Generally Accepted Standards and Best Practices for Administering MLM Policies
Terrel F Transtrum, CEO ServiceQuest
October 2014
Best practices for MLM companies administering policies and compliance are often defined by practical considerations of staff and skills for handling complaints of possible violations. This entry takes a first look at the generally accepted standards for administering MLM policies.
On average, a distributor support staff member will handle approximately 100 to 120 email and phone transactions and inquiries daily. These issues are consistently of an advanced, more complex nature and require specialists who possess training and experience gained in the specific environment of distributor support.
The issues handled by the advanced distributor support staff range from compensation plan questions and research, interpersonal disputes, and training-related questions to policy questions, policy administration, and complaints with potential implications of policy violations. The underlying legal foundation is the distributor agreement which incorporates the published policies & procedures of each MLM company. Assuming a compliance staff of three specialists to whom policy complaints are filtered, and if the staff of distributor support reps submit 1 complaint or other information they feel meet the criteria for closer examination by compliance, in a month, an average of 20 matters will be assessed for further action. This would accumulate approximately 6 to 7 new cases per compliance specialist per month to consider for further development or disposition.
The cumulative effect of potentially hundreds of cases at a given time is a large number which requires a company to prioritize and make choices about further investigation and case development, taking into account the various people potentially involved and affected, and the impact on the company and distributors. In light of this potent reality, a compliance specialist and the compliance team must make informed judgments and decisions of continued action, particularly when distributors choose to not contribute actionable evidence.
In a real-life environment (not theory), and in light of the overall experience with hundreds of customer service teams, I regularly observe and conclude that most companies do not purposefully perpetuated travesties, plot to manipulate genealogies of distributors, selectively enforce policies, blatantly abuse distributors through self-serving disclaimers and machinations, unethically sacrifice the rights of innocent individuals, administer compliance in a predatory manner, or provide a select few with an unfair advantage.
What is the role of the company in effective policy administration?
Regarding the administration of policies against generally accepted standards, each company is best thought of as a referee or “traffic cop,” ensuring that the independent distributors stay in their lanes, and issuing tickets to those they might observe running a red light. Not all violations can possibly be observed, even in the best of technology circumstances, and not every complaint from fellow drivers can be investigated with infinite energy and perfect insight. It’s the nature of a dynamic and energetic community of entrepreneurs given opportunities and supported by a visionary company.
Thus, in guiding the company by helping distributors to step up, manage and lead their organizations, the company is fulfilling its first responsibility in generally accepted standards. The first standard, therefore is to remind distributors of their duties and provide them with information and guidance on resolving the issues that typically arrive first at the desk of a customer service representative for the company.
Policies & procedures are to be administered as consistently as possible based on the plainest reading of the policy, considering the circumstances and facts as well as the myriad factors brought into play by the humanity of distributors. In other words, the unique blend of human energy, emotion and creativity that spark innovation and growth within a direct selling company are also the elements that can hardly be anticipated in their infinite possibility of mixed means to accomplish goals and desires. Nevertheless, a company representative working with independent representatives who have leadership responsibilities (by virtue of their rank, good standing, leader influence, and other related factors) must follow the most rudimentary approaches such as IRAC (Issue, Rule, Analysis, Conclusion), a method for the study of law and administration of policies taught in first-year law schools across the nation. Because policies and procedures are contract elements (by virtue of being incorporated by reference linked from the independent distributor agreement), they must be approached and administered within the anticipated review of judges and triers of fact.
What factors influence policy administration?
From 25 years of policy administration and compliance management and training, I have concluded that every policy issue involves factual and subjective determinations. Even the best trained professional will approach a difficult policy issue by asking, “what is the purpose of the policy?” and “how can we best perform our role to help all affected to be able to return their focus to what matters?” In this effort, the basic standards that are considered when distributors do not play by the rules are illustrated by these key questions:
- What impact will our actions have with regard to state and federal regulators, the distributors involved, the stability of the company, and precedence for the future?
- Who benefits and who gets hurt?
- What have we done in the past?
- What is the accepted practice in the industry?
- What’s the right thing to do?
It is my opinion that reports of violations may or may not be investigated, depending on a host of factors that determine the use of company resources. Spotting violations is random, at best, and not all violations will be identified; in fact, most won’t be. Only factual, timely and verifiable information will be used, and decision-makers determine sufficiency of evidence and whether to proceed with an action.
Terrel Transtrum terrel@servicequest.com