The binary plan is a compensation structure used by multilevel marketing organizations, based on a two-legged chart. The plan encourages teamwork and balance between power and profit legs, but is limited by market conditions. Starting a new hierarchy can increase profitability.
The binary plan is an organizational structure used to determine compensation. It is based on a reporting tree or two-legged chart, often described as power and profit, which must be balanced on both sides to make a profit. The plan consists of one individual at the top, who then recruits two individuals. These two people find two more recruits and the hierarchy continues to grow like this until it has reached its full market potential. The plan is used by multilevel marketing organizations, which are groups that earn compensation from both personal sales and those of their recruits.
By balancing the power and profit legs of the hierarchy, both within themselves and between the two, an organization using the binary plan can continue to grow efficiently. This is usually accomplished by building the outer legs of the binary tree. For example, the top level individual brings in two new recruits. One of those recruits brings another individual, who will be located below him in the tree. If that recruit brings in another individual, then they will not be able to place another recruit at that level until the recruit at the level above brings in a second individual.
Keeping new recruits on the outer legs of the tree, while building additional recruits inside the tree in the same order, ensures that the structure is never out of balance. For this reason, it’s also important that the power and profit legs collectively maintain the same balance that they do individually. This also ensures that all new recruits have sufficient supervision from individuals higher up the structure.
The binary plan encourages teamwork. The success of higher positions on the reporting tree depends in part on the results of lower or assumed positions. By helping others, members of the organization can maintain balance in the hierarchical tree and thus encourage profits to grow steadily.
While the binary plan allows for unlimited depth in the hierarchy structure, it is still typically limited by market conditions. This means that while the system allows for rapid and steady growth, it has limited profitability. One solution to this problem is to start a new hierarchy. For example, if a company has tapped into a local market, it can increase profitability by opening a new position and then starting the reporting tree all over again.
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