On July 19, 2008, Bob and Anna Bassett were honoured to be guests of Richard Dennis on a Saturday evening Mentoring For Free Skills Call. To listen to that call, click here: Policies and Procedures with Bob and Anna Bassett.
In 2009, Frieke Karlovits, a mentor with Mentoring for Free encouraged us to look more carefully at MLM, Network Marketing and Affiliate Programs based on Michael Dlouhy’s training of “Five Pillars – What To Look For In A Company”, what YOU need to be successful not what the company needs! Bob and Anna have now analyzed over three hundred companies. They have looked deep into the Policies and Procedures and the Compensation Plans to see what hidden traps await the reps, distributors or networker. What they found overwhelmed them and was viewed as appalling to them the industry and should be to the distributor.
We have written some articles regarding your responsibility as a home-based business owner to read your contract, your Policies and Procedures. One of our most recent was called “TERMINATE” .. It Is In Your MLM Networking Contract and IT IS USED AGAINST YOU At the Company’s Sole Discretion? which addressed one word that is a red flag warning clause if it is in your contract. Another article that we have published to our readers on our blog is Network Marketing Company Management – Are They People of Integrity and Dependability? Part 1
What Michael is teaching and Bob and Anna have discovered through their analysis is that the Red Flag Clauses of PNP’s fall into five major categories:
1. Readability and Length
3. Ongoing and Increasing Responsibility *
4. Unusual, Vague or Bizarre Responsibilities *
5. Way Out There and What is Up With That?
Bob and Anna say,
And some companies think they own you and your family too! Just check the clauses that tell you all how to behave and what to say!
Here are more horrifying clauses written by lawyers in actual Policies and Procedures of the companies that some of us are promoting and building a nice income…for the company, but what kind of residual income are you creating for yourself? (Bob and Anna’s comments are in brackets.)
The third category we are looking at today is:
*3. Ongoing and Increasing Responsibilities (Sales, Recruiting, Training)
Bob and Anna warn and caution us to beware of clauses that deny you the freedom/right to retire, take a vacation, or even take time off for illness or death in your family. When reading your contract look for words like ‘ongoing’, ‘regular’, ‘continued’, etc. Companies often coerce you to have ongoing sales, ongoing recruiting, and ongoing training. Here are some actual phrases. In each case, my question I would think you would want to ask yourself is, who will be giving the definition of terms like ‘regular’ or ‘bona fide’ or ‘professional’, etc. It is usually determined by the “Company”, using words like “sole discretion” will be a dead give away as to who is in control of making the definition.
- A director must demonstrate regular leadership and guidance.
- A leader must maintain ongoing contact with his/her team.
- You must fulfill the obligation of performing a bona fide supervisory sales or distributive function in the sale or delivery of products and services.
- A sponsor must maintain an ongoing professional leadership association with his group.
- You are to assist the new recruit in obtaining associates training and enrolling new customers and new associates. Failure to provide complete and accurate corporate-approved training will adversely affect the associates business. Associates understand they are also responsible for providing ongoing advice and support of the downline organization of associates they sponsor into the (Company) program and agree to maintain regular communication and support to those associates in their commissionable downlines by way of any combination of the following methods: personal contact, telephone communication, written communication, electronic communication and attendance at associate meetings. Associates should retain proof of their efforts to comply with this policy by maintaining appropriate records (Does this mean that if you do not attend meetings or write a letter, you can be terminated?)
- You will fulfill your leadership responsibilities as a Sponsor including training, communicating and supporting your team. (Vague indeed)
- As Distributors progress through the various levels of leadership, they will become more experienced in sales techniques, product knowledge, and understanding of the [Company] program. They will be called upon to share this knowledge with less experienced Distributors within their organization.
- Regardless of their level of achievement, Distributors have an ongoing obligation to continue to personally promote sales through the generation of new customers and through servicing their existing customers. (This is the one! You can never take a holiday or retire from this company!)
Why is the “Company” not responsible for the “ongoing”, “bone fide” and “regular” training?
*4. Unusual, Vague or Bizarre Responsibilities and Red Flags
- Beware of open ended or vague phrases that the company can interpret any way they want. Watch out for clauses such as these actual examples:
- [The Company] may elect to not renew any distributorship for any reason it deems to be in the best interest of the Company, its customers and other distributors. These reasons may include, but are not limited to the following: Failure to use best efforts to promote [The Company’s] products and services, and actions that bring dishonour to or impute the reputation of [The Company]. (Who decides if you are using your best efforts? Who defines ‘dishonour’? Who determines the reputation of the company? Does “in the best interest of the company’ include their needing to steal your check because they are in the hole and the shareholders are complaining?)
- You are responsible for motivation of your team. (Who defines ‘motivation’? If a team member reports you as being uninspiring, can you be terminated for being dull?)
- Adequate training shall include but not be limited to … education regarding the company Policies and Procedures Manual, Compensation Plan, product information, sound business practices, sales strategies, and ethical behaviour. (Is this not the job of the company to train its distributors? What does ‘not limited to’ mean? Where’s the rest of the list of things you have to do?)
- [The Company] reserves the right to retitle a Business Leader regardless of the PV requirements if, in [The Company]’s assessment, a Business Leader fails to fulfill other qualifications and responsibilities of leadership, as explained in this PnP’s.” (We have no clue what this means. Can the company demote you without giving an explanation?)
How will you or anyone ever be able to fulfill these qualifications and responsibilities? Look at the qualifications like this. You work for a Car Dealership and sell 5 cars today and 3 cars tomorrow and one on the weekend that is 9 cars sold…a profit for the company..but the company says that you have not meet your qualifications of selling 10 cars. The dealership will not pay you any commissions until you sell 10 vehicles, boy that does not sit well with me. The salesman has sold 9 vehicles and not a dime for his effort and revenue for the company.
I think perhaps when we are looking for a company perhaps we look past all the hype in a video presentation and see the compensation plan and policies and procedures for what they are…Your contract and your job description. Look, investigate and research to see how hard you have to work and what hoops have to jump through to make a dime. Why not look for and join a company that will pay YOU for ALL your effort and sales revenue brought to the company.
To learn more about how to protect yourself so you do not get burned by your policies and procedures, start with Success In Ten Steps by Michael Dlouhy. It will save you years of failure and frustration.
Come back soon for Part 3: Way Out There and What is Up With That Clauses…
To Your Success
Dave and Darlene Mills
Leadership with a vision