As a direct selling corporate executive hoping to build a strong and geometrically growing organization to help your distributors meet their financial goals, understanding the compensation plans of the growing number of MLM companies could become a full time job in itself.  “Stair Step - Unilevel - Matrix - Binary - Australian ... it’s enough to drive even the most experienced corporate executives mad. 

I’ve debated theory for hours on how the compensation plan is like a piece of art with every twist and turn, every level and qualifier, every bonus pool or discount incentive carrying a specific action and positive reaction from the distributor base.  New Age compensation plans are no longer “pure” MLM, but can be better categorized as hybrid systems which attempt to be all things to all people.  A little more discount here, another level in depth there, infinity bonuses, compression, roll-up, pass-through bonuses -- we need an MLM dictionary just to decipher the written explanations of the plans. 

If you are considering the “Decision to Transition” of your present compensation structure to an MLM model, please take note!

Radical change may be necessary but don’t jump on the first fad compensation plan that rings your chimes.  Your corporate and product mission along with distributor culture must be considered.  Adopting a plan that maintains your long established principles while incorporating current trends should be your goal.

Today’s plans must address the following:

1. Cost of new distributor entry sales kit should be modest making it easy to get started.

2. Early payout of initial commissions and bonuses paid weekly or bi-weekly is becoming the norm. 

3. A good plan provides bonuses balanced between the beginning MLMer who is just trying it on for size, the committed part time business builder who is building an organization through multiple levels, and the totally committed leader who can benefit from bonuses from sales generated by a significant downline community.  

4. Distributor monthly maintenance qualifications to receive downline organization bonuses should be reasonable and achievable for the consistent part timer as well as the dedicated and committed full time participant.

5. Program should incorporate Auto-Ship ordering programs with a bonus volume relationship to monthly distributor qualifications.

6. Plan should mandate distributor minimum personal retail sales while rewarding for building an organization in depth.

7. A “Plus” plan.  This means that there are no sponsor disincentives created by lost or reduced centers of profit as the downline advances that might encourage leaders to suppress downline advancement.  All earned bonus levels are in addition to those previously earned, never in place of them.

8. Distributor ranks and titles should be permanent once received, but distributor bonuses should be “Paid-as” the position for which they actually qualify during the pay period. 

9. Compression of levels or generations should occur to properly reward performers through maximum depth of income stream.

10. The plan should be “Capitalistic” in its design to reward the business builders who contribute regularly to the company growth.  Beware of plans that are “socialistic” in design dividing available profits among many and encouraging a something for nothing philosophy.

If you are a traditional direct sales company considering transitioning to MLM or an established MLM just trying to play catch up in the evolving marketplace, a competitive compensation plan tied to today’s technology is only part of the equation for maintaining and growing your market position. You will be competing for your distributor’s time, not just their product sales or consumption loyalty.  Show them how to leverage their time while geometrically growing their income and you will put your company in the winner’s circle.

Of course, technology and a hot compensation plan cannot replace person-to-person communications. People still do business with people, and the more you embrace technology, the harder you should work at building personal relationships with your distributors. Make yourself accessible at every opportunity by arranging occasions that will bring you together with them face-to-face.  However, keep in mind that the world of sales and marketing is changing rapidly. Some companies are recognizing these opportunities and rushing reinvent themselves. Others are watching intently and will soon follow, if only out of the need to stay competitive. As we have heard it said many times in business, “Lead - Follow - or Get Out of the Way!”

Michael L. Sheffield is the CEO of Sheffield Resource Network, a full-service direct sales and Multi-Level Marketing (MLM) consulting firm and the industries leading compensation plan expert. He is also the co-founder and Chairman Emeritus of the Multilevel Marketing International Association (MLMIA). He can be contacted through http://www.sheffieldnet.com.