moment and say, man, these
Speaker A
people just aren't up to snuff. How quickly can I pull the standards I will have in 5 years into the present so that I can create the reality of winning and success that would have been aligned with that
Speaker A
standard of excellence. And so this is just something that was top of mind for me is that like if you want to have a better team you do it through elimination.
Speaker A
You do it through elimination. You get out everybody who sucks and then what you are left with is awesome. Like if you want to increase the IQ per square foot, remove everything that is not high IQ.
Speaker A
Like think about it. And even if we were let's actually let's let's let's actually dive deep into that for a second. Let's say that uh you wanted to have the highest actual IQ average right?
Speaker A
one person who's at 80 is going to draw the average down so much more than getting another 140 person, right? So, let's say you've got three 140s and an 80. If you hire another 140, it will do less for the
Speaker A
business, the average IQ, than removing the 80. And so, there's like there's a lot to that little analogy. like your bar will raise so much faster by eliminating the duds. And so I'm just saying I'm trying to pass on a lesson that's that's just
Speaker A
it served me so well. Um and it just requires you to be bold. And I think it's so difficult for people because uh it feels like a conflicting priority. We want to feel like good people. We want to be nice people. We understand that
Speaker A
people have families. We people that have kids. They're trying to make a livelihood. Some people just don't have the horsepower to do it. And I think about it like this, which is that I am doing a disservice to everyone
Speaker A
else in this business by allowing this person to be here. And so the question is, do I want to have local or global empathy?
Speaker A
Do I want to have empathy for the person or do I want to have empathy for the business? Do I want empathy for everyone else on the team? And so when we shift from local to global, it means that you
Speaker A
get to deal with the local pain while everyone else gets the global benefit. The reverse is that you get the local benefit and everyone else suffers the the global pain. And so in some ways it's like we have to be
Speaker A
willing to take the emotional pain of doing what's required in order to protect and preserve and proliferate the culture of high performance that we ultimately want to build. And so I would encourage you to use that frame when
Speaker A
you're having these hard conversations is that I'm going to take on this guilt. I'm going to take on this pain so that everyone else here doesn't have to suffer. And I think that is probably one of the more charitable frames of of
Speaker A
making the hard decisions around people because at the end of the day like even with AI, you're still going to be dealing with people for the vast majority of people listening to this.
Speaker A
You have teams, you have other humans. And so if you're going to be dealing with other humans, it's the messiness of the emotions that makes it so hard. You already know logically what you need to do. It's like
Speaker A
right now you know what you need to do and everything between you knowing what you need to do and you doing it that delay is what is delaying the success you want and the growth you're looking for and the team and the culture that
Speaker A
you ultimately want like think about that you know what to do the delay between you knowing it and doing it shrinking that is what makes you a better entrepreneur and I would say like me looking at the best entrepreneurs
Speaker A
that I have seen in my career it's almost immediate the moment they know it they do it and it's almost like And and this is why you know some of the highest level entrepreneurs get this this this reputation of you know being sociopaths
Speaker A
or or like you know they don't care about people. It's like no people tell the story of the individual occurrence because telling a story of how one person negatively impacts 20 in 20 micro examples is not compelling. But having
Speaker A
Steve Jobs just fire somebody or Zach fire somebody or Elon fire somebody in what appears to be a ruthless way. Of course I think you can do this like treat people with respect, honor the individual. Absolutely. But you also
Speaker A
have to honor the rest of the team and make those hard calls because no one else is going to do it. It is literally our job. It's our call and it's our responsibility.
Speaker A
And so anyways, if you want to build still team six, if you want to build a high performance team, it comes from cutting the bottom more than it comes from finding the people on the top. And the more concentrated the high
Speaker A
performers are on the top, the more you will be able to attract them because they will also bring other high performers. So with that, lots of love.
Speaker A
I'll see you next video. Bye. Real quick, I'm going to show you the exact 10 stage road map from zero to 100 million plus that less than 1% of companies finish. I've now done multiple times. And so I can say with a lot of
Speaker A
confidence that these are the stages as headcount increases that you need to get through. And I broke each of these down by eight different functions of the business. What the constraint feels like, like what are the symptoms of it
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when you're going through it and then what steps we actually took to graduate. And we've done this across software, physical products, uh, service businesses, brickandmortar, all of this.
Speaker A
And it works. And it's my gift to you. It's absolutely free. And so the link's in the description, but you just go acquisition.com/roadmap.
Speaker A
Just enter your info and it'll spit it right back to you. Offer.
Topics:company culturehigh performance teamsleadershipfiring underperformersmanagementbusiness growthAlex Hormoziperformance standardsteam buildingentrepreneurship
