This an open letter from Founder’s Diamond and (former?) IBOAI board member Chuck Goetschel. While there are some things I disagree with (and at least one error of fact I’m aware of) I actually agree with much of what he is saying here. I’ll have more specific comments later today when I have more time.
What do you do when you learn that what you have been promoting isn’t working? Do you simply complain about it? Do you keep telling everyone that the good times are coming? Or, do you do something about it?
Let me complicate it: What if you learn the supporting facts of this business failure after you’ve invested 17 years of your personal life, and your parents have invested over 35 years? What if you find yourself financially dependent upon the business income; the basis of which was built years ago? What do you do? This is the story of where I found myself and why I chose to do what I have done.
(click Read More below for the full story ….)
First, some facts: In 1982 Amway of N America did $1 Billion in volume (interestingly, so did Wal-Mart). Twenty-five years later, Amway/Quixtar of N America recorded approximately $1.1 Billion in volume. Considering inflation, the relative volume has plummeted over the past 25 years; most significantly in the last ten. Currently, out of 1, people that register in this business, only 833 will remain after three years. That is, 91.6% of people will be gone within 36 months of registering. From 1999-2, 6, English speaking people as a first language registered in the business in North America. By end of 25, of those registered business owners, only six have achieved the Founders Emerald level (in 25, the average income was less than $9,/year) or above. That is, 1/1, achieved an income of $9,/year or more. Nearly 5 years of community building for Amway/Quixtar and the qualified Diamonds in North America fit in one ballroom with tables. These are the facts. Perhaps, you relate to them. How’s it working for you?
In addition to these horrifying statistics, the business is riddled with litigation including very significant court cases threatening the very existence of the company in the US, England and India. The core issue in these cases is the same core issue behind the current failure of the business—over-priced products. Everything stems from this root problem. A very unfortunate domino effect resulted in one negative thing leading to the next till now we find ourselves in the current situation.
After years of attempting to correct this within Quixtar, it finally became apparent that if there was ever to truly be change, then a more dramatic stance would need to be taken. As much as I felt like David stepping up to the plate to meet Goliath, the time had come to take a stand for what I believe in.
How did we get here?
When I registered in Nov 1989 and really started building my business in May of 199, things were different. The big box stores had been building in acceptance but the Super Wal-Mart’s hadn’t appeared yet. Furthermore, the internet was not used yet for commerce so there were no consumer options there. A product could be higher in price and still sell because consumers didn’t have many of options. However, the big box stores continued to grow in numbers and acceptance. The Super Wal-Marts launched and in 1994 internet commerce began. As a result, the world of shopping changed quickly. The Wal-Mart business model drove prices down. The internet gave us a world of options without leaving our chair. Entire web sites were developed to search the web and find the best prices for various products. As a result, competition dramatically increased. Suddenly in order to sell products in this world, clear value had to exist. Businesses that survived responded to this pressure. Businesses that didn’t respond or couldn’t respond, failed. One exception to this the Amway/Quixtar business.
While the rest of retail business struggled to survive through this sudden increase in competition, Amway/Quixtar continued to increase product prices more in alignment with inflation than with the changing market economy. This caused the prices to get further and further from the consumer’s “good deal” perception as it was easily noticed that they weren’t keeping up with what was available in the marketplace.
So, why was Amway/Quixtar able to survive when others businesses who didn’t respond to the market failed? The products in the business were still purchased by the business owners for personal use in order to achieve bonuses. The primary reason the FTC looks for retail sales in our business is to validate the price a product is selling for. If the public is not buying our product but the people within the network are buying it, then something is wrong. In such a case the people in the network are buying the product not on the merits of product value but rather for a compensation bonus. The FTC declares such an operation a pyramid. Therefore, a legitimate business opportunity can slowly and unnoticeably slide into a pyramid status.
The Dominos begin—one fall causing the next…
A person has a dream to make money and registers into the business. They quickly realize that the prices are too high to successfully retail the products. Consequently, they look to the compensation plan for profit. Since the compensation plan is predominately a width-focused compensation plan, a focus on sponsoring in width is the only remaining way to initially profit. This leads to the philosophy of “get wide and see who the hungry ones are. Register 9-12 and you’ll find your three.” The other “less-hungry” ones fall out as they are not able to retail products, and without anyone registered below them they see no reason not to quit. With this ratio of fallout/failure, a negative image grows. With a negative image (made very obvious by certain websites), it becomes even harder to sponsor people while continuing to be near impossible to retail the products. This reinforces the fallout, adds to the negative image and the cycle continues.
Eventually, after enough failure occurs, business analysis is done and lawsuits are filed. This is the current situation of the Amway/Quixtar business. Currently, the DTI in England has a court date scheduled to determine whether Amway in England represents a legitimate business opportunity primarily due to the fact that most people are not making money, retail sales are not occurring and people are spending money on training. If people spend money on training but still are not able to retail the products, then the opportunity is questionable. Amway of India is in court over similar challenges. A class action lawsuit seeking significant damages has been filed in California (Porkony vs. Quixtar) over the same challenges as well.
The continued erosion of the product pricing over the years has put this business in a legally vulnerable place, since a network without retail sales is deemed illegal. Currently, Quixtar’s retail volume is approximately only 3% of its total volume. Members of the IBOAI board have diligently worked with the company to change this situation. However, ironically, although they are the ones working the hardest to change the situation, they now find themselves with the greatest legal liability given their high level of knowledge and business influence.
Lawsuits-Lawyers in Charge-Reputation Focus:
As a result of all the lawsuits that threaten the very existence of the business, Amway/Quixtar attorneys are now running the show. Their perspective is their legal position, and their decision making process runs towards whatever makes the business more secure. Although this sounds great initially (and to a certain extent it is), the general reality is that the greater an institution’s regulations, the less an individual’s freedom. For example, although some laws are very valuable, each law limits our freedom. With no laws we would have ultimate freedom (along with ultimate chaos—imagine no driving laws?). With the other extreme of all law we would eventually have no freedom (and yes, no chaos). The new rules with Amway/Quixtar will limit even more freedom and make it even more difficult within an already difficult business. And, unfortunately given their current legal vulnerability, they need to. Consequently, the company’s primary focuses is to tighten things legally and attempt to improve upon reputation. Their key question is, “Is it better for the reputation?” If it is, then it will be the course of action. Unfortunately, not all reputation decisions lead to better results—especially for the new person.
Reputation Focus-Amway Business Transformation-Increased IBO Difficulty:
In order for the attorneys to secure the business, they continue their movement towards whatever will decrease risk and improve reputation. As a result, on September 1, 27 the “Business Transformation” to a global Amway will begin. Although I agree with the idea of decreasing risk, the transformation unfortunately will be to the detriment of the IBOs’ desired results. This will make a very difficult business even harder. Consider the upcoming changes:
Quixtar name change to Amway
It is a shame that the DeVos and VanAndel families made this decision without any communication with the field, including the IBOAI board. This name change creates obvious challenges to growing one’s business. It is a hurdle that was placed in the in front of already struggling people. Furthermore, the name change dramatically hurts the trust between the field and the company—not a good thing. For the past eight years IBOs have been telling people that this is not Amway; that it is an independent corporation being a subsidiary of Alticor Corp and a sister company to Amway. Many were told Quixtar is just Amway online and we were all taught to point out that Quixtar is actually a unique business model designed specifically for the internet. Although it takes many aspects of the Amway business and incorporated them, it is its own unique business. With Quixtar now folding back into Amway, it makes everyone look like a liar. How do you tell those people that you actually are in Amway online? What do you tell those people who asked, “Is this Amway?” before registering, and you said, “No?” Now they are in Amway. These uncomfortable and frankly unnecessary situations the IBOs will find themselves in will be difficult. The feelings will not be good. And, the trust with the owners for suddenly “changing the deal” is definitely damaged.
Why would this decision be made? Most all business owners are against it and the IBOAI board unanimously voted against it. So, then why did they do it? I believe their answer has a few platforms. First of all, it makes for a simpler business from a world wide perspective with the use of one name—Amway. It will eliminate the possibility of anyone misinterpreting what the relationship of the business is to Amway once it just is Amway. This clarity is good for risk and reputation even though it may be very damaging to IBO results. However, when asked why the name change, the company will regularly recite their research that yielded two findings.
The first finding is that the Amway brand name is better known by far in N. America than the Quixtar name. This, of course, is no surprise, nor is the fact that the better known Amway name comes with a much lower approval rating by the public. That is, Amway not only has a higher “Awareness” factor, it also has a much higher “Bewareness” factor. However, their research tells them that it is better to start with a high awareness factor name like Amway, even with the negative reputation, than to build the awareness factor of a lesser known Quixtar name. Personally, that makes sense to me if it were just a product that the company wanted to sell. However, when it is a business that we are going to build involving friends and family, the conversion is much more complex. Why would I choose a business with a negative reputation as my business of choice when I have other businesses (perhaps lesser known names) that I could choose? The company’s goal is to end up with such a great reputation that you can just walk up to someone and ask if they want to see the Amway business plan and people would be positive. A great thought, but currently it is light-years away from that point, if it’s even possible. Further, it isn’t necessary. The original concept of Quixtar was to have a fresh start, to try again to do it right—new business format (online), new name, and a new result! Even the company’s research said that it would be devastating to go back to the Amway name before making changes to dramatically improve the business model.
The second finding their research discovered is that the more they advertised Amway in the state of Michigan, the slightly better approval ratings Dick DeVos received during his campaign for the Governor of Michigan. In fact, I was told that if they had been running the advertising longer, it might have made the difference in winning the election. I can see where advertising can contribute to persuading the general public during an election. However, I certainly don’t want to believe that the name change with which most everyone disagrees, and the timing of which consultants warn about, could really have anything to do with votes towards future elections.
New Mandatory Leave behind brochure (New SA44).
Starting September 1, 27 all IBOs will be required to give prospects a new brochure that will replace the current SA44. Although it is a nice piece, it fully describes the return to the Amway name by 29. (I agree this should be disclosed since it is coming). Even though the official name change is a matter of months away, the necessary dialog about it effectively makes it happen now. At a board meeting I asked the company about the situation since their own studies showed that it would be “devastating prior to major business improvements.” I asked what they expected the business owners to do during this potentially “devastating time?” I was told: “They will need to be patient”. Patient for how long? Two years? Five years? Ten years? Forever? What a difficult position that puts the people in!
The brochure also does a great job promoting the training and support provided by the Amway/Quixtar company yet referred to the IBO training system more like a warning on a pack of cigarettes.
New IBO Amway/Quixtar Orientation & First 12 day requirements
Starting September 1, 27 all new IBOs will be required to review an Amway/Quixtar Orientation which currently explains to new IBOs the history of Amway, the focus on product sales and the philosophy of building the business around finding others who want to sell products with you. Of course this philosophy takes us right back to the original product pricing problem. In addition, new IBOs are required to sell 5 PV of products to documented customers three of their first four months in the business in order to receive various benefits. Also, it appears that Platinums will need a specific percentage of their new IBOs (probably 1%) to achieve this in order to receive their year-end bonuses. This unfortunately will cause the Platinums to have to become more of sales team managers, likely to put excessive pressure on new IBOs’ sales performance. This will dramatically change the chemistry of the field from how it operates today.
In coming months all new IBOs will have a specifically monitored first 9-12 days upon their registration. The details are being finalized but if it is to follow suit with other countries, we can expect several things including a limitation of what business support materials a new IBO can purchase. These limitations could include what information a new IBO can review, whether they are corporate or field produced, as well as the amount one could spend on them. Given that most new IBOs who quit in their first year do so within the first 9-12 days of their registration, this is by far our most coveted time with our new people. To have the company involved and making decisions defining the new IBOs experience during this period is alarming to say the least. All of the business effort that leads up to the registration of a new IBO, and therefore the growth of the entire team, can be totally lost if the company exercises something with an adverse effect during this period. This program is flirting with disaster at the point of all business growth. From the Company’s viewpoint, having control over this period decreases their legal risk as they can document their early emphasis on sales. It also bodes well for net incomes of the new IBO if they choose to limit the new IBO’s expenses; good for the Company’s reputation. However, without products that are retailable, this process will only magnify failure to a new IBO.
New “Stacking” Policy
Starting September 1, 27 this new policy takes effect. The implementation of this policy is a dramatic representation of a corporate agenda without apparent IBOAI board input. I was on the legal and ethics conference call with the company discussing this policy, and after 2 ½ hours of explaining IBO’s concerns to the company, it was as if the call never happened. Without further contact with the board, the company sent an email to the field explaining their new policy. Personally, I believe that people should have a choice to build in width or depth as makes most sense for an individual’s business. “Stacking,” as the Company commonly refers to it, is simply the process of registering someone directly below someone they don’t know before seeing the business.
There are many examples where someone may not know their sponsor but it would make sense to sponsor them. Example 1 – A person lives in CA and registers a friend in Florida. They cannot fly out to Florida regularly so they register a CA neighbor under the Florida business owner. These people don’t know one another, but now the original business owner can help their Florida friend by driving depth in CA. Since this wouldn’t be permissible, the Florida person is left on their own without this help. Example 2 – A person is as wide as they want to be but they know someone that wants to register into the business. Since the person with the contact doesn’t want to start any new legs, they register the new person in depth. However, the contact and their sponsor wouldn’t know each other before hand, so this wouldn’t be permissible. Example 3—The Corporation sends me a new person “lead”, which they do from time to time, so I can register them. But, I don’t know them, do I? Example 4 – People don’t renew and now someone is registered by someone they don’t know. Obviously, they aren’t in violation but that seems to be how it is written. These are random examples of situations that would lead to sponsoring someone without a previous relationship.
A team-approach strategy to depth is a strategic focus of combining team resources and talents to successfully drive depth while apprenticing new IBOs. From all my research and after directly questioning the legal team at the Corporation, there isn’t a legal risk with team approach to depth. It doesn’t violate pyramid or security laws. So, why did the company send out an email stating, “…our complaint history confirms that the absence of a relationship [between an IBO and their sponsor] often is accompanied by high-risk representations that trigger pyramid and securities law issues.”? Their concern is not the actual registration of people who don’t know one another, but rather forcing someone to register people in depth when they don’t want to, or prospecting people with promises of rewards without effort. Obviously, if someone forces an individual to register people in a place that they don’t want to, then there could be an issue—customer allocation laws. If someone prospects people by suggesting team approach will allow them to register, do nothing and still make money, that could also be an issue—pyramid concerns. However, neither of these practices are a part of the team approach to depth.
Most of the “complaints” the Company is referring to are from people calling in wondering who the person is that they just sponsored. They wonder because they receive an email from the company notifying them of the new person and the responsibilities of being their sponsor. Typically, their confusion and fears of responsibilities are not actually a complaint but rather an inquiry. This inquiry could easily be promoted positively since their business just grew because of the efforts of someone in their business support team. How awesome is that? Instead, the company records it as a complaint and the new sponsor feels confused and often concerned with the responsibility to “train, supply and motivate” as the rules state.
Years ago, a sponsor had to supply all the products to their IBOs and pay bonus checks. Today products are ordered online and bonuses are paid by the Company. In addition, the training and motivation are typically done by an education system and specialists in the business support team. Times have changed. Think about it, how much does your sponsor train, supply and motivate you? It is arguable that the business has never really depended upon the relationship between and IBO and their sponsor, but it clearly does not today. Relationships are vital for success but not necessarily with one’s sponsor. In fact, the team approach to depth actually allows the new person to build more relationships and receive more support as they inherit a larger support team than they would have naturally received. That is, the people between you and the one who sponsors your original contact is an additional support team of people who have an invested interest in the new IBOs’ success.
Finally, the new policy is the first policy or rule that I’m aware of where someone who has done nothing wrong can be penalized. For example, say business owner A is crossline from you within the same Platinumship and they violate this policy. The first time this happens, everyone new in the Platinumship may be called and questioned. No one will be allowed to sponsor until a re-training has occurred. In this example, you would also have to pay the consequence for business owner A’s actions. How is that right when business owner A is neither in your upline or your downline? You just happen to fall within an unlucky Platinumship. Furthermore, the Platinum may lose bonuses and/or be terminated for something they didn’t do. Because someone unwittingly violates this policy or because one simply doesn’t understand who their “sponsor” is, innocent people will be hurt.
As a side note, I also found it interesting, given such dramatic consequences to violating this policy, how loosely it is defined. On the conference call, Billy Florence repeatedly asked the Company to define “to know” one’s sponsor. Since the entire policy revolves around knowing one’s sponsor, Billy’s question seemed like a good one to me. Does a phone call constitute knowing someone? Does it take a face-to-face meeting? Is it a matter of a certain amount of time with someone? The Company never answered Billy’s question and now has a policy that can have a changing meaning at their discretion. Given the policy’s consequences, that’s a scary realization.
This policy is directly targeted to discourage the team approach depth philosophy to building the business. However, since the team approach has produced most of the results in the business since 1999 (five of the six Anglo business owners who achieved Founders Emerald or above) and since it doesn’t seem to create any legal risk to the business, why would it be targeted? Team approach has shown to yield a lower average income at Platinum than the traditional width approach. Given that so many more people achieve Platinum with team approach, the average income statistics are being brought down. This is not good for reputation. It is a shame that the company statistics don’t include the fact that with team approach it takes about half the time to achieve the Platinum level when compared with the traditional approach. Team approach also resulted in the majority of recent higher awards as noted above. Too bad the statistic shared isn’t the total income over time earned by an IBO. It should be. If that were the case, the reputation focus would lead the company to promote team approach.
Mandatory Contracts between tool companies and Amway/Quixtar
Currently there is heavy discussion regarding the implementation of a contract between the tool companies and Amway/Quixtar. This contract would most likely give Amway/Quixtar the position of licensing the tool companies—and controlling/dictating what business support materials (BSMs) (books, tapes, CD’s, meetings, websites) could be produced as well as to whom they could be offered. Just as with any business, the more governmental restrictions that are applied, the more difficult it becomes for the business to prosper. I’ve always believed in balance—some regulations are healthy but not too many. The global Amway business will be in total control of all aspects of BSMs. Unfortunately, since the company’s perspective is coming from their legal and corporate marketing offices rather than from IBOs in the field who are actually building the business, the content will most likely change dramatically. Although it would be good from a legal perspective, it could be devastating from the IBO perspective. The best way to predict what will happen in N. America is to look at Amway’s actions in other countries. Here are some excerpts from a letter from Ben Woodward, Amway Branch Manager UK.
Effective immediately, Amway will prohibit the production, sale, or promotion of BSM that are not authorized and distributed by Amway; this includes any BSM that have already been approved by Amway. They are now considered unauthorized for use. Any meetings for which an entry fee is charged are suspended until Amway has approved, in writing, the meeting and its content…Failure to comply with the above will lead to a suspension and/or termination of the respective IBO contract. Please also note that Amway is in no way limited to these sanctions, but can impose further corrective or punitive measures…These are important steps, but in some ways, they are not surprising ones. Many of you know that for the past 1 years, Amway has been moving to exert more control over the way we do business globally.
Note: For the complete document, refer to: Amway UK & Ireland Changes
Mandatory Accreditation for QBI Bonuses
It was announced that the new Quixtar Business Incentives (QBI) that are being offered will only be awarded to accredited teams. This was a surprise to many, because previously it was contractually stated that accreditation was optional. When this was brought to the Company’s attention they responded with, “It is optional. You only need to complete it if you want to receive your QBI bonuses.” Jim Payne responded simply with, “Contracts change.” Like the name change back to Amway, unilaterally changing an optional program to a mandatory program damages trust.
In addition, accreditation is a concern for IBO leaders as many of its upcoming requirements are very unclear. A couple of examples: What restrictions will apply from the contract that will be required between Amway/Quixtar and the tool companies? A big question mark hangs on defining the changes Amway/Quixtar wants to make to business support materials. Next, what will need to be taught regarding the positioning of the business? That is, will a person need to lead dialog with prospects using the Amway name? “Do you want to come to an Amway meeting?” Given the focus on reputation, the curiosity approach (inviting people to a meeting without sharing the business name) wouldn’t appear to have a long shelf life remaining. Some of these unknowns could have a dramatic effect on the results obtained in the business as a team conforms to the new accreditation requirements.
Given the trust concerns established with the Corporation, the vagueness of what future accreditation looks like, statements like ‘other requirements and restrictions apply’ listed on the QBI awards brochure, and hearing stories from diamonds in Australia saying that many of the diamonds who qualified for 6-figure year-end bonuses didn’t receive them last year due to various restrictions, there is grave concern and uncertainty about the reality of QBI awards coming to fruition.
Amway advertising after Business Transformation
Two hundred million dollars is a lot of money. However, it is not enough to change the poor reputation of Amway through advertising. In a recent IBOAI board meeting, Doug DeVos and Steve VanAndel acknowledged that it would take a lot more than $2 million—and allowed that there was probably no amount of money capable of changing the Amway reputation through advertising. In fact, if the advertising happened now, people would see a broken business model and it would only re-confirm their poor perception. Consequently, the Company’s plan is to “change IBO behavior in order to transform the business.” Once the business is transformed, then advertising can begin. The biggest behavior change desired, as it should be, is more retail sales. However, doesn’t that bring us back to the core product pricing issue? Mike Mohr said, “You can’t have competitive retail pricing and support an MLM structure!” If that is so, than this may be a long transformation! The MLM structure and an excessive owner margin.
New rule allowing certain establishments to sell to the public directly
Some leaders are concerned that the Company is moving towards selling directly to the public and going around the IBOs. They currently have websites set up selling to the public directly (although they are still awarding the PV to random IBOs). They have also recently purchased companies such as Gurwich Products which sell products directly to the public in competition with Amway/Quixtar products. I mentioned to Doug DeVos and Steve VanAndel that it seems this business is heading towards becoming an Avon type business. They didn’t make any comment to my Avon reference. Avon’s recent business transformation included the initiation of selling products directly to the public, around their distributors. A new rule is also currently being incorporated that allows certain retail establishments to sell products directly to the public—interestingly, the Amway Arena and VanAndel Arena will both qualify to do direct sales under the new rule.
My Personal Journey
At a Diamond Club several years ago, I was informed that over 1, people didn’t renew that year in my business. Even though my team had registered a great deal more than that yielding a net increase in the team size, I was still devastated by the thought of over 1, people on my team losing their hope in the business. As I thought more about it I decided that I needed to go on a quest to increase retention. Even Rich DeVos said long ago, “We are in the business of keeping people in the business till they realize the business they are in.” I realized the obvious—that people who had something valuable to lose wouldn’t quit. That value could come from solid relationships, great value in the products and customers, and/or a team of registered business owners in depth. Having someone registered in depth gives someone something to lose and consequently can be an encouragement to stay in the business.
It was then that I decided to call Orrin Woodward. We had been casual friends for several years, enjoying Peter Island, BVI together. I knew he and Chris Brady had been having phenomenal growth with a team depth program. Orrin was gracious and shared his thoughts and insights. I began the implementation of the team approach to depth and we had more IBO success stories result the following year than had happened in a long time. Even my own business qualified as a Founders Diamondship for the first time.
Accreditation was soon brought to the table and I eagerly choose to participate. I was continuing my quest to improve things for the new IBO and felt accreditation would help the new IBO have confidence in the value of our training system. I knew that our system already had many aspects of balance that the Company was looking for, including product training and an emphasis on retail. I had personally made sure that a great deal of our material had been reviewed by Quixtar legal and received a “content reviewed” stamp of approval. Consequently, I was confident I could complete this program without much change to our system. I also wanted to add a level of security to the IBOs on my team. I had been hit with a lawsuit claiming bad business practices citing things such as a missing refund policy on our website and tickets, not reading the proper disclaimer prior to beginning Hotel Open meetings, etc. In addition, the suit claimed that most of the money was made by the BSM business and not through Quixtar; retail sales weren’t happening; nor was Quixtar enforcing the retail rule. I knew that accreditation would bring to light any of these issues of which I was unaware or upon which I could improve, and bring our team to a squeaky-clean status. More importantly, I knew that those considering filing a lawsuit may choose IBOs that are not part of an accredited team over those that are a part of an accredited team; hence, more security for IBOs on our team. After over a year of effort, we became Quixtar’s second accredited team.
As time continued, I realized our system needed to continue to improve. The work effort necessary to grow the business became excessive. People needed better results. Once again, product pricing led the domino effect of challenges that everyone was facing. As a result, I contacted Orrin Woodward again and spoke to him about my thoughts. He was open and we dialoged business philosophy, ethical and moral principles, as well as the vision for the future. We talked about accreditation and the desire to build a business that would stand the test of time. We agreed that the greatest reward of the business, and indeed our greatest strength, was helping people with personal growth. We all have so many stories of people who claim that their success in some work outside of the business came from what they learned through their association with the training system. I kept thinking, wouldn’t it be awesome if these people could apply their new personal growth to the Amway/Quixtar business rather than something else? However, this repeating scenario confirms that the training systems are working well but the Amway/Quixtar business operates at too high of an effort level for success.
As a result of understanding what we do best in our business is to find and develop leaders, Orrin Woodward and Chris Brady have built the best leadership development program that exists today. One’s results from this training can be applied to anything, and within this business it has yielded new IBOs with the majority of results in the Amway/Quixtar business since 1999.
Over time, and particularly while serving together on the IBOAI board the past couple of years, I have really gotten to know the Orrin Woodward that most of the world doesn’t know. Orrin Woodward is a man of character and integrity. He is also a great thinker and a brilliant systems designer. He is one of the most well-read individuals that I have ever met. His decision making process always is based upon specific, solid principle. He is also very misunderstood. When he believes something is right in principle, he will move forward with his belief with unwavering fortitude. Others will often see this without understanding the thinking that is driving his decisions, and just label him as stubborn or rebellious.
I spoke with Orrin for the following year until it came to a point that I knew the best thing for our IBOs would be to be a part of his leadership development program and be a part of his vision to grow a team to 1 million IBOs. Of course this meant initially leaving my system behind, including our accreditation status. I knew that the quality and consistency of Orrin’s information combined with the leverage created through teamwork would far outweigh any part of my system including its accreditation. Orrin and I agreed on the principles of accreditation and after fully reviewing the TEAM system it was obvious to me that it was based on sound principles. Being on the legal committee of the IBOAI board, as well as being one of the few who had completed the accreditation program, I have a very good grasp of the rules. In fact, members of the Corporate legal team have often commented that I could “write the manual” when it comes to understanding the rules as they are applied to BSMs. Consequently, Orrin asked if I would head-up, along with Ron Simmons, CEO of Legacy Inc., the enormous project of getting TEAM accredited. I accepted and began working with Amway/Quixtar again on the accreditation process.
After launching my efforts with Amway/Quixtar, I clarified that the main point to work through was the positioning of the business. Amway/Quixtar wants their name mentioned anytime the TEAM name is mentioned. However, this is not a rule or law that currently exists but rather an opinion that has arisen with the new legal team in charge. Previous managing director of N. America, Ken McDonald had put in writing the Company’s stance on positioning and it wasn’t to force the Amway/Quixtar name to come out in front or even simultaneously with the TEAM name. But, yes, once again, things change.
With the company’s focus on reputation, they argue that saying the Amway/Quixtar name up-front eliminates any potential misunderstandings. However, I would argue just the opposite. People have preconceptions of what the words Amway or Quixtar mean to them. Some people still believe today that Amway is a door-to-door soap sales business. So, to say a company name prematurely may, in fact, be misleading them by triggering reference to their own inaccurate understandings. When I mentioned this to lead attorney Mike Mohr he said, “I don’t understand what you are talking about. My brain doesn’t work that way.”
Further, say Amway/Quixtar to a prospect and you can start a stop-watch to time how quickly they do a Google search and find a plethora of negative website reading. Therefore, if the goal is to grow the team by allowing someone to make a decision based on accurate information, wouldn’t it make sense to educate the prospect and build a trusting relationship with them first rather than prematurely flashing a name up that kills any chance of moving forward? Currently, those leading with Quixtar/Amway (or even simultaneously) have experienced devastating failure. Yes, it looks good on the legal paper, but we have yet to find one English-speaking as a first language team in N. America that is currently growing that uses this approach.
I don’t want to deceive anyone. I won’t. Yet, discernment of disclosure is a necessary process to produce the best results. Why haven’t you told your five-year old how babies are really made? I’m sure you have said something on the subject but you have discerned that disclosing too much information at the present time may not be your wisest choice. Obviously this is an extreme example and not exactly applicable in context, but the point is, there are times when some discernment of what to disclose must be considered for best results. Don’t get me wrong, TEAM would love to lead with the Amway/Quixtar name. However the Company would first need to clean-up people’s inaccurate misconceptions as well as its reputation online. This will become a larger issue as all teams come to understand the Company’s non-negotiable stance on this topic.
The other area of positioning that needed resolving for accreditation was that Amway/Quixtar feels TEAM is being positioned as the business opportunity and not Amway/Quixtar. The truth is there is really more than one opportunity interlinked. We have always said that we are not “in” Amway/Quixtar but rather we are Independent Business Owners (IBOs) who are “powered by Quixtar.” Personally, I always felt “powered by” was a bit strong since I have not felt power from the Company as much as I have felt it from other sources, but, nevertheless, there is an established independence of the individual from the Company and the reality is that they do have multiple opportunities available to them.
We have continually requested that the Company allow us to share the income opportunity of the system openly. They have denied us that ability citing that being transparent with the potential system income is wrong, as it could be considered “enticement” to register in the Amway/Quixtar business. Meanwhile on many websites and blogs throughout the internet, the IBO leaders are being painted as crooks by not being open about their system businesses. How ironic is that?
In fact, Ron Simmons as recently as June 5, 27 emailed the Company attorney Gary VanderVen, requesting that at least on Company blogs they share the truth that the Company “has prohibited IBOs from being transparent about system income.” Orrin and Chris Brady attempted to start this process through their explanations in a book and online and, even without disclosing incomes, were threatened with suspension by the Corporation. Orrin and Chris disclosed that there are really multiple sources of income: Amway/Quixtar products, sales of ticket events and BSMs, and speaking at events. Each of these is based on a compensation plan where any individual can achieve the same or more income than anyone in the upline business support team.
An analogy they used was a car dealership. Say you wanted to sell new cars and started a business doing so creating income. As people wanted to trade-in their cars to buy a new one, you found yourself additionally in the used-car sales business, now with a second income. Next, people came in with their car wanting service so you start a service business—income number three. The service business needs parts so you start a parts businesss—income number four. Certainly, there is nothing wrong with these other sources of income. If you made more income in your service business than in selling new cars (your original business) is there anything morally wrong with that? Is your primary business selling new cars or are you just in the car business with multiple businesses interlinked? Finally, what if someone was considering starting a new car sales business and you were to share your knowledge of it with them? Should you not share the other interlinked businesses in the discussion even though they may never get to that point?
Open disclosure on this topic is a large battle between the field leadership and the Corporation. I believe the Amway/Quixtar reputation suffers less when this knowledge is hidden. They can then discredit the IBO leadership rather than allow the public to learn the truth of how little profit margin remains in the Amway/Quixtar products after the DeVos and VanAndel families take their cut. However, as the Company takes over the BSM business with their new contracts, this will be a moot point, as they will have the power to regulate pricing and profits on BSMs as well.
For the record, the Company stopped communicating with me about TEAM’s accreditation. My last email on the subject was sent to attorney Sharon Grider on June 4, 27 (with copies to both Beth Hines and Gary VanderVen) requesting direction on the next step regarding “meeting content and positioning.” I never received a response. Only days after that email, I was at the June IBOAI board meeting when the bomb was dropped on us about the name change to Amway and the Business Transformation.
As I began to put it all together and realized the crisis point had come, I knew something had to happen NOW! Amway/Quixtar had slipped into a pyramid status as the products became non-retailable. After years of hearing nothing but “we’re working on it” regarding their promises to provide retailable products, it became obvious that it wasn’t going to change. I know for certain that the Company heard our persistent requests the day I witnessed Rob Davidson, Director of Sales, in a board meeting slam his fist on the conference table, stand up and yell at Don Wilson, “We get it Don! You need those 1-15 retailable products. We’ve dropped the ball on it!” I couldn’t figure out why he was so mad at Don. Don wasn’t the one who kept dropping the ball.
It finally became obvious that either they were lying (they weren’t really working on it) or they were totally incompetent (no results after supposed years of effort). As nice as I try to always be, that unfortunately was the case. There is so much pending litigation against the Company that the attorneys are now at the helm of the ship charting its direction. The resulting Amway Business Transformation has so many unknowns and the Company’s heavy-handed first steps toward implementation have already broken so much trust, nobody is confident that they know what it will look like.
Finally, the IBOAI board, that most everyone believed had significant power, clearly displayed its lack of influence during this crucial time. In fact, as a direct result of the IBOAI board sharing its disapproval with the Company regarding the name change to Amway and casting a unanimous vote of no-confidence regarding the upcoming Amway Business Transformation, the Company responded by canceling the Board’s contract with the company; turning it to a month-to-month contract! That’s right. The IBOAI board was the one thing almost all of us were led to believe provided the IBOs any security. It was the field’s voice and most believed it allowed us to “keep the Company from changing the deal on us.” That certainly was an urban legend. The board voiced an opinion and the Company cut it off at the legs by taking it to a month-to-month contract.
Furthermore, I realized that many “leaders” who knew this information were not going to do anything about it. I heard people who represented thousands of Independent Business Owners (IBOs) commonly say, “I can spin it.” Each time I would think I know I could, but I know that I wouldn’t—ever! I listened to these leaders whose thinking was all about holding on to what they have. However, I listened to others like Randy Haugen say, “If it’s not good for the new IBO than I don’t care what it is for me, I won’t do it.” I heard leaders say, “Well, what can we do? We have no options. We have no power.” Others in private said, “Nobody has ever successfully gone up against the company.”
Don’t get me wrong, it’s not like I didn’t understand those folks who want to hold on to their success, spin the situation to a positive perspective to everyone, be hopeful and continue business as usual. Like Randy Haugen, I just couldn’t do it. Do I want to lose everything I have worked for through this process? Of course not. However, I don’t want success based on the churning of other people’s failure. In fact, when speaking with lead Amway/Quixtar attorney Mike Mohr about my concerns, he told me that he hoped we could work it out since there is a lot of money on the table for me. I know he meant it encouragingly. I was aware that I have one of only four systems that has been accredited and I regularly qualify as a Founders Diamond—the combination of which should result in a new QBI bonus of $5,.. However, I responded to him saying that if I didn’t believe that the new IBO starting today could ever achieve with the New Amway what I have achieved with the previous business, then the money felt more like a buy-off than a bonus.
My moral dilemma began; do I stand up to the Giant regarding this disaster and put it all on the line, or do I let things just continue as they may and let my life stay simple? It became apparent that the necessary price changes weren’t coming. The “Amway business transformation” wasn’t going to make it easier for an IBO to succeed, and trust with the DeVos and VanAndel families as well as with Corporate management was gone.
I just couldn’t promote something I didn’t believe in, nor could I leave people unaware of the facts just because I’m set and the company is intimidating. As a result, I was compelled to step up to the plate and make a change. I was willing to put it all on the line because I believe so much in truly leading people to something that they can succeed with. I keep thinking of all the people who need their business to work—they’re counting on it!
I understood the current condition of the business and why it was this way. I also understood who was in charge, what their objective was, and the general direction the business was headed. I knew that the IBOAI board had no teeth and was barely alive. I knew that most people who knew what I knew wouldn’t say anything but would rather just “make the best of it.” I knew that it would expose those making the decisions as well as those who would “spin” those decisions. I realized by sharing the truth that some people would be hurt and leave the business. I knew that I would potentially receive a great deal of abuse by those who were unhappy with my sharing this information.
I realized that some people would wonder how we had been promoting the business yet now announce its flaws; knowing they don’t understand how we always have believed in the business concept which we promoted and were diligently working behind the scenes to invoke disparately needed change within the Company all the while believing positive change was coming. The bottom line is I knew that my life would be a lot simpler if I just stayed quiet. However, I knew that I was asked to be on the IBOAI board to protect and serve the IBOs, and I knew for the new people to have a chance of achieving their dreams I had to expose the truth and invoke change.
I was really hopeful that the Company would come to a peaceful resolution. I was hopeful that it could just be talked through and avoid anything public or mean. However, that wasn’t to happen. When we suggested rolling back the non-compete rule to simply give people a choice to either move forward with this new business transformation or to choose another opportunity, Quixtar attorney Mike Mohr said, “Why in today’s competitive environment would I open the door and let our crown jewels leave?”
This rule (Rule 6.5) was implemented just three years ago; 45 years after Amway started. Simply put, this rule doesn’t allow someone in this business to be in another competing MLM marketers out of our Quixtar camp since the rule would not allow IBOs to register with another MLM business. However, the wall more significantly keeps IBOs trapped inside the Quixtar camp giving the Quixtar Corporation the ability to do whatever they want with their trapped audience.
If the company won’t change, than at least give people a chance to choose a different opportunity. If this business is really so great then nobody would want to do anything else and it would have been a non-issue. The fact that the idea of giving people an option is such a big deal to the Company shows me that they understand that given their freedom, people will go elsewhere. The freedom to leave should always be available. That freedom allows competition to bring the best performance out of each company and keep the focus on what’s best for the new business owner.
Unfortunately, the Corporation won’t allow such options to exist. They effectively have become the ultimate “Hotel California” where “You can check out anytime you like, but you may never leave.” Our lawsuit is not requesting any damages or retribution. The suit is simply a request to the court system to let free enterprise freely operate once again.
As a final note, life has its irony. How interesting is it that approximately 5 years ago, Rich DeVos and Jay VanAndel found themselves in a similar situation with the MLM business they were sponsored in, called Nutrilite. They couldn’t amicably resolve some company decisions that they believed were wrong, so they and some others left and formed Amway!
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