For the past few weeks, I have been talking about the elements that go into creating a compensation plan. Over the next few posts, I would like to discuss the common compensation plans, their strengths and weaknesses, and how the various elements are applied in them.
We will start with the most common compensation plan, the unilevel plan. In this plan, every member can recruit as many people as they like and they, in turn, do the same. The network, therefore, grows wide and deep.
This is a very simple plan to understand but it can attract the wrong people and result in a great deal of disillusionment and frustration for the people being recruited in large numbers and then left to their own devices. If you are going to adopt the unilevel plan you must create strong structure requirements and discourage indiscriminate recruiting. If a leader is recruiting new members, they must be responsible for mentoring and training them and this can only be enforced by making it part of their promotion requirements. For instance, if a member wants to be promoted to the first leadership rank, let’s call it Bronze, she could be required to recruit 2 active agents and help them sell more than $500 per month. If she has 10 members and none of them are active, she will not be promoted. In this way, you focus her on helping 2 new members to be active rather than signing up every Tom, Dick, and Harry. You could then apply this concept to every level of promotion. To reach the next level, Silver, you may require your Bronze leader to help the two active members get to Bronze. Creating structure will overcome the key drawbacks of the unilevel plan.
The following compensation elements work well in a unilevel compensation plan. I am not suggesting that you apply all of them to your plan. Rather, select the elements that will drive the desired behaviors.
1. Retail Commission – 15%
2. Volume Bonus – 15%
3. Fast Start Bonus
This should be geared to the first 6-week push
4. Level Based Commission
Open each level as the leaders achieve higher ranks
5. Leadership Bonus
This would be up to 100% matching based on the level-based commission of the leader's direct recruits
6. Rank Achievement Bonus
7. Pool bonus
This plan is well suited to sales-oriented networks. If you have a range of products that you require your agents to demonstrate and sell, then this plan is probably worth considering. I find it easy to structure, easy to explain and, although the team will not grow as fast as with other plans when it matures, it is traditionally the most stable of the plans. Most importantly, you will develop strong sales managers in the form of team leaders who will make sure that your agents are selling and making money.
Some of the biggest MLM companies in the world use the unilevel plan e.g. Avon, with global sales volumes exceeding $11B, and Amway, with over $9B.