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How Have Raiding Rules Evolved in Network Marketing Contracts and Policies and Procedures?

Charity — Thu, 29 May 2014 17:47:27 +0000

Most companies will allow consultants to join downlines with multiple companies so long as they don’t raid the sales organization.

Some companies state that you can’t recruit people that you didn’t personally sponsor. If you personally sponsor a friend or family member then why can’t you recruit them to join you at your new company?

The short answer is that company policies have evolved over the years, resulting firstly from a combination of increased raiding by distributors who switch companies. And secondly, direct selling companies have become more rigid in trying to retain their sales force, sometimes with good reason, although they sometimes appearing to be “overreaching.”

For instance, around 20 years ago, leading direct selling companies maintained a policy that required consultants to only offer the opportunity to people who they personally sponsored. Twenty years ago, this was a common policy.

Over time that policy changed. With the increased ease of communication due to technology, many companies asked that consultants not participate in raiding anyone in their organization while they were active with a company. The policy later morphed again to require consultants not to sponsor anyone in a new opportunity except for those that they personally sponsored upon leaving for a new company. Then the policy changed once again to where companies required that consultants who left a company not sponsor anyone into the new company.

In a few instances, some companies have provided non-compete agreements, which aren’t considered fair and are not even enforceable as a matter of policy in the state of California. Some companies have gone so far as to tell their distributors that they cannot participate in any direct selling activity for a certain period of time after leaving the company. Almost all states frown on non-compete agreements because they inhibit people from conducting their livelihood. Compared with the policies of twenty years ago, the extremities in policy have morphed extensively in terms of restrictions.

Today, the most common clauses seen are ones in which companies have moved from the concept of “don’t recruit anyone unless you’ve personally sponsored them” to “during your time with our company, we ask that you not raid anyone in your sales organization, whether you’ve personally sponsored them or not.” Most companies today will also ask that former consultants not raid people in their organization and recruit them to another for a period of six months to one year.

Most companies will allow consultants to join downlines with multiple companies so long as they don’t raid the sales organization. In the party plan arena, companies will often implement restrictions based on product. If you are selling jewelry, for instance, then the company will ask that you not join another company which is selling jewelry.

What happens if consultants raid anyway?

As a practical matter, not a legal matter, if a distributor is affecting the entire franchise of the company – having a major impact – a company will not hesitate to file suit and to seek an injunction against the distributor. It is very rare to see a company pursue a consultant who is very low on the sales genealogy or who has a very limited sales organization. Legal action is usually reserved for consultants whose major raiding activities would take a good portion of the business away from the company. Often in situations, such as these, there has been a bad-faith decision by the distributor themselves, which isn’t fair to the company.

Is there a right or wrong? Probably not. However, it is important to the future of direct selling that companies and distributors reach some common ground on acceptable practices by distributors who leave companies and recruit their former colleagues to new companies versus reasonable expectations of companies in restricting distributor movement in a way that is not overreaching in the marketplace.

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How Often Should Companies Renew Their Policies and Procedures to Make Them Relevant in Today’s Marketplace?

Charity — Tue, 27 May 2014 20:32:42 +0000

Companies that claim to be partners with their consultants should walk the talk.

There are two issues that have surfaced in recent years: 1) social networking and 2) frequent migration of distributors between companies. With social networking concerns, companies have had to decide on positive protocol for consultants who socialize through technology and the internet. In terms of the migration of consultants, companies have often found themselves constantly revisiting policy that both protect the livelihood of all its distributors while also protecting the interest of the company. These issues are constantly under review. Most companies continue to revisit these issues multiple times.

Certainly, it’s not a good idea to make frequent changes to a compensation plan because it undermines faith in the company. Companies should also try and limit the number of changes in basic agreements and also be able to justify any of the changes being made. Companies that claim to be partners with their consultants should walk the talk. They should be saying that their interests lie in protecting distributors and consumers, not just the company. They have a responsibility to protect the livelihoods of thousands, or millions, of consultants who depend on income from the company. This is important because when companies disassemble, consultants who have spent all of their time building sales organizations only to find them stolen or taken elsewhere, are deeply hurt.

In the direct selling industry, the word change can send a certain group of people into orbit. Companies that are making adjustments or enhancements to their policies and procedures or compensation plan must carefully communicate those changes to sellers, especially to the leadership of the company. Leaders need to be prepared to deliver messages and to have the messages palatable to the rest of the sales force.

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Are Network Marketing Companies Mostly Moving to All-Digital/All-Online Starter Kits? Can Online Starter Kits Be Made in a Way That Ensures a High Perceived Value?

Charity — Fri, 25 Apr 2014 20:21:02 +0000

In reality, the real and perceived value of emerging online sales and marketing support will far exceed the limited sales kits of “yesterday.”

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