MLM Master Classes
How to Identify First, Second, Third and Fourth Generation Business Systems
By John Counsel
Briefly…
- Fourth Generation systems of any kind will only operate successfully on Fourth Generation principles — and it’s those unseen principles that make these systems so profoundly different to other systems.
- Multi-Level Marketing is different from conventional First, Second and Third Generation business systems precisely because it’s the only Fourth Generation business system ever to evolve. It’s not different in its structures or methods! These are, in fact, where the similarities to other systems are to be found. But, because we’re so commonly misled and distracted by similarities, we fail to recognise the true differences. So we continue trying to make MLM work according to familiar First Generation principles.
- By becoming independent, then teaching our people to master the knowledge, attitudes and skills that will make them independent, too, we achieve synergy through interdependence and acquire the freedom to create our own reality, based on integrity, trust and co-operation.
- The selfish, manipulative, competitive, Win-Lose, dog-eat-dog, deceptive, exploitative and ultimately self-defeating motives, attitudes and behaviour that typify First Generation business systems have no place in a successful Fourth Generation system.
- The successful MLM leader understands that results are the product (or effect) of Win-Win relationships. Putting relationships first guarantees ongoing results. Putting results first ensures the end of the relationships — and the hope of any more results!
The same principles apply to systems — including businesses — as apply to personal relationships. Things are rarely what they seem to be. Distinguishing between the various generations is a matter of identifying the nature of the relationship involved, because the basis of that relationship reveals the true motive of the controlling party — which, consequently, determines the attitudes and behaviour of both sides. The important thing to remember, especially in Multi-Level Marketing, is this:
“Fourth Generation systems will only operate successfully on Fourth Generation principles.”
Trying to operate a Fourth Generation system on First Generation principles makes about as much sense as trying to launch a space shuttle by sitting in the cockpit and flapping your arms.
In other words, you cannot build a successful Multi-Level Marketing business on the self-defeating, Win-Lose, dog-eat-dog lack of principles that is the traditional hallmark of First Generation business practice… the Law of the Jungle.
And please… before you fire off an indignant e-mail defending your First Generation organisation, please look beneath the thin veneer of civility at the reality involved. If nothing else, the recent era of “downsizing” should have demonstrated clearly to all concerned that there is no such thing as loyalty or security in a business organisation or government department or agency. Not even for management. Never heard the old saying… “the higher you rise, the closer your seat is to the door?”
Profit is king, for one very simple reasons: it’s the only result that allows a business to stay in business.
First Generation Systems
These can be best defined as master-servant relationships, where one party holds control over the other(s). This includes employment, bond-servitude, slavery, and all relationships where the basis is control imposed by one party over the other. In a normal employment situation, this can become quite complex, with control exerted over individuals and groups by unions, government regulators, pressure groups, the management chain, employer bodies and other vested interests – including ambitious or defensive bureaucrats.
This can also include franchise and Multi-Level Marketing companies where the agreements impose one-sided, Win-Lose control. It also includes MLM network organisations where leaders encourage their people to become emotionally dependent on them.
(Agreements that confer reasonable protection of the strengths that give the parties their true value in an interdependent relationship should not be confused with contracts that impose control. This can include protection of intellectual property, such as trademarks, brands, patents, copyrights, etc. These agreements are, in reality, protection against parties who are deceitful — they are legitimate contingency strategies.)
Second Generation Systems
These are systems based on independence or self-reliance. They include “self-employment” as a sole proprietor. When a master-servant relationship is entered into that imposes any degree of control over the other parties (for example, when you hire an employee), the system reverts to First Generation, automatically. Partnerships are rarely Second Generation. They are either First, Third or Fourth, depending on the reality of the relationship between partners, not just the appearance.
Third Generation Systems
Definable as any system where genuinely independent people co-operate to add leverage and achieve synergy that produces greater results than they could achieve individually. This can apply to co-operatives, some franchise operations (rare), sub-contracting between independent professionals and tradespeople, and to the growing trend toward contract labour. It also applies to MLM businesses that are, in fact, only wholesale buying clubs. If the interdependent relationship breaks down, the parties revert to Second Generation systems. If one party holds an unfair advantage over the others, the system reverts to First Generation.
Fourth Generation Systems
Multi-Level Marketing is the ONLY Fourth Generation business concept ever to evolve. Everyone is treated as independent (despite their initial dependence on the sponsoring relationship). Everyone can learn to become truly independent, then teach others to become independent people, with whom they can be interdependent in order to gain eventual financial freedom.
However, when MLM companies impose Win-Lose control, either through their distributor agreements, codes of conduct, or through their structures and procedures, they do not qualify as Fourth Generation systems. They revert to First Generation systems. When they fail to create truly interdependent relationships — such as through recruiting purely for consumption — they can only ever be Second or Third Generation systems because of the absence of leverage and synergy.
A flawed compensation plan can also create this reality.
The key to determining where any system falls on the Freedom Continuum is to examine the basis of the relationship — and its implementation!
For example: franchising has the appearance of a Third — perhaps even Fourth — Generation business system. It operates on the illusion of interdependence — a group of independent owners who use their collective strength to create better buying power, market awareness, market share and profitability.
The reality is usually otherwise. They’re usually just branch managers who put their personal and family assets at high risk to buy their jobs.
The key, always, is the basis of the relationship involved.
In this case, it’s the Franchise Agreements.
These contracts are usually so one-sided that they represent a Win-Lose approach on the part of the franchisor. They create dependence, despite the illusion of independence and interdependence. Franchising can be more frustrating and emotionally damaging than an undisguised master-servant relationship because of this illusion. The relationships are often strained.
The evidence of this can be found by talking to franchisees. Most see franchising, at least initially, as offering unprecedented personal freedom. Before too long, though, the hidden, negative reality begins to emerge. Frustration and bewilderment increase to the point of eventual disillusionment, and many franchisees quit their franchises because they realise they are in bondage to the franchisor.
The reality of franchising is that you trade your personal freedom for the illusion of financial security. Just like you do in a job.
This is not intended to be a condemnation of franchising or the people and companies involved in it. Compulsion is the only way that this particular system can work successfully. By removing your freedom of action, the system ensures that you achieve specific business objectives. Whether or not your personal objectives and values are compatible with this outcome is quite another matter. Get the right perspective before committing yourself.
In Multi-Level Marketing, a genuinely Fourth Generation system can revert to a First Generation system simply because of the motives, attitudes and behaviour of individuals. By imposing control through Win-Lose attitudes, a First Generation leader creates a First Generation relationship with his or her people.
MLM companies tend to be reactive — they become a reflection of their distributor organisations. When those distributor organisations act in First Generation fashion the companies usually respond in First Generation ways. When the distributors become Fourth Generation people, the companies inevitably adopt Fourth Generation attitudes and practices. This is simply cause and effect at work. You can transform reality.
Abuses by distributors create abuses by companies in the form of imposed control (draconian rules of conduct, or discriminatory practices). Win-Lose attitudes destroy integrity and trust.
What has to be realised is that MLM companies are usually First Generation simply because they employ people in master-servant relationships — in administration, research and development, production, packaging, distribution, marketing, field relations, etc. The real Fourth Generation relationships in Multi-Level Marketing exist only within the distributor networks and between those networks and their MLM companies.
Discover more about Fourth Generation Thinking
© 1994 John Counsel. All rights reserved. No reproduction by any means permitted without prior written consent of the copyright owner. This article is taken from The Beginner’s Guide to Making Money in Low-cost, Home-based Businesses… No Risk!.
©1998 The Profit Clinic. All rights reserved. This page updated 10 August 2002
