Last week Amway Europe notified all European Diamonds and above about a new policy regarding “inappropriate depth building” or “stacking”. If you are wondering what is “appropriate” and what is “inappropriate”, Quixtar’s Director of Sales, Todd Krause, recently did a great post on this topic on the Opportunity Zone – Stacking vs Depth Building – a couple of weeks ago. The guidelines from Amway Europe state -
“Stacking” is an unacceptable business building practice. It is defined as the strategic and artificial structuring of an organization by an upline IBO placing new IBOs in depth, regardless of whether there are relationships between those who are sponsored and those who sponsor. It is a method of doing business which creates an imbalance in Depth, and inhibits Profitability.
This business building method is one of the areas of dispute between Quixtar and Team in North America, however there are other organizations that continue to use a “team” approach to depth building. Amway says the following is acceptable depth building -
- Any business building strategy, such as a team approach, is optional and should be so stated.
- Building a balance of both width and depth is vital must be taught in a group as the basis of profitability.
- The line of sponsorship may not be restructured by use of the transfer rules for strategic realignment of Depth.
- Product education is vital and a requirement for a successful business, which is based on building a balance of product sales and recruiting.
- It is important that each IBO has a prior relationship with his sponsor who in turn participates in a meaningful way in the sponsoring activity and agrees to fulfill the obligations of being a sponsor.
- It is every IBO’s responsibility to communicate and clearly educate all who enter the business that profitability comes from the sale of products and the development of width for the long term.
- It must be taught that building one leg in Depth will not create profitability.
- A team approach does not take away the fact that it takes hard work and it is the responsibility of each individual IBO to build his business.
- IBOs must be educated on the fact that the act of referring prospects to other IBOs may have a significant impact on the potential for qualification as well as a potentially negative impact on the profitability of that business.
There seem to be two concerns here – one is the issue of profitability, and the other is the issue of a sponsor knowing who they’ve sponsored and vice versa. Focusing on depth helps build a stable business and allows all IBOs to take advantage of increasing bonuses on their own purchases. The width first methodology on the other hand leads to greater initial profitability, but there can be a tendency for those IBOs that aren’t ready to be active immediately to be “forgotten”, and without constant efforts by their upline are likely to do little and eventually not renew – another Amway “failure”.
A focus on building Depth first helps prevent this, but at a loss of early profitability. In the Amway compensation plan we earn income based on volume differential. An IBO at 15% might have legs at say 9%, 6% and some at 3% or lower. He or she will earn 6%, 9%, and 12% respectively on those legs, and 15% on new sponsored legs. If these folk are all in one leg, then it’s likely the sponsor and his immediate downline are both at 15% – no differential, no profit. When the organization I work with began looking at this system, one message that came through was that this made retailing to customers even more important – folk need to be making a profit, and it will take longer to earn bonuses with depth, though perhaps quicker and easier to some of the larger bonuses available at Emerald and beyond.
There are various anecdotal reports on the ‘net of some “stacking” practices that I could image would cause problems. For example focusing on building just one leg at a time. Our organization teaches people to start building a second leg quite early (typically when the first leg is no more than about 10 “deep”). Along with retailing to clients, this means they start to get a bonus reasonably early. Interestingly, in the document sent to Diamonds (linked below), Amway lists the following as an “unacceptable practice” -
1. Legs are 25, 50 or even 100 deep with little or no volume or width.
The fact they list this as a concern indicates to me this has actually been happening. 25,50, or even 100 folk, with no volume or second or third legs means an awful lot of people joining and then getting no benefit at all. A recipe for problems. Another concern listed -
9. Upline holds the applications until the end of the month to artificially control volume for qualification or income purposes.
I’d heard reports of this happening, but frankly I didn’t believe them. It appears though the stories might be true! Some have claimed that folk were even getting sponsored into legs completely separate to the person who introduced them! That’s wrong no matter how you look at it.
Obviously if these types of things occurring, Amway has to take some kind of action. They are doing so and this new policy comes into effect on September 1, 2007. From a practical point of view the biggest issue for IBOs using a “team” approach is the following -
If a leg goes more than 10 in depth, Amway employees will call individuals to insure that the normal sponsor/sponsee relationship exists.
In theory a sponsor is supposed to know the people they sponsor and they are responsible for “training and motivating” that person. In practice I’m certain that this hasn’t always happened with the Team approach. Personally I don’t believe this in itself should really be a problem, assuming there is someone upline who has agreed to take this responsibility. Indeed, some network marketing companies record both a “sponsor” and an “enroller”, so a person can be placed in an organization where it helps them the best, but the person who actually introduced them to the business is noted and still responsible for them.
Interestingly enough, in the countries I’ve worked with Amway, a sponsor is not required to sign the contract agreeing to sponsor a new person – so someone could theoretically fill out an IBO application form and choose *any* IBO as their sponsor, and that sponsor would then be obliged to help them! I can’t find anything in the IBO contract and rules actually requiring a prior personal relationship, however it’s apparent Amway has decided to “enforce” this anyway.
It’s my belief the “real” problem isn’t the lack of this personal relationship, it’s the fact that perhaps prospects and new IBOs are not properly having the strategy explained to them and don’t understand the pluses and minuses. On The Real Quixtar Blog, Quixtar PR Robin Luymes said in response to a query -
All I know is that too many complaints were coming from Team IBOs about who was listed as their upline.
So, IBOs that continue to use a “depth strategy”, Amway wants to ensure new IBOs know the situation, know the pitfalls, and know their upline. Personally I think this can make the method even more powerful. If a potential new IBO wants to take advantage of this strategy, even if they want to only be a wholesale shopper and get the additional rebates, then they must get along to some kind of meeting and meet other members of the team they are joining. This can only make it more likely they’ll actually take advantage of the opportunity, as meeting others is what tends to give people belief about the business and the products.
Read the new guidelines here
Read the sanctions Amway may take if you ignore them