October 01, 2009
Target the Right Behaviors with Bedrock Compensation Principles
by Mark Rawlins
I have a good friend who has a hobby—well, more like a single-minded passion—for target shooting. As I’ve watched him over the years, I’ve often thought how MLM compensation plans are like target shooting. To make the analogy work for network marketing, picture a side-by-side double-barreled shotgun and two targets—one for enrollers and the other for sales leaders.
Why two targets? Because there are two activities every compensation plan has to reward—that of enrollers and sales leaders.
Let’s first talk about enrollers. It’s important to understand who enrolls people. We also need to know what enrollers do and why they are so crucial.
Most of your field (about 65 percent) won’t enroll anyone; they are your customers. Then, there are your social enrollers (around 30 percent of your field), who enroll between one and four people. They enroll within their social circle. Finally, there are your professional enrollers (5 percent of your field) who are “enrolling machines” that bring in five or more people. What this boils down to is this: 1) the professional enrollers bring in 43 percent of your new people; and 2) the social enrollers bring in 57 percent.
The target or purpose of enrollers is to enroll as many people as possible—a specific skill that is different from that of sales leaders. The act of enrolling consumers is an end unto itself for the enrollers—social and professional.
The best social enrollers are like the people who go to movies and then tell all their friends about it, and their motivation is much the same. The two reasons people tell you about a movie are: 1) they like the movie, and 2) the movie theater was full—this is the social feedback they receive on their decision. Their activity is very much driven by noting how full the movie theater was. Social enrollers need this same kind of feedback. They check, “Is this company on the move?” or “Is there real excitement?” In a company where the excitement is fading or waning, the social enrollers pull back.
The professional enrollers create the excitement. They are very important because they enroll the most people per capita. However, they impact more than just the 43 percent of the people enrolled. Although that percentage is truly valued by the company, these enrollers have an importance far beyond that because they affect the attitude and, therefore, the actions of the social enrollers. The company needs this symbiotic relationship between the social and professional enrollers.
Top sales leaders, on the other hand, have a completely different target in mind. They strategically view the enrolling process as a means to an end. What is that end? To create their downline organizations with the intent of building their business. Their skills are very different from the enrollers’ skills because sales leaders are enrolling people they think will help build their downline.
You may ask, “How many distributors do top sales leaders enroll?” The answer is, as many as they need; this might be 50 for one sales leader or five for another. I’ve looked at this kind of data my whole life, and it’s impossible to distinguish top sales leaders by the number of people they enroll.
At first glance, the number of people top enrollers and top sales leaders enroll often look similar, but they have nothing to do with each other. Top enrollers must enroll lots of people, whereas top sales leaders only need to enroll a handful of people.
There are two types of sales leaders, but the number of people they enroll is not a distinguishing factor between them. These two types are: 1) those who build a downline with a tactical, in-the-trenches work ethic, and 2) those who are very good at painting the dream—often referred to as dream builders.
Over the last 30 years, the problem most MLM companies struggle with is how to incentivize both the enrollers and the sales leaders target groups. This leads to my bedrock principles of compensation plans, whose premise is, “If you don’t find a way to compensate the behaviors of both groups, then you diminish your chance for success.” Compensation plans are a means to achieve this.
If that’s so, then “Which compensation plan best pays both groups?” The answer is: “None of them do!”
This is why hybrid compensation plans are so important. To hit both target groups at once, you have to combine commission types to incentivize both kinds of distributors. Successful compensation plans will always aim at both enrollers and sales leaders. At this point, you might ask, “Is it really possible to ‘fine-tune’ my compensation plan to improve the behavior of both groups?” Absolutely!
The magic comes when you can create a compensation plan that both your professional enrollers and sales leaders can really get excited about and communicate to the field. What is essential in that message is how leaders get rewarded within each target group.
Those of you who already have your compensation plan percentage allocated may ask, “What good does this do for me?” The fact of the matter is, when you pick a compensation plan like a hybrid-binary or a hybrid-unilevel, you have just spent 80 percent of your compensation plan dollars. Companies that really target do it with the last 20 percent of their compensation dollars. Between 5 and 10 percent of your compensation money is really the differentiating factor. It’s how you spend these final percentage points that can create the magic. It’s the qualifications or the matching bonus you place or the little tweaks and fine-tuning you do to make sure this last 5 to 10 percent goes into the hands of your people.
Just like with my target-shooting friend, those last little adjustments make the real difference between hitting the target or not. Those little changes to account for weight of ammunition, temperature, humidity and wind speed really do matter. A few percentage points in qualifications, how those qualifications are set up and how they focus on that target, become the difference between hitting the mark—creating the right behavior with just the right compensation plan principles—or not. This ought to matter to you. Why? Between 35 and 50 percent of all revenue is earmarked to pay commissions in this $100 billion industry! That’s a lot of cash! Therefore, making sense of your compensation plan and targeting the right behaviors distinguishes the champions from those just getting by.
Mark Rawlins is CEO of InfoTrax Systems.