“SYSTEMS” / A Good Idea Gone Bad

We have discussed how a system of motivation and training through continuing education is important. This continuing education provided by books and tapes and social gatherings is effective in giving the new distributor a feeling of camaraderie, and educating him on the techniques of sponsoring new distributors, and selling products, and encouraging him to overcome obstacles, rejection, and depression.

One Amway distributor around 40 years ago, felt that a system such as that was needed; and he succeeded in growing a large organization of distributors. He began by merely loaning books, recommending books, and producing audiocassettes to exchange with his organization.

Now, I want to discuss one of the issues many have with this “system”. It’s the issue of turning “The System” of training and motivating distributors into a secondary business. How did that happen? Why was it allowed to happen?

We’ve established that these “motivational systems” were successful in the beginning, but my opinion is they, in fact, became too successful.

Early on in Amway’s history, the founders decided that the distributor field should be in charge of the distributor field. Provided the company’s Rules of Conduct were followed, then distributors were free to train their distributors and conduct business within those parameters.

As demand for tapes increased, the originators of the system were forced to make an investment in more equipment to produce them. Their overhead increased with the demand. Naturally no one objected to a small charge on some professionally produced materials to further their growth. Enough to cover the cost of production and the expense to distribute the materials.

I know I would not object, if I knew the materials were beneficial.

In a few years, of this successful system’s implementation, a second generation of “systemized” Diamonds was now on board and on a roll. They had learned how to get tapes and books into people’s hands and they had learned that success was coming from the techniques.

Now in business, you must be paid for your time.

The motivational system, if it takes up a portion of your business time, then it must also, on reflection, pay you for that time. It is; after all, part of your business, and no one can slight you if you derive some profit from it, right?

And so, the Diamonds and the Diamond’s Diamonds still produced, distributed and provided materials of motivation for their downlines, but they instituted a profit into the system, as a means to pay for their time training these distributors. There is nothing inherently wrong with this. After all it’s business.

And so the growth of these organizations continued, and naturally catapulted Amway to the top ranks of the MLM world. As the late 80’s approached, Amway’s success kept dwarfing everyone in the industry. From 1980 to 1990, Amway doubled from a billion in sales to two billion in sales world-wide and advanced into just about every country in the world with a zero failure rate. Every market opening was an incredible success.

And since duplicating the success of others is a mantra of MLM, many other MLM companies formed. These companies adopted similar products, similar training methods all vying to be the “next Amway”, the next big thing.

“The System” and Amway had formed a symbiotic relationship. The “systemized Diamonds” were providing billions of dollars of revenue for Amway, and Amway in turn, was providing a stable infrastructure for the system to flourish.

But, Amway does see some problems with “the system”. One of those problems is the secondary profit being derived from it. There is a danger of the focus being removed from the actual sale of Amway products. Rich DeVos is quoted as saying,

“If the system becomes the business folks, we are in trouble, because it’s an illegal pyramid scam.”

Still, Amway is bound by their own agreement to let distributors train distributors as long as the Rules of Conduct are being followed.

Well, these were very powerful Diamonds creating billions of dollars of volume for Amway. They were going to protect their interests, which they believed, is the system. They had been brought up believing the system they had (and no other) was the key to success.

Amway’s worldwide sales scream from $2 billion in sales to over $7 billion dollars in 1997! There are not even any other MLMs with HALF that much sales in any year. The Diamonds are saying, “Look at us! “Look what we have done with this! How could you say this is bad?”

But the system becomes so ingrained and so profitable, it really replaces Amway as the business profit-center.

This is not to say that products and services are not still being made, nor that Amway is not still making good on every point in the compensation plan, just that the secondary business become more the focus.

Now in most MLMs, when a distributor quits, he leaves quietly, he or she comes to whatever business decision they make and for whatever reason decides not to pursue it. Refunds on unsold products are given, and the distributor walks away. But with the “systems”, the distributor walks away usually at a loss.

Whatever money they made, they were encouraged to “invest” in the motivational tools, in hopes of furthering their business. With this total focus on selling “The System” over the products and services, the image of Amway declines dramatically. Those distributors who left “The System” as well as Amway see themselves as drastically changed. They emerged from a daze of motivation and hype, and are left bitter and less financially stable. And they equate “The System” AND Amway as the cause for their predicament.

Pushy salesman tactics, and inventory loading problems that ALL MLMs had problems with in the 70’s and 80’s, had already began to taint the image of the MLM industry. Add on top of that, the relentless prospecting of new recruits to fund “The System” and replace the old distributors who can no longer afford the expenses of the system and the image only gets worse.

Tomorrow we’ll continue to discuss the financial symbiosis between “The System” and Amway, and some proposed solutions to the image problem.

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About Dave Robison

Now Appearing in an Extended Engagement! Join Dave Robison as he takes you into his world and his daily life of reviving a stand-up comedy career. Prepare for side trips exploring Public Relations, marketing and business ethics. Enjoy some frequent detours describing his observations on life. Read the exploits of this self-proclaimed Renaissance-man and blooming blogger as you go On The Road With Dave. From Mobile, Alabama comes Dave Robison, a confessed Internet-aholic, middle-aged-married-man, who's generally a nice guy--he just has one or two issues. Stand-Up Comedy by Dave Robison is available for corporate events, college campuses, and nightclubs.
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3 Responses to “SYSTEMS” / A Good Idea Gone Bad

  1. KentF says:

    Well done Dave -maybe there’s a book in there somewhere 🙂

  2. Casey,

    We all are. That’s the great thing.

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