“Speaking of Amway, what are YOUR thoughts on…?”

“Trust is the lubrication that makes organizations work.” — WARREN G. BENNIS

“When a train goes through a dark tunnel and it gets dark, you don’t throw away the ticket and jump off.  You sit still and trust the engineer.” – CORRIE TEN BOOM

“Trust your own instinct.  Your mistakes might as well be your own, instead of someone else’s.” – BILLY WILDER

When I originally created this blog this past April my primary motivation was to encourage candid dialogue among IBOs about topics and issues that concerned me in the business.  The company was in the early months of a global business transformation and I hoped that open discussion of challenges that I and others perceived in the business would potentially lead to real world solutions and change.  I was also hopeful that Amway and Quixtar’s executives would listen in on our discussions — and even participate in our discussions when appropriate — and that has happened from time to time.  From day one this blog was intended to be a collaborative effort, open to original posts by other IBOs, and not centered around one IBO’s point of view or a particular business direction or outcome.  That intention has been realized with frequent posts by “rdknyvr” and post-like comments by “Big Apple,” “IBOFightback,” and others.

My approach to posting about our business was different than anything that I had seen online to that time.  Posts were theme- and issue-based; and initiated dialogue on numerous topics rather than only responding to issues after a problem had emerged publicly, or simply reporting business news.  The approach has been highly effective, has led to hundreds of comments on many topics, and was eventually copied by other sites.

But you might ask, why was creating this blog so important to me?  And that’s a good question.  So if you don’t mind, allow me to answer it.

It was important simply because in my heart of hearts I didn’t believe in the business anymore.  I didn’t believe I personally could honestly promote our business model to potential prospects in its state at the end of 2007 — as much as I wanted to.  (As an aside, allow me to add that my challenges with the business had little to do with the issues that the TEAM debacle raised.  In fact, I thought the TEAM approach was a big part of the problem.)  Even though the company was in the first months of its global business transformation, I had heard the promise of “change” in the business before, and had been disappointed each time, so I had little real hope it would follow through.  In short, I knew that if I was ever going to be able to confidently and honestly build the business there would have to be substantial changes in the business at a foundational level — the company would have to come through and prove to me it was serious about real, lasting change.  I knew it was going to take a lot to bring me back into the fold, and in all candor, I held little hope it would happen.  A lot had transpired over the years to undermine my belief in the company, its leadership, and the IBO leadership.  There was a lot to overcome.

What were the challenges that disturbed me the most?  What were the issues that would have to change for me to be able to honestly and confidently pursue building the business?  They primarily fell into three areas:

The first area of concern was the lack of balance in the business in relation to the tool systems.  I believed the tool systems had become the tail that wagged the dog.  It is interesting to note that Orrin Woodward recently revealed that he never made more than $750,000 in Quixtar at the Executive Diamond level, yet Forbes.com stated a month ago that Orrin told it that he was on schedule to make $4 to $5 million this year alone from the tool support side of his MonaVie business, and that’s after lowering the price of his system tools when he joined MonaVie!  So which business was he really in when he was in Quixtar?!  Quixtar, or tools?  It appears Quixtar was little more than a receptive host that the parasitic TEAM used to feed itself.  And by the way, TEAM was not alone.  Many tool systems had evolved far beyond their original purpose and now ruled the roost, particularly in terms of income, and often treated the company like a second class citizen.  Rest assured, not all tool systems were equally culpable, but all were culpable on some level.

The second area of concern was the mismanagement of the Amway/Quixtar businesses by corporate leadership and the effect its mismanagement had had on its IBOs, its business opportunity, and its product lines.  I held the company leadership personally responsible for allowing the tool systems to usurp so much business territory and to hijack the business far off its original course, often for reasons that allowed the company to be lazy in the marketplace and to serve its own interests.  In all honesty, I’m still disappointed the company leadership has not apologized for its failure in this area.  The company’s failure at this point was more than a “mistake” in my opinion (as they’ve often called it).  One simple example (there are many others) was the retail customer price of most products in 2007 and the company’s retail customer sales volume.  The figures revealed during the TEAM court case revealed that only 3.5% of the company’s U.S. volume was retail customer volume.  But why should the company care?  It was getting its billion dollar plus sales revenue from the IBOs and that was all that mattered.  Otherwise wouldn’t they would have taken steps to initiate change in this area well before mid-2007?  And why should the system leaders care?  They were deriving a substantial portion of their income from the IBOs participating in their systems and that was what mattered most.  Besides it was far easier to generate income from business support materials and functions than to earn income from developing business sales volume with downline IBOs.

The critical role of tool income to IBO leaders in the business was driven home to me in the summer of 2007 when numerous business leaders quickly left the business as soon as it became clear their substantial tool incomes were being threatened.  They saw the writing on the wall.  Knowing it was far easier to generate substantial tool income quickly than business income, they just weren’t willing to get back to having to truly build the business they said they were building all along.  I sometimes think tool purchases by new IBOs are just the tool systems’ back door version of product front loading, but with tools the only ones who benefit are the tool system leaders.  Interestingly, the word on the street from Amway/Quixtar corporate insiders is that the corporation has been shocked to see how resistant the tool systems have been to having their role in the business reevaluated and somewhat diminished, and I’m sure much of that resistance has been due to the tool income issue.  But recent events in the UK and the US have made it clear to Amway Global that the tool system dynamic and the retail customer dynamic had to change — dramatically and soon.  As the Alticor Media Blog put it, “Never Again!”  I agree.

The third area of concern was the IBOs themselves.  I believed that many IBOs, myself included, had acted irrationally, irresponsibly, and immaturely by allowing the tool systems to sell us a bill of goods on their so-called “proven” systems; and the company to sell us overpriced products with limited customer potential.  If an airline had a proven safety record comparable to the tool systems’ proven success record in developing profitable IBOs, it would have been shut down long, long ago.  And the company’s retail customer development with its products and retail pricing was no better.  The attitude of many IBOs, often encouraged by system leadership’s “Are you a team player?” mantra, appeared to be “Question nothing, believe everything.”  I’m convinced a far better approach for IBOs would have been to “Trust, but verify.”  No one should blindly follow anyone anywhere.  By the way, if you only read a couple of books a year (hopefully more), this year I’d recommend making one of those books Predictably Irrational:  The Hidden Forces That Shape Our Decisions by Dan Ariely.  It will convince you of the importance of “trust, but verify.”  All IBOs would be well-served to read it at the earliest opportunity.

Another new book offers some interesting insights along similar lines to Predictably Irrational.  Ori and Rom Brafman, in their new release Sway:  The Irresistable Pull of Irrational Behavior, make a number of intriguing points.  For example, why would a seasoned pilot, the head of KLM’s safety program, ignore his co-pilot and attempt a takeoff in dense fog with 55 tons of fuel (far more than the allowable limit for his intended flight) at an unfamiliar airport, Tenerife — causing the worst air disaster in history?  And why would the co-pilot, who had followed procedure exactly when he reminded his captain that the flight had not been cleared for takeoff, fail to repeat his warning when the pilot pressed ahead anyway?  The collision at Tenarife airport cost the lives of 583 people. Using that accident as their starting point, the Brafman brothers explore the psychological forces that cause people to take large risks to avoid small losses, to judge people and situations by first impressions despite subsequent inconsistent evidence, and to ignore objections from dissenters.

One of the most interesting aspects of the book is the most reassuring in regard to the purposes of this blog.  Research reveals that groups often make better decisions when there’s a “blocker” or “dissenter” present — even if that person dissents for the wrong reasons.  The authors describe a classic experiment in which test subjects are led to believe they are being tested for their visual skills:  three lines of different lengths are to be matched to a fourth line.  The differences in line length are clearly obvious, so there is plainly only one correct answer.  However, if you put the real test subject in a room with several actors who pretend to be test subjects, but actually have been instructed to give an obviously wrong answer, most subjects in the experiment will behave in a completely irrational manner and agree with the other test “subjects” that lines that are clearly different in length are exactly the same.  But if an actor playing “blocker” is added to the mix and points out that the group is wrong, the subject then feels free to disagree and usually makes the right choice.  Interestingly, this is true even if the “blocker” makes a different “wrong” choice by picking two other lines of plainly different lengths.  What this experiment says to the business and political world is that organizations that allow no dissent, or demean dissenters, are likely to perform about as well as that ill-fated flight at Tenerife.  It also implies that the mass mind is often intimidating, a good reason for strong checks and balances in this business.  As an aside, pilots at Southwest and other airlines are now trained to avoid the disaster that happened at Tenerife.  Pilots are taught to listen to objections from other crew members, and crew members are trained to communicate those objections in a way that enables the pilot to respond quickly and correctly.

But back to my three areas of concern.  Obviously, there was plenty of blame to go around in mid-2007, and it wasn’t limited to one part of the business or any one group of people or IBOs.  Everyone, and I mean everyone, myself included, was culpable.  Fortunately, last summer the company promised that big changes were coming and a complete business transformation was in the works.  Having heard that unfulfilled promise before, I began to shape my vision for a blog like this one, an online “coffeehouse” to discuss my perception of what shape IBOs like me might want that business transformation to take if in fact the company was truly serious this time.

So where do I stand today in relation to my 2007 concerns?

Today I am convinced that the company is serious about taking its business back and creating a more appropriate balance between the corporation and the tool systems (although I would not be surprised if somewhere down the road the systems’ role is limited to motivation only — or they no longer exist at all).  As I stated earlier, the UK and US issues (and those in other countries) have made it clear that the status quo was unworkable.  Where that unworkability takes us all long-term remains to be seen.  However, there is absolutely nothing going on in the corporate training arena for product knowledge and retailing (Quixtar University and related) that is not easily transferable by the corporation to the training arena for building a network of IBOs — and it could likely be offered at far less cost to IBOs.  Important factors such as “identification and association” would still be best served by upline IBOs, but would not require the costs associated with them in the current system approach.  Years ago when the company offered business training materials they were dramatically less expensive than system produced BSMs, over 50% less.  I look forward to a return to those days and enhanced new IBO profitability.  The current state of the business in the tool system and business support materials area generates confidence in me that things are going to be positively different in the months and years to come.

Today the focus on new product offerings in health and wellness — for example, Simply Nutrilite — and the pricing that goes with them are all customer driven.  The new Gensona offerings are leading edge and can be expected to be even more diverse over time.  The Ribbon Gift program is nothing less than terrific.  The above-mentioned Quixtar University puts a foundation under every product offering the company has.  In addition, the continued sponsorship of top-notch professional athletes will lead to even greater awareness of our company and our products in the public at-large.

Today the public “coming out party” of Amway Global in print and media ads and other venues has convinced me the company is serious about building, maintaining, and monitoring its public and internet image and reputation — and this will serve the needs of IBOs increasingly well.  Everything the company is doing in this arena is first rate and bodes well for the future of all IBOs.  But it is important for IBOs, and myself in particular, not to waste the opportunity Amway Global is giving us in this area today.  This is a real opportunity for all of us, not just a pig in a pretty dress.

I’ve said all that to say this:  Today I  believe I could honestly promote our business to prospects without any serious reservations — and I intend to do just that. There are still a few areas where I’d like to see some changes implemented, but they are not deal breakers for me.  Thus, in the coming months and years I intend to work diligently to build a Diamond level business outside of a system context.  At the same time I intend to keep the company’s hand to the fire from time to time regarding those few critical issues that I still consider important and worth reevaluating.  Those issues still critical to me are:

1.  The curiosity approach (or as some call it in other variations, the Professional Business Approach).  I personally believe the curiosity approach should be banned outright.  It creates far more issues than it solves — and none of them are positive.  Lack of trust, the potential for deceit, misrepresentation, half-truths, and worse, all come into play with the curiosity approach, and the general public hates it.  It is time to do away with it once and for all.  Amway needs a clear and upfront image and reputation, not one based on how much information we can hide from a prospect while we dance away in doublespeak.  I have no problem with explaining the business in full at an appropriate time when it can be explained properly, but I have a big problem with an opaque response to a direct question.  In his recent autobiography/success tome Get In The Game, highly respected baseball Hall of Famer and former Baltimore Oriole Cal Ripken, Jr. wrote:

“Both my parents were as honest as the day is long.  My mother just wouldn’t tolerate dishonesty of any sort.  Dad [Note: Cal Ripken, Sr. was a former manager of the Baltimore Orioles] was also as straight a shooter as they come.  If you asked him a question, you got a direct answer.  He had a strong sense of right versus wrong.  And if he thought something was wrong, believe me, you heard about it.  Dad also tended not to mince words.  Nor would he stay quiet just to avoid telling you bad news.

So, just as with the values of hard work and excellence, my parents raised me to be honest and to have integrity.  Because of them, I believe I grew up to be a sincere and serious-minded adult.  But how do honesty and integrity help a person persevere?  Personally, I think it has something to do with trust.

Honesty breeds trust in others.  Straight shooters get more work, are appreciated more, and are almost always respected.  On the other hand, dishonest people almost never garner universal respect.  As with honesty, integrity also breeds trust.  If people believe you have strong principles, are sound in mind and body, and are incorruptible, they’ll choose to work with you over others.

You cannot persevere in any organization without the trust of others.  If an executive doesn’t trust you, you can be out of a job in the blink of an eye.  If coworkers don’t trust you, they’ll complain about you behind your back.  And too much of that can also lead to a loss job.  It’s far better to be trusted by the people with whom you work and associate.  But, as the adage goes, trust has to be earned.  Only over a sustained period can people come to count on you.  You have to demonstrate your honesty and integrity over and over.  And you can’t slip up — not even once.  If you do, you’ll have to start all over again.  In that case, it’s doubly difficult to regain a person’s respect and esteem.  Therefore, it always wise to start out being straight with people from day one.  Let them know right from the start that you can be counted on…“

2.  Selective openness, honesty, and transparency.  When Steve Lieberman announced the global business transformation he stated the company was committed to “openness, honesty, and transparency.”   Yet certain outcomes since his announcement have led me to believe Steve should have said “selective” openness, honesty, and transparency.  I’ve posted numerous posts on this topic in the past so I won’t rehash them here, but let it suffice for me to state the company could do a better job in the areas of openness and transparency.  When Amway Global gets these areas right I honestly believe it will be on the doorstep of getting everything right.

3.  The arbitration clause.  I believe in the arbitration clause.  It can benefit both sides in a dispute, but not if its a one-sided arbitration process in which the company holds all the cards.  A one-sided arbitration process is just what the several courts have said it is:  unconscionable.  Amway Global’s owners are Christian men who hold to Christian principles of fair and equitable dealing.  They should know better.  Fix it guys. Now.  Enough said.

4.  The non-compete clause.  I understand and accept some of the solid reasons for the non-compete clause, and can see its value in protecting the integrity of our businesses, particularly in relation to IBOs at a certain level in the business, say Platinum and above.  But in its current form it is nothing less than overkill, and it creates a lot of ill will.  Reevaluate it and apply only it to those who really have something at stake in the business, as I said, perhaps IBOs at Platinum and above.  And like the arbitration clause issue above, do it now.  I’m not particularly excited about asking my new IBO to sign an IBO agreement with these two clauses in their current form.  So fix it and ask all IBOs to sign a new contract.  The sooner the better.

5.  The pricing of core line products.   The company clearly needs to reset the price of some of its existing core line products to a more competitive retail market price.  Current pricing assumes IBOs are the paying customer and real target market.  Yes, incomes might drop as the BV drops.  However, with the increased emphasis on retailing in the business, and the increase in retailing that should occur with reasonable price adjustments, over both the short term and intermediate term, incomes should actually rise — particularly for those actively building balanced businesses that include a strong customer component.  Quality, overpriced products don’t create any buzz in the market; but quality, competitively priced products do.

6.  The pricing of logo clothing and other items used to promote the business.  While this is not nearly as important as the other issues as a general matter, it is an important philosophical issue for me.  If the company wants the tool systems to reduce the price of tools (and it does), the company should also reduce the price of clothing using the company name or logo, and other items and literature used to promote the business to customers and prospects.  As a philosophical matter I do not believe materials or items used to promote the business should be a high margin profit center.  If an IBO can only earn income through the personal and downline sale of products, the company should make the same commitment.  IBOs are the company’s partners and its wholesale customers.  We should not be treated as retail customers on any level, particularly when we are purchasing clothing with the Nutrilite or Artistry logos to promote and personally advertise our business and its products, for which Amway Global benefits as well.  I don’t believe an IBO should have to pay a premium to purchase a company hat, shirt, or jacket to promote his or her involvement with the business.  In the most recent “Achieve” magazine Steve Van Andel and Doug DeVos asked IBOs to make their friends and acquaintances aware of their involvement in the business.  To that end the company should be going out of its way to offer clothing and literature that allows us to do just that as inexpensively as possible.  Brochures that IBOs use to present the business and promote the products should not be retail priced items.  The Quixtar Business Opportunity Brochure is priced very well.  But the price of most of the Nutrilite logo clothing is not.  (XS Energy’s clothing is full retail as well.)  In Steve Van Andel’s recent talk at Diamond Club he stated that the company recognizes that it is really our “upline.”  That should mean that the company and IBOs make money the same way, the “old-fashioned way,” moving products to customers.  Let’s keep it that way.

As I look back at it, that’s a pretty short list of issues.  That tells me the company has come a long way since mid-2007.  It also tells me that it’s time to get to work.

When I first heard Steve Lieberman’s promise of a global Amway business tranformation in the summer of 2007 my first thought was that I had heard all this before — and it was always an empty promise.  But today it has become clear that Steve Van Andel, Doug DeVos, and Steve Lieberman really meant it this time, that the promises of 2007 are real.  Recently the company began a series of print and media ads around the “Now You Know” theme, geared toward creating awareness of our brand, products, and our business in the mind of the public.  For IBOs like me though the company had to go much further than brand awareness, for as I stated at the start of this post, I personally can’t promote a business model that I honestly don’t believe in.  Thankfully, the promises of real change that the company has continued to keep over the past year have begun to restore my belief in the company, its leadership, and its future.  I am beginning to believe the company is going to follow through and create a business we can all be publicly proud of and place our trust in.  And that leads me to my final thought.

Amway Global:  “Now I Know.”  I not only know what the company is doing today, I also have a better sense of why the company is doing it and how the company is going about it.  More importantly, today I believe more deeply in the company and can more readily embrace it and its goals.

So folks, it’s time for me to get to work.  You’ll be hearing from me.

Speaking of Amway, how have the recent changes in Quixtar North America and Amway Global affected your belief in the business and your future in it?

written by Chuck Lia \\ tags: Amway Global, arbitration clause, Business Transformation, Cal Ripken Jr., core line products, curiosity approach, Doug DeVos, Gensona, Get In The Game, logo clothing, non-compete clause, Nutrilite, Predictably Irrational, Quixtar, Quixtar Business Opportunity Brochure, Quixtar University, Ribbon Gift, Ronaldinho, Steve Lieberman, Steve Van Andel, TEAM, tool income, tool systems, Transparency, XS Energy

“The worth and value of knowledge is in proportion to the worth and value of its object.” – SAMUEL T. COLERIDGE

Don’t we all enjoy the expectant smiles on the faces of newlyweds on their wedding day?  In fact, I would say there are few newlywed couples that don’t have special dreams for their marriages on that special day.  Both the bride and the groom envision a happy home, smiling children, fun times, and growing old with their mates.  Sadly, sometimes their dreams are later shattered by the infidelity or dishonesty of a partner — or even both partners.  The result?  The trust they once had in each other is undermined and the relationship becomes broken.  Some couples are able to recover and to recapture their marriage dreams and rebuild their relationship – perhaps even stronger than before the infidelity.  But others are not.  For some, the personal hurt and the harm to the relationship was too great and too painful for one or both of the spouses to overcome.

In “rdknyvr’s” June 7th post he asked the question “How do you recapture your dream?”.  I was surprised to find that all of the posted comments discussed only one side of the issue, the internal mindset of the IBO.  Many seemed to believe that an IBO’s loss of his dream was indicative of a weakness in that IBO’s mind, heart, or will; and all he needed to do was read another book or listen to a CD or two to begin to get back on track.  While I agree the IBO’s mindset is an issue, it is only half of the story — and maybe not even the most important half.  I am convinced there is an undiscussed aspect of this “lost dream” issue that is equally, if not more, important:  the worthiness of the object of your dream, the worthiness of the object of your trust.

As I said, some couples aren’t able to recapture their dream and restore their marriage.  One spouse simply no longer believes in the long-term trustworthiness of their mate.  On the other hand, those married couples who are able to recapture their dreams do so as a result of both spouses exhibiting daily trustworthiness toward each other over a period of time.  And that is the key factor:  daily trustworthiness toward each other over a period of time.  It doesn’t happen in a week or a month.  It often takes months and years.  Day after day the husband must demonstrate that he loves and cherishes his wife.  Day after day the wife must demonstrate that she respects and loves her husband.  Both spouses must demonstrate through their daily behavior that they are worthy of their mate’s trust if the dreams they initially had for their marriage are going to be recaptured and rekindled.  Ultimately, if a spouse really believes his or her mate can truly be trusted in the relationship, that spouse can begin recapturing again the dream he or she once held for their marriage, and begin to move forward with confidence.

The same is true in this business.

To be candid, one of my own struggles with the Amway business has been this issue of broken trust.  Before I go further, let me state for the record this is just my opinion.  Your experience and opinion might be different.  Regardless, I believe some, if not all, of the IBO training systems have violated on some level the trust they were given by rank-and-file IBOs.  I’m not sure of all of the reasons, but without wanting to impugn anyone’s motives, greed and control immediately come to mind.  Let me be clear here.  I do not think all tool systems are equally culpable, but I do believe all systems are somewhat culpable.  The lack of transparency and full disclosure about tool system issues has been pathetic, unconscionable, and inexcusable.  Often training materials, CDs, and books endorsed and promoted by tool systems have been little more than Yugo quality drivel, but at a BMW price.  For example, you could easily find two dozen far better business and personal motivation books in ten minutes on BarnesandNoble.com for less money than you pay your tool systems for some of the mediocre books they promote — and earn PV/BV to boot.

At the same time Amway has also violated the trust it has been given by rank-and-file IBOs to provide quality products at a reasonable price and to guard the integrity of the business.  It has allowed tool systems to operate virtually unrestrained for years.  Most, but not all, of the substantial lawsuits the company has been drawn into over the past three decades originated with a tool system issue, as IBO leaders battled each other over tool system income payouts and other issues, and the company was drawn into their battles.  In addition, Amway had little incentive to improve its products or pricing because the lack of profitability from product movement was hidden behind the substantial incomes IBO leaders earned from the tool systems.  Tool system income and the personal use business model insulated the company from the business realities of many of its non-competitively priced products.  Thus company products were often Acura quality, but at a Ferrari price. 

One-sided arbitration processes, broad in scope non-compete clauses, heavyhanded enforcement approaches, and an unwillingness to candidly discuss negative business issues, have also worked to undermine trust and respect.  Some have even backfired against the business.  This lack of transparency and honesty about product and company issues and the business model itself has been nothing less than a huge disappointment to me.

Yet, even through all of that, I, like many of you, want to trust the company.  I truly want the company to be a business vehicle worthy of my trust and worthy of the investment of my time and effort.   There was a time when this business had a strong moral imperative, when integrity was a non-negotiable, when trust had been earned over many years, and that earned trust was valued and protected.  Somewhere, at some point in time, at least in the North American market, it appears everyone lost their way.

Thankfully, the UK situation and other recent legal issues were a real wakeup call and got the attention of everyone.

Pastor Timothy Keller of Manhattan, New York, uses an example to make an interesting point in his book The Reason For God. He says,

“Imagine you are on a high cliff and you lose your footing and begin to fall.  Just beside you as you fall is a branch sticking out of the very edge of the cliff.  It is your only hope and it is more than strong enough to support your weight.  How can it save you?  If your mind is filled with intellectual certainty that the branch can support you, but you don’t actually reach out and grab it, you are lost.  If your mind is instead filled with doubts and uncertainty that the branch can hold you, but you reach out and grab it anyway, you will be saved.  Why?  It is not the strength of your faith but the object of your faith that actually saves you.  Strong faith in a weak branch is fatally inferior to weak faith in a strong branch.”  (bold italics mine) 

To take the point a step further, one of the key issues in having worthwhile dreams is finding a strong branch, an object (read “a business vehicle”) worthy of your faith, dreams, and efforts.  At the present time I am not convinced Amway is the strong branch I believe it needs to be.  I believe it can be, but I do not believe it is that branch today.  Over the past decade I am sure there have been thousands of ABOs in the UK who trusted Amway to be their strong branch and the vehicle to achieve their dreams.  Have they been rewarded for their trust?  Have they been rewarded for centering their dreams on their Amway businesses?  Are the issues rank-and-file ABOs have in the UK today due to their lack of belief or their lack of a dream?  Or are they due more to the lack of daily faithfulness by Amway and some tool system leaders to the trust they were given by ABOs?  I think a quick read of the judge’s final ruling in the DBERR v. Amway UK case provides a clear answer.    

So to recapture our dreams it isn’t enough for an IBO to take his mind, heart, and will in hand.  It’s equally important for the company and IBO tool system leaders to take themselves in hand, to act on a daily basis in a manner commensurate with the trust they have been given. 

Let me ask you, which of these options might you prefer?  A business with a mediocre product line but a great business model; or a business with a great product line but a mediocre business model?  My answer?  Neither.  Neither business would be a worthwhile object of my trust or faith, nor worthy of my dreams or efforts.  Rooting my dreams and investing my effort in either business approach would be incredibly foolish in my opinion. 

I’m looking for a business with great product line and a great business model — one worthy of my trust and an investment of my time and energy.  Product line is not enough on its own.  Business model is not enough on its own (and, for the sake of discussion, I am including tool systems when I say “business model”).  It takes both quality products and a solid, integrity based business model. 

A business with respect for all IBOs all the time.  A business that views transparency, honesty, and openness as part and parcel of the very fabric of its business.  A business that, to borrow a biblical phrase, “swears to its own hurt.”  A business with a vast Ellis Island and a small Berlin Wall (and you know what I mean by that).  A business that becomes so competent at doing what it has set out to do it doesn’t matter what its competition is doing.  A business with a few less legal eagles and a few more Jon M. Huntsmans.  [Read Huntsman’s book “Winners Never Cheat:  Everyday Values We Learned As Children (But May Have Forgotten)” and you’ll understand what I saying.]  A business with less hype and spin, and more truth and candor.  A business with an unfettered commitment by everyone at the company and in the field to real transformation, rather than a business that sometimes acts like a bipolar teenager giving it lip service. 

That would be a good place to start in rebuilding trust with me.  How about you?

When I begin to really see that kind of a business day after day, not just when it suits the company or IBO leadership – a business truly worthy of my trust and efforts — that’s when I will start believing far more deeply in the company and its potential to again be the vehicle to help me achieve my personal and business goals. 

And that’s when I will begin recapturing my dreams in the business again. 

written by Chuck Lia \\ tags: Amway, Business Competition, Recapturing Dreams

This past Friday, May 23, 2008, U.S. Magistrate Judge Don D. Bush of the U.S. District Court for the Eastern District of Texas handed down his ruling regarding Amway/Quixtar’s arbitration agreement in a case pursued by Ron Simmons and several other members of TEAM.  In this ruling the judge vacated a previous order in the Court referring this case to arbitration and ruled Friday that the case must now proceed in the judge’s Court.  I have posted the judge’s entire ruling below (it was only five legal pages long) so you won’t have to chase it down on Wikipedia.  (Thanks to ‘Tex’ for sending me the .pdf file.)

This ruling, and a couple of other recent ones, will likely have an impact (how significant remains to be seen) on several recent TEAM cases and Quixtar’s arbitration agreement.  On February 8, 2008, on the Alticor Media Blog, the blog’s moderator, in speaking to the dismissal of the Nitro case stated: 

“And another important point: Contrary to some of the spinners out there, the ruling hinges on the fact that the dispute is so very old—beginning before 1998, before we even had an arbitration program. Therefore, the effect of this ruling on our current arbitration program and current cases (a shrinking list, given the Nitro dismissal) is virtually zero. If someone’s telling you otherwise, don’t buy the hype.”

Well, it’s obvious the judge in this case clearly disagrees with the blog moderator’s assessment of the matter.  Apparently “virtually zero” isn’t “absolute zero.”  However, this is not a final ruling on the merits of the case itself, so we will have to wait to hear how the specific case itself plays out.  

Several lines in the ruling stand out to me and I have highlighted them in red italics.  Here is Judge Bush’s ruling:   

[Page] 1

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS -SHERMAN DIVISION

RON and LISA SIMMONS, § BRENTERPRISES, L.P., CHARLES § SCOTT TYKES, JR., d/b/a CSS § TECHNOLOGY ASSOCIATES § SYKES & ASSOCIATES,

§ Plaintiffs, §

v. § C ASE NO. 4:07cv389 §

§ QUIXTAR, INC., §

§ Defendant. §

ORDER AND RECOMMENDATION REGARDING ARBITRATION

Before the Court is Plaintiffs’ Motion for Reconsideration of Order of Stay (Dkt. 83). This case involves a business dispute between certain Quixtar business distributors and Quixtar.  Essentially, the distributors sued Quixtar for breach of contract, and interference with prospective and business relations. Soon after this case was filed, the Court heard evidence on Plaintiffs’ motion for preliminary injunction and recommended that the motion be granted in part. Thereafter, Quixtar filed a motion for arbitration under its distributor agreements with certain of the Plaintiffs. After hearing the arguments of the parties and over the objection of Plaintiffs, that motion was granted and the case was referred to arbitration for resolution. The court notes that Plaintiffs’ opposition to the arbitration sufficiently preserved its argument that there was no valid arbitration agreement.

Plaintiffs now seek reconsideration of the Court’s order staying this case pending arbitration in light of a recent decision issued by the Fifth Circuit Court of Appeals involving Amway, Quixtar’s

Case 4:07-cv-00389-MHS-DDB Document 88 Filed 05/23/2008 Page 1 of 5

predecessor. The Court, after hearing the argument of the parties at the hearing held on May 22, 2008 and noting the Fifth Circuit’s decision in Morrison v. Amway, finds that the arbitration clause in the case sub judice is the same as that in Morrison and that the language from the Court’s opinion that follows sums up the matter before the Court and requires that the Motion for Reconsideration be granted:  There is no express exemption of the arbitration provisions from Amway’s ability to unilaterally modify all rules, and the only express limitation on that unilateral right is published notice. While it is inferable that an amendment thus unilaterally made by Amway to the arbitration provision would not become effective until published, there is nothing to suggest that once published the amendment would be inapplicable to disputes arising, or arising out of events occurring, before such publication.

* * *

There is nothing in any of the relevant documents which precludes amendment to the arbitration program-made under Amway’s unilateral authority to amend its Rules of Conduct-from eliminating the entire arbitration program or its applicability to certain claims or disputes so that once notice of such an amendment was published mandatory arbitration would no longer be available even as to disputes which had arisen and of which Amway had notice prior to the publication. There are no Halliburton type savings clauses which preclude application of such amendments to disputes which arose (or of which Amway had notice) before the amendment.

Morrison v. Amway Corp., 517 F.3d 248, 254, 257 (5th Cir. 2008).

Before the Court is the same agreement scrutinized by the Fifth Circuit. The material terms of Rule 1 and Rule 11 in the parties’ agreements here are the same as those examined by the Fifth Circuit in Morrison. While the agreements allow for distributor input prior to any amendment to the arbitration provisions, Quixtar still retains the unilateral right to do as it sees fit. The fact that the Morrision case dealt with matters which occurred before the arbitration clause was inserted in the

Case 4:07-cv-00389-MHS-DDB Document 88 Filed 05/23/2008 Page 2 of 5

[Page] 3

Rules of Conduct does not change the Circuit’s holding that the contract was merely illusory.  Quixtar attempts to distinguish Morrison on four grounds. First, it argues that Morrison dealt with a retroactive application of a requirement to arbitrate. The Court agrees. However, a close reading of the Fifth Circuit’s opinion indicates that the Court’s decision is not predicated on that sole ground. The Court’s reasoning applies to the Rules of Conduct and Amway’s (Quixtar’s) ability to unilaterally change the rules of the game. The 1998 contract before the Court in Morrison provided that “Amway reserves to itself the sole right to adopt, amend, modify, supplement or rescind any or all of these Rules, as necessary with respect to Rules enforcement.” Introduction to The Rules of Conduct of an Amway Distributor (emphasis added). Amway acknowledges that from time to time the contents of its various documents may be changed. Although it represents it will present such changes to the distributor board, final decision making authority rests with Amway (Quixtar).

Quixtar admits that the preface to its Rules of Conduct has not materially changed since 1998. It was this preface that appears to have drawn the Circuit’s attention and, in this Court’s opinion, the ultimate rationale for its holding that the arbitration contract was merely illusory. A promise is illusory if it does not commit the promisor to perform. Alex Sheshunoff Mgm’t Servs., L.P. v. Johnson, 206 S.W. 3d 644 (Tex. 2006). Quixtar argues that the Rules governing arbitration do not permit it to amend the Rules once arbitration has commenced. That is what the arbitration provisions state in part. However, Quixtar has left itself ample “wiggle” room by providing that it may modify the Rules of Conduct as it sees fit. The same provision appears to have been before the Circuit in Morrison. Quixtar presents this scenario to its distributors, you agree to arbitrate but we reserve the right to change the rules whenever it suits Quixtar. Therefore, Quixtar’s first point is

Case 4:07-cv-00389-MHS-DDB Document 88 Filed 05/23/2008 Page 3 of 5

[Page] 4

overruled.

Second, Quixtar argues that Morrison dealt with matters that predated the unilateral imposition of an agreement to arbitrate, and therefore, on that ground, it is distinguishable. The Court disagrees. The language of the Circuit’s opinion addressed this issue but decided the issue on the basis that the ability to change the rules at any time made the contract merely illusory.

Third, Quixtar argues that the Circuit did not address the point that any change requires distributor input. However, the old rules so provided, and, in fact, Quixtar is still free to do whatever it decides.

Quixtar’s last point is that the distributor’s performance under these yearly agreements with the arbitration clause amounts to consideration and perforce a valid and enforceable contract. Under Texas law, an illusory promise can still serve as a basis for a valid unilateral contract if accepted by performance. Alex Sheshunoff Mgm’t Servs., 206 S.W. 3d at 644. Quixtar points out that the distributors have enjoyed the fruits of their agreements in the way of sales and bonuses for a period of well in excess of ten years. Suddenly, the hue and cry is that the arbitration contract is illusory.

Under the contract before the Court, Quixtar could still amend the arbitration provision even after arbitration began. Quixtar could not amend the rules governing how the arbitration is conducted. In other words, how the arbitrator is selected could not be changed. But the Court sees no prohibition as to Quixtar changing the rules on what matters would be subject to arbitration.  To borrow a page from these parties, this Court is bound by the rules and decisions of its upline decision-makers, and further discussion and analysis is pointless. This Court is bound by the Fifth Circuit’s holding in Morrison regarding the specific arbitration provisions at issue here.

Case 4:07-cv-00389-MHS-DDB Document 88 Filed 05/23/2008 Page 4 of 5

[Page] 5

Therefore, Plaintiffs’ Motion for Reconsideration of Order of Stay (Dkt. 83) is GRANTED and it is further recommended that the order referring this matter to arbitration (Dkt. 56) be VACATED and that the case proceed in this Court.

Within ten (10) days after service of the magistrate judge’s report, any party may serve and file written objections to the findings and recommendations of the magistrate judge. 28 U.S.C.A. § 636(b)(1)(C).

Failure to file written objections to the proposed findings and recommendations contained in this report within ten days after service shall bar an aggrieved party from de novo review by the district court of the proposed findings and recommendations and from appellate review of factual findings accepted or adopted by the district court except on grounds of plain error or manifest injustice. Thomas v. Arn, 474 U.S. 140, 148 (1985); Rodriguez v. Bowen, 857 F.2d 275, 276-77 (5th Cir. 1988).

Case 4:07-cv-00389-MHS-DDB Document 88 Filed 05/23/2008 Page 5 of 5

written by Chuck Lia

You can download the pdf of Mr. Justice Norris’ well-written 69 page decision in the case of Amway v. BERR (UK) at www.amwaywiki.com . [On the home page, go to “Facts, Myths and Controversies” and click on “Controversies.” Under “Current” click on “BERR v Amway UK.” The pdf of the Final Judgement is at the bottom of the article under “Court Documents.”]

It is highly relevant to Chuck’s current series on transparency and change. If you have any comments to make, kindly make them NOT HERE, but just below in Chuck’s last post and in response to the questions he has already posed there.

I would just quickly note my view that Mr. Justice Norris has done Amway a huge service, not only in approving them to continue business in the UK under their revised business model, but by incisively discussing and dissecting the inadequacies of the past — both Amway UK and the Systems – thereby driving a legal stake in the ground which will be a benchmark for Amway Global around the world as well as all other direct sales companies — and for any other legal reviews of the business model. As Alticor said last May at the Amway Blog, “never again.” And one would also have to observe that the business landscape for Systems has also changed radically.

Comments below in Chuck’s post, please.

written by rdknyvr \\ tags: Amway, Amway v BERR, amwaywiki, BERR, business landscape, Mr. Justice Norris, Transparency, UK

“For those who would joyously march in rank and file, they have already earned my contempt, for they were given a large brain by accident when a spinal cord would have sufficed.” – ALBERT EINSTEIN 

“Follow the path of the unsafe, independent thinker.  Expose your ideas to the danger of controversy.  Speak your mind and fear less the label of ‘crackpot’ than the stigma of conformity.” – THOMAS J. WATSON SR., former president of IBM

“The critic is the only independent source of information.  All the rest is advertising.” – PAULINE KAEL, former film critic for The New Yorker magazine

“Dictators ride to and fro upon tigers they dare not dismount.  And the tigers are getting hungry.” – WINSTON CHURCHILL

Let me ask you a question.  What do you think it means to be an “Independent”Business Owner in Quixtar/Amway?

What is a Quixtar/Amway “Independent Business Owner” anyway?  What does Quixtar/Amway/Alticor mean when they say we are “Independent Business Owners?”  What do the IBO system leaders mean when they say we are “Independent Business Owners?”  Finally, what do we as individual IBOs mean when we call ourselves “Independent Business Owners?” 

Now, having honestly tried to answer that question, here’s the critical follow-up question:  Is the answer to that question the same for all three parties – or vastly different? 

Websters.com offers the following definition of what “independent” means: 

in·de·pend·ent  [in-di-pen-duh nt] –adjective

As I have interacted with different IBOs in the business at various levels, including several high pins, multiple viewpoints have been offered on what it means to be an IBO.  A couple of IBO leaders have made it very clear to me that if IBOs don’t like how things are being done by the tool support systems, rather than complaining or venting their negative perspective online, they should “go do their own training thing or join another MLM.  After all, it’s your business.  Take responsibility for it.  But quit trying to change what we are doing.”  However, if an IBO believes that doing his own thing includes the right to talk with anyone (say online) or to pursue information about his business with anyone he chooses (privately or otherwise) he is seen as undermining the “principle” of crosslining.  For those IBO leaders apparently an IBO’s “independence” extends only so far.

A couple of other IBO leaders told me that they see this process of opening up the conversation about the business to anyone and everyone online as one that was long overdue.  Another told me that the secrecy about the level of tool system income has led to deep mistrust within the business and an “us” vs. “them” mindset that he believed could have easily been avoided.  As he put it, “As soon as trust is broken in one area, it begins to affect other areas, and soon there are multiple issues on the table, some of which unfortunately have no basis in fact.”  He felt the general unwillingness of the company and its IBO leaders to meaningfully engage in the conversation going on about them online until very recently had undermined their reputation and credibility tremendously — particularly in regard to tool income.  He added that “if the company and IBO leaders want to hold the field IBOs accountable for certain issues affecting the company and IBO leaders, the company and IBO leaders need to hold themselves accountable to a similar standard on issues affecting field IBOs, and that includes reasonable transparency (he didn’t define “reasonable” for me).”   

I agree completely. 

Do we as Independent Business Owners have the same rights as normal business owners?  Or is it a label only, with little or no ”independence” actually intended?  Does our view of ourselves as Independent Business Owners match up with the views the company and our tool system leaders hold of us as IBOs?  If not, where do you think we differ?  What kind of issues do these differences (if any) create for us and/or the company and tool system leaders?  How have these differences (again, if any) affected the relationship between IBOs, the company, and tool system leaders thus far?  Based on the differences you’ve observed, how would you suggest all three parties look at finding common ground so we can attempt to repair, if possible, the damage that has been done by the issues you’ve observed?  I’m interested in your perspective on things.

(By the way, I realize it might have been worthwhile to also discuss what is meant by being a “business” owner or a business “owner.”  But I am going to save that for another day.)

What are YOUR thoughts on what it means to be an “Independent Business Owner?”    

written by Chuck Lia

“If the game runs sometimes against us at home, we must have patience till luck turns, and then we shall have an opportunity of winning back the principles we have lost, for this is a game where principles are at stake.”  – THOMAS JEFFERSON 

Alticor, what’s it going to be?  Quixtar, what’s it going to be?  Spin and silence, or truth and transparency? 

Over the past almost nine months, as various issues and lawsuits have been exposed and discussed in the media and even on company sponsored blogs, a pattern has begun to emerge.  When the results of some legal action enhance the reputation of or serve the interests of Alticor/Quixtar/Amway, corporate communications has something substantial to say within hours — and it is usually posted quickly online and elsewhere.  However, when those results don’t serve the business interests of A/Q/A there is either silence, or spin and pathetic personal attacks.  Why?

One of Quixtar’s promises to its IBOs this past year was transparency, full disclosure, entering the dialogue about itself fully and transparency, instead of leaving that conversation up to its critics.  But transparency isn’t transparency if we are only willing to be transparent when it suits us or if the issue at hand is rather benign.  Transparency only develops trust when it is the all-encompassing atmosphere of every aspect of the business — when transparency is the air we breathe.  If I can trust A/Q/A to tell the truth and not spin an issue whether or not the issue enhances or detracts from the reputation of the business, I soon begin to trust what the company has to say across the board.  But if it appears I only hear about an issue when it enhances the company’s reputation and not when I know there has been a negative issue raised, I soon begin to wonder if I can trust the company’s take on things, because we all know there are difficult ongoing issues in the business.  That’s just business. 

When the Nitro case was dismissed the Alticor Media Blog celebrated the decision and posted the result almost immediately, February 8th.  The same was true in the California Woodward case.  But when Orrin Woodward was released from arbitration and thus freed to pursue new business interests, what do we hear?  Nothing, not even an acknowledgement of that fact, after months of personal attacks on Woodward including the “Mis-leader” post on March 10th on the Alticor Media blog.  Why?

And this past Monday, March 31st, when U.S. District Court Judge Samuel Conti of the Northern District of California issued a final ruling denying Quixtar, Puryear, and Britt’s attempt to force the plaintiffs Pokorny and Blenn into arbitration, what do we get from Alticor and Quixtar?  Silence.  Complete silence.  Not transparency.  Not conversation.  Nothing.  Just silence. 

The judge calls Quixtar’s arbitration clause in the IBO contract ”unconscionable and unenforceable” and also throws out the BSM arbitration agreement and all we can get from A/Q is silence?  Amazing.  The judge also said he personally would hear the class action lawsuit the plaintiffs had brought under the RICO (racketerring) statutes against Quixtar, Puryear et al, and Britt et al.  And that isn’t news?!  Do you not think that IBOs would be interested in hearing how the company views the ruling and what it’s next course of action is going to be?  How this decision might impact or not impact the ongoing transformation and current stipulations in the IBO contract?

Heavens, the IBOAI board has been meeting for this entire week.  Could they not have posted even a simple acknowledgement on their website?  They can respond in one day to MonaVie’s ridiculous global initiative, or equally quickly on the Jim Dornan April Fool’s Day hoax.  But on the far more weighty matter in California, they too have nothing to say?  Like I said, amazing.  In fact, almost sad.

What is going to be Alticor?  What’s it going to be Quixtar?  Spin and silence, or truth and transparency?  Thus far I find your approach to be rather misguided and I believe all IBOs deserve better from you and the IBOAI board.  I could be wrong.  I could be ill-informed and missing a huge piece of the puzzle.  But if I am, why not explain why I am wrong and ill-informed and what the critical issue is that I am not aware of.  I can handle being corrected and would benefit from the process.

So, Alticor and Quixtar, what is it going to be?  Spin and silence, or truth and transparency?

IBOs, what are YOUR thoughts on Quixtar’s approach to dealing with various issues and legal rulings in a transparent and truthful way?

written by Chuck Lia \\ tags: Alticor, Amway, Blenn, Lawsuits, Pokorny, Quixtar, Transparency

COURT RULES QUIXTAR’S ARBITRATION PROCESS “UNCONSCIONABLE AND UNENFORCEABLE.”

Over at “The Truth About Amway” site there is an update posted by IBOFightback on the court’s ruling in the “Pokorny and Blenn vs. Quixtar et al” case.  I completely agree with IBOFightback’s take on this matter.  This is an important case that will likely impact a number of issues in the business.  Definitely worth taking a look at the court’s decision.  Link to it here:

http://www.thetruthaboutamway.com/index.php/content/view/8809/90/lang,en/

written by Chuck Lia \\ tags: Amway, arbitration, court cases, Quixtar

THERE MAY BE GOOD REASONS WHY QUIXTAR IS PURSUING THIS LEGAL COURSE OF ACTION

The recent Quixtar motion to compel (Feb 21st), the MonaVie suit (March 17th), and Quixtar’s counter suit (March 18th) immediately raise questions as to why the TEAM debacle has now moved into another legal arena.  While I will admit upfront I was not thrilled initially to read about more legal maneuvering involving Quixtar, the issues involving MonaVie and some of its associates appear to me to be valid concerns that may justify Quixtar’s action. 

Orrin Woodward announced on his personal blog a month ago that he was going to be joining MonaVie, but recently 45 days were added to his no-compete waiting period by the arbitrator in his case, apparently, sources tell me, because Orrin was trying to avoid the arbitration process.  That arbitration process has potentially put Orrin at risk of a large financial judgement against him if the arbitrator rules that Orrin’s alleged violation of his IBOAI Board Confidentiality Agreement, and his activities outside of arbitration including the TEAM lawsuit against Quixtar in multiple venues, caused Quixtar and its IBOs substantial losses in reputation or revenue. 

As of today Orrin is effectively enjoined from joining any other competitor, at least for a few more weeks.  Yet many of his former downline have finished their six month waiting periods and are now free to join whatever business they choose.  That raises many obvious  questions.  Is Orrin’s former downline waiting for him to register, or did they already register in MonaVie in advance of him?  If the latter, will Orrin be grandfathered in down the road above his former IBOs even though he registered in MonaVie after his former downline Quixtar IBOs?  What will the organizational structure of former Quixtar IBOs look like in MonaVie?  Similar to their Quixtar LOS?  Were any former Quixtar IBOs given sweetheart or structural guarantees?  Did MonaVie have a role in encouraging former Quixtar IBOs to violate the terms of their non-compete?  

In light of the stipulations and conditions stated in the Quixtar IBO contract agreed to by Orrin, the questions above (and many others) are serious questions of real importance to current Quixtar IBOs who want to protect not only the integrity of their organizations from raiding, but also the hard work they invested in building their networks.

In addition to these issues, Quixtar’s complaint also alleges that MonaVie engages in unfair competition based on false claims made by MonaVie and its distributors.  MonaVie talks about its ”body-beneficial blend of 19 berries, including the Brazilian acai berry, but does not disclose how much acai berry is in each bottle of MonaVie juice ($48).  The product seems to be a lot of hype, but not much in the way of substance.  Orrin’s protests about ”overpriced” Quixtar products and his commitment to WalMart pricing now ring incredibly hollow.  Today it seems Orrin’s more into Neiman Marcus pricing!  

It will be interesting to see how this plays out in U.S. District Court in the coming weeks and months. 

What are your thoughts on the latest legal filings by Quixtar?          

written by Chuck Lia \\ tags: Lawsuits, MonaVie, Quixtar, Woodward