What Is A Simple Compensation Plan?

August 14, 2018 By admin Leave a Comment

For many years, I have written blog posts and recorded videos explaining why simple compensation plans don’t work.

Did you know that simple plans wound and kill companies? Sharing this information is important to me, because of our company’s mission of education.

Our Mission: We educate the owners, management teams, and independent representatives of direct selling companies with information, wisdom, and solutions to improve the health and stability of their businesses.

Features of Simple Compensation Plans

In this article, I will define clearly the features of simple compensation plans.

Lack of Depth

Simple plans pay on just a few levels of downline volume. How many is too few? I would say a plan that pays less than five levels deep is a simple plan.

Only Pay By Level

Many simple plans also pay only by level.

A level is a positional relationship between two independent representatives in the same leg. While paying by level is good, a compensation plan that pays only by level is too simple, which is bad.

Not Using Compression Properly

Compression is a term used to describe the action of bypassing inactive or ineligible independent representatives when determining rank qualifications and/or compensation plan earnings.

Simple plans are ineffective in their insufficient use or overuse of compression, or in their decisions to use the wrong type of compression.

For more info about compression, read my article Compensation Plans: Focus On Compression.

Insufficient Recognition

Simple plans often have too few compensation plan ranks and/or the requirements for the ranks are not set properly with full consideration of each other.

Not Measuring Volume and Structure

Volume requirements are absolutely necessary for multilevel compensation plans. Simple plans frequently have volume requirements that are either too high, too low, or both.

While volume is king, structure is queen. Structure requirements help representatives to meet volume requirements. Simple plans commonly lack structure requirements.

Did you know that structure requirements lead to more relationships between leaders because one can’t promote to higher titles based purely on volumes? Leadership development helps to grow direct selling companies faster.

Too Few Bonus Types

While you can’t pay people 50 different ways, great compensation plans pay representatives 6 to 12 different ways.

Many simple plans include only a handful of ways to earn money.

Assuming Identical Performances

Some simple plans are based upon the assumption that if everyone recruits so many, then everyone will get great compensation. The truth is that this conclusion is a myth.

Compensation plans built on myths never place a company on the success highway.

Design Without Awareness Of The 12 Behaviors

One of the reasons people design simple compensation plans is that they are unaware of the 12 essential behaviors that all multilevel compensation plans should motivate and reward.

Simple compensation plans cannot encourage and compensate independent representatives of direct selling companies for the activities we want them to perform.

Conclusion

I encourage you to evaluate your compensation plan using the features listed above.

If any of these features describe your compensation plan, let’s talk. The last thing you want your simple compensation plan to do is to wound or kill your company.

Jay Leisner, the President of Sylvina Consulting, is a top compensation plan and direct selling expert, a trusted adviser to new and established network marketing and party plan companies. For more than 30 years, Jay has enjoyed assessing and improving network marketing, party plan and referral marketing companies across the globe.

Jay Leisner and Victoria Dohr authored the top-rated book for new and young network marketing, referral marketing, and party plan companies, "Start Here: The Guide to Building and Growing Your Direct Selling Company".

Available in English and Spanish. This startup guide contains 250 pages of wisdom that will guide you through the right steps to start and continue on your journey to build a successful direct selling company.

You will save thousands of dollars and hundreds of hours of your time using the information you will read in our book.

In 1986, Jay began his career in direct selling by working for a major direct selling software provider. First as a software developer and later as a project leader and a business analyst, Jay worked closely with new and established network marketing and party direct selling companies to provide them with software solutions to meet their unique requirements.

Jay contributed in many ways to the success of large implementation projects for many companies. Jay also worked with dozens of smaller companies to assist each of them in various capacities to provide them with the systems they needed to help their businesses to grow faster.

Along the way while working with them, he learned the secrets of successful direct selling companies and the challenges faced by them. In true entrepreneurial spirit, Jay’s decision in 1999 to start Sylvina Consulting as a direct selling consulting company was driven by what he saw was a need for answers, advice, and solutions.

In 2004, 2006, 2009, 2014, and 2018, Jay gave presentations on compensation plans, recognition, and field leadership development at conferences held by the US Direct Selling Association.

He traveled to South Africa in 2015, 2016, and 2017 to conduct workshops on compensation plan design and recognition programs for member companies of the South African Direct Selling Association.

In 2017, Jay spoke at the Canadian Direct Sellers Association Meeting on the importance of recognition.

More than just a compensation plan expert, Jay is exceptionally skilled at advising new and established companies on business strategies. Before offering advice or solutions, he asks important questions to understand each client’s specific concerns and goals.

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