How to Analyze Compensation Plans
FINDING THE RIGHT COMPANY
By Jeffrey A. Babener
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Go for the Goals
When choosing a company to join, the most important factor is not the type of compensation plan, but whether that plan is achieving important goals for distributors. Alfred White, senior management consultant at San Diego-based Hamilton LaRonde & Associates, Inc. recommends evaluating each company you are considering against the following characteristics of a good compensation plan:
1. Is it easy to enter into the opportunity? You should only have to buy a modestly priced sales kit.
2. Are you rewarded primarily for direct sales, rather than for override commissions?
3. Are you rewarded for personally sponsoring others?
4. Are you rewarded for recruiting multiple levels?
5. Is the focus on selling products to the end consumer, rather than to your downline?
6. Are you rewarded for training and supporting your downline?
7. Are you rewarded for high personal volume?
8. Are you rewarded for high group volume?
9. Are you rewarded for maintaining a monthly volume?
10. Does the plan provide for recognition?
11. Does the plan offer nonmonetary rewards and incentives, such as trips or cars?
12. Is the plan's monthly maintenance requirement reasonable - not so high that you can never achieve it, and thus never receive compensation?
Conversely, here are some compensation plan characteristics that should send you running in the opposite direction:
1. A plan that does nothing to discourage deadweight distributors and nonproducers.
2. A plan that encourages inventory loading or large investments in products.
3. A plan that emphasizes gimmicks rather than product sales.
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