After nearly 40 years in the direct selling business, I’ve learned a thing or two about companies and their products, the importance of compensation plans and some basic rules about money. For example, when it comes to products vs. compensation plans, providing the salesforce with unique high-value products to sell can often overcome poorly designed compensation and marketing programs. When people love a product, they will often work to sell it even if all the plans aren’t well-designed.
The opposite, however, is not true. A great compensation plan and the best marketing materials cannot overcome a poor line of products or products for which the value proposition appears to be overstated—certainly, not for very long.
I’ve also learned that there are only two rules about money that govern the success of every direct selling company:
- Rule 1: If the salesforce is not earning good money, the company never will.
- Rule 2: If the company cannot earn money, the salesforce will not have the opportunity to earn money for any significant length of time.
For the company to succeed, solid business practices must be in place so that both the company and the salesforce can prosper.
But most important, I’ve learned some lessons about trust, specifically the trust that should exist between the home office and the salesforce. As long as the salesforce trusts that the company is working in their best interest, they can overcome almost any obstacle and work through any necessary changes, even very emotionally charged changes, such as reworking a comp plan. Trust is often referred to as “the most precious commodity.” Just as you cannot demand that a shard of glass turn into a diamond, neither can a company demand trust from a salesforce which doubts management’s intentions. Trust is only earned, and only kept by continuing to act in good faith.
If a company takes the trust of its salesforce for granted, that company could set itself on a path of great difficulty.
In fact, creating and maintaining that bond of trust between company management and the independent salesforce may well be the single most important duty and obligation of every direct selling company CEO. Of course, the company must be profitable and investors must be satisfied with its performance. A company must also be in compliance with laws and regulations and look for all possible efficiencies to reduce costs and increase profits. But all of these tasks and efforts will go for naught if, in the course of carrying out these routine management tasks, the company loses the trust of its salesforce.
In my experience, there are two primary reasons that companies lose the trust of their salesforce:
First, there is a failure to pass on the understanding that this business is built upon mutual trust.
Many direct selling companies are founded by entrepreneurs, some of whom learned the business by selling for another direct selling company as an independent contractor. The companies often start on a shoestring budget, working out of a family home basement or back bedroom. The founder is often personally involved with both selling the products and recruiting and training the first independent contractors to join them in selling the products. Through this process the founder comes to understand that the “early adopters” who volunteer to join them in selling the products are doing so for two primary reasons: they like and will use the products themselves and they like and trust the founder of the company. There are strong personal relationship bonds, built through shared dreams and goals, between the company founder and home office team and the early volunteer leaders.
In turn, as some of the early adopters develop into effective and successful sales team builders, thus creating more volume and sales for the company, the founders become grateful to the early volunteer leaders for trusting them, and develop a sense of responsibility toward protecting the business and income opportunity of the volunteer salesforce. In other words, the founders of direct selling companies recognize the mutual dependence between the company and volunteer leaders. Each side must trust the other to do the things that together will make them both successful.
As the company grows on the business-building progress of the volunteer sales leaders, the founder often becomes less active as a seller and recruiter in the field and begins to concentrate more on building and maintaining the bond of trust with the salesforce. Founders do this by recognizing that volunteer sellers need a continuous flow of high-quality products to sell to their friends, family and neighbors with confidence. They take the time to build outstanding home office customer-service, driven by the need to never embarrass the volunteer salesforce if it can be avoided. That means delivering the right products to the right customers on time and every time. If they do make a mistake, they desire to fix it fast and with no hassle for the customer, and do it in a way that saves face for the salesperson.
As time passes, the founders, with their deep sense of gratitude and appreciation for the work and accomplishments of the salesforce, give way to the next generation of the family or hire outside professional managers, or sell the company and retire. Sometimes these founders have done a great job of preparing the next generation of management to understand that the success of the company is built first and foremost on maintaining that bond of trust with the volunteer salesforce. They help their successors develop a sense of gratitude and respect for the independent sales leaders. They inculcate the entire company culture with the understanding that only through the efforts and achievements of the salesforce can the company earn the money to pay employees’ salary and shareholders’ dividends.
Some founders pass on these fundamental understandings necessary to sustain the company. We see this in long-enduring successful companies. When we do not find these fundamental concepts of trust between the company and salesforce, we begin to see once great direct selling companies and brand names fall by the wayside, one after another.
All companies run into challenges and obstacles over time. Products must change and be modernized, services must improve, and training techniques must be delivered in ways that are relevant to the recruits of the day. But without the belief and trust of the salesforce, none of the changes inevitably required over time will succeed.
Second, short-term decisions are too often made in regard to efficiencies and profits only, without due consideration of how such decisions will impact the trust of the salesforce.
I have lived this nightmare both as a senior direct selling company executive and as a consultant to direct selling companies. Too often CEOs do not understand the foundational importance of the bond of trust between the company and the volunteer salesforce. New leadership tends to focus on the financial and statistical analysis of the business, often because they lack direct selling backgrounds or because they have come up through the company in jobs with little exposure to the salesforce.
As a result, the new leadership may not fully understand the fact that every product was sold by a volunteer. They may not understand that if the salesforce loses trust in the company, then they will not recruit friends and neighbors to join the company. Because this fundamental component is not a part of their understanding of the company’s success, they might never stop to wonder how their decisions may be viewed by the salesforce. Will it make the sellers’ job easier or harder? Will it help or hinder their efforts to recruit new salespeople? Will the salesforce see any new program as increasing the independent sellers’ opportunity to build their businesses, or will they see it as the company decreasing the motivation of the sellers?
One can argue that trust is an important element of every type of business. All customers must trust that manufacturers will make safe, quality products. It is important no matter how those products are sold. Employees need to trust that management will make good decisions that will protect their jobs in every form of business.
No other form of business or distribution depends more on the trust and belief of independent volunteer sellers for its success than direct selling does. Every founder of every successful direct selling company learns the need for, and importance of, this bond of trust by working side by side in the trenches with the early adopter sales leaders. They quickly learn to recognize that salesforce trust and belief is a must-have, not a nice-to-have element of their business philosophy, and that every key decision must be made on that basis. When that critical bond of trust is lost over time, the company will go into decline. Not just sometimes—every time!
This is my personal perspective based on 40 years as a participant in the industry at the highest levels and as a consultant for the past 13 years who has observed the industry and worked personally with several hundred industry leaders.
Alan Luce is Founder and CEO of Luce & Associates Direct Selling Consultants.