You have to be reasonably smart to start a direct selling company and grow it to any size. And even if you have some blind spots yourself, most founders surround themselves with other smart people — compensation plan consultants, back office software providers, experienced MLM attorneys, etc.
So why is it that some companies do some really stupid things? Spencer Reese asks this in his latest blog post, pointing out that:
Whenever an MLM is attacked by law enforcement, other MLMs want to scrutinize the defendant company’s policies and compensation plan and parse every phrase in court filings, orders and opinions and quickly make changes so that the same fate does not befall their company. But it’s a COLLOSSAL MISTAKE to assume that the critical flaws all reside in the compensation plan or policies. The first step should be to identify every element of STUPID (and arrogant) in your business and fix it. The company may have turned a blind eye to the stupid practice for years or thought because a practice is not specifically illegal, it’s okay. Most commonly, the stupid practice is effective at growing the business, so they try to rationalize that it’s acceptable. But guess what? Even if it’s not illegal, it’s still stupid! And it’s STUPID that most often brings MLMs into regulatory crosshairs.
When a company is in fast growth mode, management is usually afraid to rock the boat with successful field leaders. Penny wise, pound foolish. The long-term risk far outweighs the short-term benefits. Even if your company “survives” an FTC or other regulatory action, the reputation cost directly impacts your ability to recruit new people for years to come. Even if you win, you still lose.
Ron White says you can’t fix stupid, but in this case, you can, and as an industry, we must. Don’t be afraid to hold your leaders accountable. Just take an approach that’s educational, not adversarial. Remind them that the P&Ps are there to protect both the company and them legally, as well as to protect the good name of the company, which makes it easier for them to recruit people. It’s in their own best interest to adhere to those policies.
And if they can’t get with the program, can their ass! The potential — no, almost certain — future cost to the company far outweighs the revenue of any one leader, no matter how big they are.