Theoretically, this should be the most attractive compensation plan in the world. Practically, however, it seems to elicit some strange behavior. I will describe the structure using an example.
Mary joins the team under Joan. Her first x recruits (normally two) are placed under Joan. These recruits are considered to have been surrendered. Thereafter all Mary’s recruits are placed in her front line. Each of Mary’s recruits now must surrender their first x recruits to her before they can build their front line.
So, once Mary has surrendered her first x recruits, she is on a rollercoaster ride. Each person she recruits gives her x new members who, in turn, give her x new members who, in turn, give her x new members ad infinitum. The income from the members Mary surrenders is usually split with her upline, with the upline getting the lion's share of the commission. Thereafter she gets 100% of the commission from her personal recruits and a substantial percentage of the commission from any members given to her.
Here is the rub - when Mary joins, she is not at all keen to give her primary people to her upline. She will try to find two useless people to give away while keeping her good people for herself. As a result, she either never gets going or the upline lands up with a team that is useless.
If you decide to adopt this plan you need to spend a lot of time teaching the ethics and principles. This is an “as a man sows, so shall he reap” business. If you teach your people to give their best recruits away and trust that the principals work, then this plan becomes extremely effective.
Another mechanism you can use to get the team to surrender good people is to treat the process as part of the training. If Joan takes Mary on her first several sales presentations and shows her how to do the business, Mary will feel less aggrieved if Joan gets the first x recruits. Thereafter, Mary will do the same with her team and so on. This provides you with a powerful training platform and will ensure that your members know how to maximize their income.
This plan is good for companies with a single high-priced product. I have seen it used to great effect in the timeshare industry where the investment is substantial. When the stars align, the Australian Two Up explodes and the incomes can be substantial.
If you have a high-priced product that has a single one-off purchase then this may be the compensation plan for you. I would personally still use the binary plan for a product such as this but that is probably just a matter of preference.