To misquote Billy Shakespeare: “To disclose or not to disclose, that is the question.” Troy recently received an email from someone expressing concern about the practice of companies “buying leaders.” I’ve written in the past about the practice of companies offering special sweeteners for top performers. In the video below, Troy says the lack of transparency creates “an integrity issue” and cites a book on Integrity by Henry Cloud. Troy says when there’s a lack of information, the “integrity of the whole” is questioned, which threatens to undermine the reputation of the industry we all fight hard to protect.
Under the video, I list 5 reasons why Troy is wrong and why more disclosure IS A TERRIBLE IDEA!
(be prepared for sarcasm)
5 reasons why more disclosure IS A TERRIBLE IDEA!
1. It gives prospects an extra factor to consider when making a decision
When you need people to buy into the character of the leader before joining, opening the door for questions on motive is a non-starter.
2. Prospects will reach crazy conclusions
If there’s a “special deal” that’s available only to certain people on stage, prospects might say, “He’s not here for the product, he’s here for the money!” Prospects should never engage in this line of thought.
3. It casts a cloud
When the leader is talking about the amazing properties of product X, prospects might naturally be distracted with the fact of the “special deal” they’re never going to get.
4. It’s nobody’s business!
Leaders drive the numbers, build the communities and should be allowed to enjoy the fruits of their labor. So for all the whiners that want more transparency, go build a bigger business and negotiate your own deal!
5. It’s the law
And laws are boring.
SOLUTION
Take the “special” out of “special deal.” Instead, publish a unique reward whereby ANYONE can qualify if they hit certain metrics within a certain timeframe. As an example, create a bonus whereby someone that climbs the charts fast i.e. Diamond in two months, give them a continuing reward i.e. pay them an extra 2% on the gross revenue they generate. Make these rewards public. And since they’re available for everyone, and they’re fully disclosed, they’re no longer “special.” Once the company is seeded with enough talent, they can shut off the reward and honor the terms with their top leaders.
The word “Transparency” should be more than a buzzword designed to foster trust. Instead, it should be part of a broad commitment to excellence and integrity. When there’s trust in the marketplace, it creates synergy that benefits everyone. When there’s a flavor of distrust, the “integrity of the whole” is compromised, which affects everyone. Until we realize that we’re all playing in the same sandbox, we’ll never be in a position to improve the state of the industry.
Many companies MLM or otherwise prospect and reward top earners. If “they” cry out “they are only in it for the money” so what. Why is it wrong to want to earn a lot of money? If it is done lawfully and ethically it’s no one business what your motive is.
I you are honest with yourself, yes you too want to make a lot of money and pointing at others and saying they got a sweetheart deal is a easy excuse for you to use.
-DJM
I’m not suggesting we’re not able to reward top earners. Of course that needs to happen. Companies that pay for testimonials and endorsements are required to disclose the financial relationship. It’s not a matter of “making excuses,” as you suggest. Suppose Peyton Manning goes on a media blitz for a new beverage company “Power Burst.” He endorses them on twitter, he publicly praises the brand, he talks about the product on talk shows, he tattoos a huge logo on his car. Knowing he was paid as an endorser by Power Burst would put you in a better position to judge his testimonials, correct? It happens in the normal market, why not MLM?
It’s not as simple as saying “so what?” When people are being enticed by marketers to part ways with their time and money, more information is always better than less. As for your last comment, I have no idea how to read it. I’m not pointing at anyone and making excuses. Thanks for your comment.
Doug,
The key part of your answer was “If “they” cry out “they are only in it for the money”.” I am not aware of anyone who actually says that, do you? The environment I’ve always seen is focused on leadership development, being part of a team, social opportunities, the product quality, etc., in fact, everything BUT they are only in it for the money. In fact, I’ve heard “successful” upline say the money isn’t even a focus for them any longer, because they have so much of it.
I want to make a lot of money, but not by lying to others. I’ve already proven that’s true, or I would have kept on the track I was on when I found out about the tool profit with the company Kevin doesn’t want me to mention, 6 years ago….
The other problem with constantly changing companies is the people you damage. Sure, the top guy can get a handsome bonus, but a large part of their organization feels betrayed and quits. It’s no big deal to the top dog, he got a sweetheart deal, but how about the people under him who lost half their group? How about the other folks in the downline who were told company X was the greatest, now they have to backtrack with their downline and customers? You speak as if the only impact is on 3 people – me, myself, and I – and it isn’t.
I would also suggest it isn’t ethical or legal to hide these sweetheart deal payments. When you ask people to be your “business partner” or “teammate,” that person has every legal and ethical reason to know how you achieved your financial success, whether we’re talking company hopping or tool profit.
Many companies MLM or otherwise prospect and reward top earners. If “they” cry out “they are only in it for the money” so what. Why is it wrong to want to earn a lot of money? If it is done lawfully and ethically it’s no one business what your motive is.
I you are honest with yourself, yes you too want to make a lot of money and pointing at others and saying they got a sweetheart deal is a easy excuse for you to use.
-DJM
As long as the deal is achievable, that sounds like a good idea. However, going Diamond with Amway in 2 months is not achievable by a new person, making the “deal” window dressing. . . . [deleted by admin]
What’s your take on the FTC guidance about proper disclosures when it comes to tool profit? Wouldn’t this be necessary in order to comply with these guidelines?
Tex, stay focused with me. The article is not about Amway and I want to keep the thread focused on the issue of disclosures in the MLM space in general. As for your questions, although the deal might not be achievable by new people, it’ll at least provide more information about the leaders to help the new people make decisions. As for your question about more disclosures, I think the FTC guidelines are clear: whenever there’s a financial interest connecting an “endorser” to a product, there needs to be disclosure. When it comes to tools, the question has always been: how much disclosure?
I am focused. The more generalized the discussion becomes, the more the specifics lose meaning. For example, it may be possible to go “Diamond” in another MLM in 2 months, and in that event I don’t have much of an issue with your idea. I put things in the Amway context because that’s the MLM company I’m familiar with. I am smart enough to know I don’t know enough details about other companies to have an informed opinion.
As far as tools are concerned, there are 2 pieces:
1. What is the “multiplier” guideline that applies? In other words, does the upline make 25, 50, 100, 200, or 500% more from tools than from the advertised MLM business?
2. If the new person follows the recommendations of the upline, at what level should they expect to break even?
Tex,
There is no legal multiplier guideline. In an effort to prevent the “tail from wagging the dog,” people talk about the importance of the tool money being a fraction of the MLM money. But in reality, the amount is not as important as the legal integrity of the model itself. If the model is legal and the owner is earning 10X relative to the MLM, it’s fine (so long as there’s adequate disclosures about where the money is coming from). It’s a tough issue. With your second question, the first 90 days is critical. If they’re not earning any income in the first 90 days, they’re gone in most cases. This has nothing to do with the law, though. Legally, if an upline promises the moon, and provides disclosures about the work involved to obtain the moon, there’s really no requirement that the downline needs to break even. Hope that helps.
Actually, I agree with you. I’ve stated that above 50%, I consider the tail to be wagging the dog. There are a couple of problems when tool profit becomes excessive:
1. The public perception of the business will suffer, and the MLM company will probably step in and control it in order to protect their reputation, and related to this,
2. The people buying the tools will not be able to make a net profit until they achieve a very large organization and/or sales volume, which leads to a high rate of churn and a negative reputation as well.
Regarding the 90 days, I agree to a point. However, “earning any income” also needs to consider not gross profit, but net profit. I think most new people who actually put forth effort (let’s not count the ones who get and don’t do anything) don’t expect to make a net profit the first 90 days. However, they also shouldn’t have to build a large business, in order to break even, that feeds their uplines’ lust for tool profit, either.
The work required to achieve the high level postulated above would be impossible to attain. So, if the work involved was accurately described, it would be seen as impossible, and the upline would lose a LOT of credibility.
Your first and second points are great. And yes, net income is the ultimate metric. If a distributor is earning a net profit after 90 days, it’s a huge plus. Even if they could just make a few sales and break even, it’s a big deal.