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.
Simple plans often have too few compensation plan ranks and/or the requirements for the ranks are not set properly with full consideration with each other.
Not Measuring Volume and Structure
Volume requirements are absolutely necessary in multilevel compensation plans. Simple plans frequently have volume requirements which 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.
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 to kill your company.