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TOP DESK: Building a Business with Purpose
Prioritization: What's It Going Cost Me?
Designing a Career Path That Works
Look Who's Coming to the Party

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I consider myself a relative newcomer to the direct sales industry and, frankly, a reluctant business person.

My parents were socialists, my brother a union politician, and my sister a social worker. It fell to me to take over the family printing business in 1968. At the time, sales for The Antioch Company were about $350,000 with about 30 employees.

My preparation for business was a little uncommon. Though I did earn a degree in business from Antioch College, my work experience up to that time was an odd assortment of jobs reflecting my family background. I spent a couple months working with UNICEF in Northeast Thailand, two years as a volunteer in rural South India, a few months living with an African tribe on an island in Lake Victoria, and I was a government bureaucrat and a traveling sales representative. My favorite (prior to my present job, of course) was a brief stint as Santa Claus at Carson Pirie Scott in Chicago.

The Antioch Company prospered, driven largely by bookstore accessories. Even today, most U.S. bookstores carry bookmarks made by The Antioch Publishing Company in Yellow Springs, Ohio. By 1985 our sales had grown to about $20 million and we had been consistently profitable. However, the industry was consolidating and we expected it would be difficult to continue to double our sales every three or four years.

That same year we learned of a bankrupt photo album company in St. Cloud, Minnesota, called Holes-Webway. By the time we visited St. Cloud, every other album company had visited and decided there was no opportunity in this bankrupt company. The album industry was considered mature in the mid- 1980s. Consolidation was taking place and imported albums were beginning to dominate the market. The only way to increase sales was to take from someone else.

With no particular plan, and with the company still in bankruptcy, we bought Holes- Webway for $1,600.

Cheryl Lightle, who had worked with me in Yellow Springs, relocated to St. Cloud in January 1986 to turn the ailing company around. Album sales at that time were about $1 million and dwindling. The Holes-Webway albums, however, had three qualities that are vital to direct sales:
• They were high quality.
• They had a unique proprietary binding.
• They required demonstration.

In 1987, Cheryl answered an after-hours call from Rhonda Anderson, a customer in Billings, Montana. Cheryl and Rhonda conceived the idea of selling scrapbook photo albums using the direct sales party plan model. That spark of an idea was the genesis of Creative Memories.

Cheryl promptly joined the Direct Selling Association and was charged with educating the rest of us. When Cheryl went on the DSA Board, she suggested I go on the Direct Selling Education Foundation Board. The experience added enormously to my understanding of the industry.

Thanks to the counsel of various DSA resources, Creative Memories enjoyed dramatic growth.

By the time other album companies even knew we existed, Creative Memories was the largest album manufacturer in the United States. We pioneered the scrapbooking industry. At one point our sales exceeded the estimated size of the entire scrapbooking market.

Scrapbooking is now a $2.5 billion a year retail industry in the United States. Our sales today are about $425 million a year at wholesale through 90,000 consultants in 10 countries.

Several factors contributed to our rapid success. The first is our corporate purpose. We exist to serve human needs by making a difference in the way people remember, celebrate and connect. We also strive to provide a community of work that offers opportunities to prosper.

We take this mission seriously. Frankly, serving human needs is what most organizations do. It is in the “community of work” and “opportunity” realms that we are, perhaps, different.

A community of work to me means an organization which shares specific goals, demonstrates shared values and has shared outcomes. We recently became 100 percent owned by our employees through an employee stock ownership trust. I can think of no better way to demonstrate our corporate purpose than to give employees a vested interest in the business. They share equally in the risks and rewards. And the rewards have been handsome during the past two decades.

Purpose and mission also have been vital to our success. The Creative Memories mission is to “preserve the past, enrich the present and inspire hope for the future.”

My wife, who happens to be a Consultant, recently had a scrapbooking workshop at our house. One of the women just sat there staring blankly at her album. When the others learned that she was trying to prepare an album about the death of her child, the outpouring of emotional support was pure human drama. Tears were shed, hugs exchanged and she got on with her album. And you know, that night all those mothers went home and gave their children an extra little hug.

To me, that moment defined the mission to preserve the past, enrich the present and inspire hope for the future.

A third element that proved helpful was Cheryl Lightle’s guiding principles. They shaped every business decision we made and were recently published in the book, Creative Memories: The 10 Timeless Principles Behind the Company that Pioneered the Scrapbooking Industry.

Two of these principles, in particular, are essential for direct sales newcomers.

The first is “Least to Most.” We did not start out with a full-fledged program. We expected everyone to understand that we were a continuous-improvement organization. It was a simple approach, but it helped us to manage expectations. We were finding our way as a start-up company. Our customers knew this about us and were therefore more forgiving.

The second principle is the “abundance mentality.” Simply put, it’s a philosophy of doing what is right for the greater good of the whole. It’s a healthy stance—one I think the entire direct sales industry should adopt.

A healthy abundance mentality is good for customers, it’s good for independent sales people and it’s good for employees. It’s especially good for the direct sales industry, because we’re all in this together.

Lee Morgan is President and CEO of The Antioch Company, the parent company of Creative Memories, zeBlooms and Our Own Image, all direct selling divisions of the company, as well as Antioch Publishing

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Prioritization:
What's It Going Cost Me?
by Teresa Day and Curt Craighead

In our last article, “Prioritization: Between Strategy and Execution” (August DSN), we discussed the need to pause between Strategy and Execution in order to prioritize, and addressed potential implications of an inability to stack-rank priorities in a true, vertical priority list. You’ll find that while everyone agrees philosophically that their businesses won’t run well without prioritization, they often overlook the practice of actually doing so.

Prioritization does not happen naturally—it takes active effort on your part. The effort may only cost you a couple of days a quarter with your top team, lunch, and some whiteboard markers. The real question is what’s it going to cost you if you don’t?

Ideally, you conduct quarterly and annual strategic planning sessions for the company as a whole, and promote mini-sessions among your department heads. You stack-rank your annual objectives and executable strategies. But remember this: Planning is merely brainstorming if it isn’t coupled with prioritization, because prioritization is the key component in planning .Without it, your plan becomes useless, and instead you operate in an environment of ad-hoc and last-minute projects. You and your business become less about “what we can do” and more about “what we can do right now.”

And in that environment, costs accumulate in two major areas: budget costs and people costs.

Before we illustrate these costs with an example, let’s review a law of the business universe that is as sound as the law of gravity. In any given scenario, you only get to choose two out of these three:

We should say at best you only get two of these three—without prioritization, the most you can hope for is one of the three,and sometimes not even that. If you are willing to trade cheap for fast, you may also lose good.

If you must choose, choose cheap and good over fast. It will cost less and you will get a better result. However, unless you prioritize against the budget and the calendar, fast becomes your only option, and your budget and people impact costs will begin to escalate.

To illustrate, suppose you have five staff members—one salaried manager, three hourly folks and a salaried district sales manager—all working on an incentive trip for your highest-volume sales leaders. We’ll call it “The Big Woo-Ha Trip Contest.”

Let’s assume that on a normal schedule, you’d need 12 weeks to project, develop, source, advertise and launch this contest, but you have a regional event in five weeks and want to launch it there. You did have a corporate planning session last quarter, and somebody mentioned the trip idea, but it didn’t get prioritized onto a true vertical priority list, so now the work must be compressed into the five weeks remaining before the event. Let’s watch the “domino effect” in action.

The “domino effect” is simply this: your first decision puts into motion a series of other actions and corresponding reactions. In this case, the first domino to fall is the decision to launch the trip in five weeks instead of 12 weeks. As a result, your trip execution might look like this:

Your three hourly employees will have to work overtime to make up the seven weeks cut from the timeline. If the mean wage is $20/hour, and each of the three employees are working an additional 20 hours/week for five weeks, that’s 100 hours of overtime per employee, to the tune of $6,000 in overtime. During this time, anything else they were working on falls by the wayside. Your vendors, which might include print, video producers, external creative, IT contractors, hotel managers or others, will all be uncomfortable with the timeframe, because they all want to do a better job than the five weeks will allow. In order to do a job they’ll be satisfied with, they’ll also have to pay overtime to pressmen and designers, pay surcharges, premiums, rush fees and off-hour delivery fees.
Remember, it’s expensive to be fast, and you also run the risk of losing good.

You’ll pay premiums in hotel space and travel costs, because your options are more limited. You take what’s available, or you don’t have a trip!

Another domino that falls is your overall project ROI, because by paying extra to make your ad-hoc idea happen, you often kill the margin. Your staff and your budget are spread thin, causing you to hope at least one other under-funded or rushed project will pay for the costs you are incurring now. Remember this: Hope is not a strategy.

People Impact
You have worked hard to hire the best people. You don’t do those decisions any justice by overworking these folks due to a lack of priority. Quality also suffers, ending in mistakes and a growing lack of enthusiasm for the program and the company.

An inability to prioritize always leads to ad-hoc and last-minute projects, which always lead to overworked employees, leading to a dip in morale, which, over time, leads to the loss of good employees. Don’t underestimate the costs of poor employee morale. Unhappy employees tend to jump at other opportunities. It will cost you more to replace them, even if you pay the newcomer a lesser wage, because of the institutional knowledge they take with them. You also run the risk of your good talent going to work for the competition.

Research data indicates free-flowing creativity and thoughtful problem solving are stifled in a high-pressure environment, so not only do you get low morale, you get people whose ability to solve problems creatively is lessened. This stifling of creativity can become a financial concern as well, because creative problem solving often saves money! You are hamstringing the very people who can help you.

A lack of prioritization breeds apathy internally, because your staff will start to see nothing more important than anything else, which is an enormous disincentive to do their best work. The overall quality of everything you do as a business will drop off, which will affect your reputation with your customers.

Your field will begin to feel the confusion of the ad hoc approach and lack of priority. Word of mouth will begin to eat away at consultant growth rates, further eroding your revenue to the point that you may no longer fund anything effectively.

When all of these situations combine to create a break-even or negative revenue stream, panic can drive even more ad-hoc attempts, which starts the whole nasty cycle over again, asking more from everyone involved, all while morale steadily worsens.

When adequate time is given to the strategic decisions made on an annual and quarterly basis, you’ll have much more confidence in those decisions because they were made when you were at your best and had time to consider any potential lurking domino effects. You had time for peer review and projections, sourcing, vendor negotiation and tweaking. But in making ad-hoc, high-impact, rushed decisions, you can never be certain there isn’t something you’ve overlooked, necessitating revisiting the decision over and over again.

When presenting the idea of stack-ranking and staying the course, we often get push-back that says the revisiting and reprioritization come on the heels of changes in the business model or in the market. This is simply a rationalization. If your business model changes frequently enough to have to reprioritize between the time you assemble a marketing plan and the time you execute it, your priority issues are much bigger than marketing. And no market, excluding anomalies, changes quickly enough to require major alterations to a 90-day priority list. So what’s it going to cost you if you don’t prioritize? Revenue? Employee morale? Your reputation? Your business?

Teresa Day and Curt Craighead write and speak about business issues and the economic value of clear communications. Day is currently serving as Vice President of Sales Training at Home Interiors & Gifts. Craighead is Managing Partner at Best Light Communications. They can be reached at info@bestlightcommunications.com.

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Designing a Career
Path That Works
by Dan Jensen

"A successful compensation plan focuses on different rewards for different behaviors, such as recruiting, selling, building managers and leaders, and retention. One part of a typical plan promotes a single behavior: selling product. It doesn’t build leaders. It doesn’t promote recruiting. Other parts of the plan should do that. A successful plan—a Career Path—should elicit all the desired behaviors, motivating the sales force to work and succeed.

The Career Path includes several ranks or titles, motivating people to move up by increasing their rewards as their performance improves.

The objectives of an effective Career Path:
• To provide a blueprint of success for each person, i.e., “Do this. Get that.”
• To inspire people to achieve higher levels of success. We are in the “people building business,” and our Career Path is one of the keys to helping people grow.
• To reward people for performance.

Plans whose Career Path does not achieve all three of these objectives fall short of their full potential.

Three Distributor Roles
First, let’s clarify the three roles of a distributor so we can see better how to construct a Career Path.

Distributor: A distributor sells product and recruits people. Everybody in the organization has the role of distributor.

Manager: When a distributor sponsors their first new recruit, they have to teach them how to sell and recruit. They, in a small way, assume the role of manager. A manager mentors their new recruits and helps them to mentor their new recruits. The manager position also represents a transition from part time to a higher level of almost full-time commitment. A manager sets an example: “Do what I do and you will succeed.”A manager continues to be a distributor.

Leader: When a manager succeeds in nurturing someone from their group to also become a manager, they assume a new role—one of helping the new downline manager succeed with their own group. This requires a different level of training, motivation and mentoring by the upline leader. As new downline managers are created, the leader will eventually mentor other leaders (not just managers). The leader is constantly on the hunt for the next “rising star” in their downline. A leader continues to be a manager and a distributor; otherwise, they cannot be a role model to their group.

Key Steps to Designing a Career Path
Some key steps to designing a Career Path:
• Design the top leader position first.
• Define the manager role.
• Design the beginning steps of the Career Path.
• Create the leadership steps of the Career Path.

Begin with the Top Leader Position
When designing a Career Path, start with the end in mind—the top leader position. When determining the requirements for the top rank or title: Don’t make it easy to achieve. Otherwise, many will achieve it quickly and then ask, “What’s next?” Adding new positions to the top of the Career Path usually costs money for additional rewards. Avoid that by making the top position difficult, but not impossible, to achieve. Out of 10,000 active distributors, you may only find one or two who achieve this rank.

What should a top leader do? What leadership behaviors should a top leader demonstrate? In most cases, they will focus on their nurturing “rising stars” in their downline. I call this behavior building leaders. It can be measured by the number of other competent and qualified leaders they have nurtured.

It should take several years to achieve. It would be reasonable to expect a hard-working and talented person to work two to five years to achieve the top rank in your Career Path.

A top leader position might require the person to continue to be a fully qualified manager (a leader is a manager, too) and have a high number of sponsored managers or leaders. A sales volume requirement for their downline might added as well.

Define the Manager Role
This role becomes the first major milestone in the Career Path for those committed to succeed. How do you measure the behaviors of a manager? Most companies have found success by measuring the size of the manager’s “group” (or unit or circle or team) and its sales volume. Thus, for a person to demonstrate the skills of a manager, they need to show that they can recruit and sell and teach others to do the same.

To determine what the requirements should be, ask:

How many people should the manager have personally recruited?
How large of a personal group should a manager have? I usually recommend between five and 15 people spread across several levels below the manager.

What’s the average volume per person in the group?
Should there be some young “rising stars” in the group? What sort of volume should they have? How many people have they sponsored?

For example, a party-plan company with an average $500 party might decide that a real manager must have recruited at least five people, two of whom have recruited two others. Thus, a minimum group size would be, 5 + 4 + the top person = 10. With an average party of $500, the minimum monthly volume for the team of a manager might be set between $4,000 and $5,000.

The Beginning Steps of the Career Path
Once the top leader position and manager position are defined, the next step is to focus on the early part of the Career Path that prepares people to become managers. Guidelines include:
• The first one or two advancement steps should be relatively easy. Distributor should believe “I can do this”—they should feel powerfully motivated to climb the ladder of success.
• Requirements for each step of the Career Path should build gradually toward manager, representing an increasing level of competence in selling the product, recruiting and teaching others to do the same.
• As each rank is achieved, the rewards must increase commensurate with the degree of difficulty.
• Most plans will have two to four steps in the Career Path leading up to the all-important role of manager. The less you have to spend on commissions, the fewer the steps you should design. The problem, however, is that the fewer the steps, the greater the difficulty to achieve the next one (big steps vs. baby steps) and the more likely people will become discouraged.

Avoid common mistakes, such as emphasizing increasing sales volume as someone advances toward manager. There’s more to being a manager than just selling products! Another common mistake is to focus solely on the sales volume of the group, which often results in people buying the manager title.

The Leadership Steps of the Career Path
The last step is to define the requirements of the positions between the manager and the top leader position. Some key guidelines:
• Focus on increasing leadership behaviors, such as creating more managers and leaders in their personal group and downline.
• Avoid using distributor behaviors of personal sales and recruiting to measure the performance of your leaders.
• Balance the degree of difficulty for each career step with the corresponding reward. If the difficulty is high, the reward must be high.

Conclusion
If your Career Path is working, you will find a high level of competence and commitment in your managers and leaders. Retention of new distributors will be high because they will quickly taste success receiving rewards and recognition for achieving their goals. You will see strong performance across all of the essential behaviors that contribute to their growth and prosperity. In short, your compensation plan can carry your company to new heights.

Dan Jensen is the chairman of Jenkon, Inc., one of the most respected software providers to the direct selling industry. Jenkon, founded by Dan in 1978, and winner of the coveted DSA Partnership Award, has served more than 800 direct selling companies in over 35 countries. Dan has earned a highly respected reputation as an industry speaker and an expert consultant on sales force compensation strategies. His seminar and consulting Web site is found at www.danjensen-seminars.com.

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Look Who's Coming to the Party
by W. Alan Luce

There is no denying that party-plan selling has been on a growth roller coaster for the last 10 years or so. Companies like Southern Living at Home, Tastefully Simple, Home & Garden Party Sales and others have burst on the scene and grown past the $100 million in sales mark in record times. Veterans like Home Interiors and Gifts have created strategic alliances with name brands like Better Homes and Gardens® of Meredith Publishing and reinvigorated their sales growth and customer appeal. Long established European and South American party-plan companies are exploring the North American market and launching operations at a record pace. As a result, the partyplan method of selling, as a percentage of overall direct sales in the U.S., has been on the rise.

A New Group Is Coming to the Party
In the midst of all this exciting activity another significant group has been quietly, but steadily, exploring direct selling and launching new partyplan businesses. I’m referring to the recent and continuing entrance of well-known, established name brand product companies offering new lines through party-plan sales operations.

In just the last year we have seen the entrance of Jockey Person-2-Person® with their upscale line of Jockey International® products and Celebrations by Lillian Vernon®. The Reader’s Digest recently made public its intention to launch Reader’s Digest Home Parties, Inc. At the recent Direct Selling Association’s Annual Meeting, several other major name brands were present, some of which have already hired staff and/or are working with industry consultants to get their new direct selling operations under way. What a change from just a few short years ago!

Why All the Sudden Interest in Direct Selling?
I’m not sure that anyone knows the complete answer to this question. However, based upon discussions with many investor types suddenly excited about our industry, and upon my work with a number of name brand companies that have launched new direct selling businesses, I will share with you what I have come to believe is driving all of this interest. It seems that several divergent forces have come together in recent years that are working very much to direct selling’s benefit.

Convergent force number one is the ongoing search for good places to invest money. The purchase of The Pampered Chef by Warren Buffet (Berkshire-Hathaway) and the attendant publicity around that event certainly caught the investment market’s attention. Suddenly, I, and many other direct sellers, were being called by venture capital groups, pension fund managers and individual investor angels all wanting to explore investment opportunities in direct selling.

Wow! For my first 30 years in direct selling it was tough to get anyone in the equity markets to take direct sellers seriously. Raising money to help fund direct selling start-up operations was darn near impossible with any of the traditional funding groups. They didn’t know much, and cared less, about direct selling as a distribution method, business model or anything else. Now they can’t get industry information fast enough. Warren Buffet really is a Pied Piper!

Some of the interest in direct selling is because the stock market, once it recovered from the shock of the 9/11 attack, has settled into a long period of nothing much happening. Investors and investment groups are looking for other places to put money to work. Real estate and direct selling seem to be opportunities of interest to these groups.

Existing businesses have the same issue. Where can they invest profits that will produce strong returns and insure the ongoing financial health of the enterprise? For many name brand companies today’s challenges around marketing and distribution in the traditional product marketplace have caused them to question how to best invest corporate profits for future growth and sustainability. Enter the other convergent force:

The consolidation of product distribution in the U.S. market is becoming an increasing challenge for product manufacturers. As the big box companies like Wal-Mart, Costco, Target, Best Buy and others become more and more dominant in the process of getting products in front of customers, they are squeezing the independent specialty products stores and the small specialty chains out of the marketplace. This gives traditional product manufactures fewer and fewer places to test the appeal of new lines before committing to the costs involved in producing the numbers necessary to feed one of the big box outlets. Equally challenging is the fact that with the demise of specialty product independents and small chains, there are even fewer places for name brand marketers to introduce new high-margin premium product lines. Compounding the “lack of outlets” problem is the fact that the major department stores are also consolidating to meet big box competition, thus reducing that distribution option for new limited-run highmargin products.

Added to these distribution constraints is the fact that the big box companies push high quantities of mainstream products and squeeze the producers on the margin. Now you have a situation where producers begin looking for new ways to introduce and sell new products. They want a greater degree of control over distribution and margins than they currently have. Some look to the Internet and some try direct marketing through catalog mailings. Increasingly, however, after examining all of the options, they are looking at direct selling and the party-plan method as a way out of the traditional marketplace squeeze and a way back to the promised land of controlling their own destiny.

How Will These Name Brand Entrants Impact Direct Selling?
The impact story is still unfolding but a few things are already clear: First, the addition of well respected company names and branded products to our method of distribution is enhancing the visibility and respect for direct selling that our companies and the DSA work so hard to achieve. Name brand companies becoming direct sellers polishes the image of all companies that distribute products via independent sales people.

Second, new well-known and solidly financed companies with branded products and new lines to offer create excitement in our direct selling marketplace. Loyal longtime customers of these product brands— who may not be active direct selling customers—will give these new party-plan buying opportunities a try. That process alone will not only bring direct selling new customers, but will also draw hosts and sales people from new groups as well. Of course, for our existing direct selling party buyers, these new entrants provide more options for hosting a party or shopping in a leisurely and social way with friends and colleagues.

Third, new entrants bring skills from other disciplines that will make all direct sellers better at what we do. One of the joys and challenges of working with smart folks who are new to our direct selling channel is trying to teach them how direct selling differs from the businesses they know so well. The name brand product managers often bring a wealth of retail customer demographic and preference data about their retail buyers that we direct sellers rarely have. They have extensive knowledge about packaging features and how to place information on packages that help up-sell or cross-sell other products. These are areas of expertise that most direct sellers have not developed.

True, they sometimes want to lead with margin-eating customer sales when they don’t need to and they often don’t really understand the negative impact that back orders can have on a volunteer sales force’s morale. Their lack of direct selling experience often causes them to stumble over things that experienced direct sellers know how to avoid. On the other hand, some of the product promotion and brand management ideas, public relations and market research skills they bring over from their original distribution methods may be very adaptable to direct selling. When that is the case, these new players will force all of direct sellers to rise up to new levels of performance. That is a good result.

If you doubt this, let me remind you of a few things. It was the direct mail explosion of the early eighties with their glossy, well-designed and stylishly photographed catalogs that forced direct sellers to raise the quality and usability of our catalogs to meet the new standards of customer expectations. And, the fast shipping with multiple shipping options of the new Internet marketers in the 90s forced direct sellers to dramatically shorten the time between ordering and delivery just to keep pace. What’s more, because the e-commerce folks have created a new standard of service, more and more direct sellers will be offering direct-to-customer shipping with options for ground or first or second day air.

Finally, well-managed and financed new direct selling companies create new options for those seeking careers in direct selling. The competition for sales people and customers will be more intense. All companies will have to shed any sloppiness or inefficiencies that may have crept into their systems. Product quality, sales force services, ordering options and information, return policies, and career opportunities will all be improved, enriched and expanded as companies vie for competitive advantage. That atmosphere can only lead to better services, choices and convenience for our customers. Those developments, in turn, will bring more folks to shop with direct sellers and when that is the result, everyone in the industry wins. So, look who’s coming to the party! I say, “Welcome name brands! We’re glad you’re here.”

W. Alan Luce is President of Luce & Associates, a consulting firm dedicated to providing services to direct sellers and specializing in guidance for start-up organizations. Luce has served as Senior Vice President of Sales & Marketing for PartyLite Gifts, Inc. and as the Founder & CEO of DK Family Learning.

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