Harvard Business: The Academy of Network Marketing?

by Michael L. Sheffield

Have you ever heard that courses in network marketing are taught at Harvard University? Thousands, perhaps even hundreds of thousands of people have heard that — and it’s not true. (This article is one in a series by Network Marketing consultant Michael L. Sheffield on this and related topics.)

The “MLM at Harvard” rumor is one of a handful of Baron Munchausen-like tall tales that made the rounds in the early 1960s. First published as an unsubstantiated claim by an overeager author, the Harvard rumor soon took on a life of its own. Starved for recognition and respect, network marketers by the score circulated this falsehood. Finally, in 1992, Upline ran a story by founder John Fogg, entitled “The Lies of MLM, ” that quickly became one of the journal’s most popular, oft-reprinted articles in its history. “MLM taught at Harvard” was one of the first industry canards to fall under myth buster Fogg’s ax.

Why was the article so popular? Because people want to know the truth — and more, people want to know that when they boast about this great business that they’re connected with, that their boasts are factual. It’s interesting that Harvard was the anchor of credibility seized upon by those inferiority complexed individuals who fed the Multi-Level Marketing (MLM) rumor mill.

Why “interesting”? Because evoking the name “Harvard” is the classic gesture that defines academic respectability. The very strength of the rumor confirms something I have long believed: for network marketing to be completely accepted in the business world, it needs an academic stamp of approval.

The good news is that stamp of approval is well on its way. The environment has changed remarkably since the covered wagon days of the late 1980s and early 1990s, when the industry was still a largely unrecognized economic force.

Downsizing Traditional Businesses

In recent years, the movement toward home-based business has accelerated with the downsizing or “right-sizing” of traditional businesses. This trend has increased public awareness of network marketing. Studies by the Direct Selling Association (DSA) indicate that:

• Direct selling accounts for annual sales of more than $80 billion worldwide.
• The US contributes nearly $25 billion.
• 12 million Americans derive independent contractor income from direct selling.
• One in every 10 households has someone involved in network marketing or direct sales.

Note that “Direct Selling” is the sales industry’s umbrella term for personal sales methods that include network marketing as well as older methods, such as door-to-door sales. Today, network marketing comprises the major part of “direct selling” figures.

Very little has been done in academic circles to teach the history, present status, principles, and operation of this economic dynamo. All the same, network marketing, also known as Multi-Level Marketing, is being recognized increasingly by academics as a significant force in the global economy. Network marketing is knocking on university doors lobbying for that yearned-for seal of approval — and some of those knocks are being answered.

Genesis of the Center for Network Marketing

Today, there is a window of opportunity opening in the academic world with possibilities appearing for college courses devoted to network marketing and scholarly journals dedicating pages to it.

In 1997, my firm’s work attracted the curiosity of a small research consortium, the Institute for Strategic Forecasting (ISF). The academics heading the ISF, Dr. Harry Domicone and Dr. John Montanari, had a question. How is it possible, they wondered, that an organizational phenomenon that globally involves tens of millions of people and billions of dollars is hardly noticed by traditional business schools?

We pointed out that network marketing, like franchising in its infancy, is broadly misunderstood, has a public image problem, and is mostly ignored. At least, that has been its history. It is changing, and rapidly so.

In 1998 and 1999, the ISF, in cooperation with my firm, The Sheffield Group, and the network marketing law firm of Babener & Associates of Portland, OR., organized and sponsored a number of events to develop an alliance between scholars and network marketing representatives.

With the support of the dean of the College of Business Administration, Dr. Frank Hoy, two such events have taken place on the campus of the University of Texas–El Paso (UTEP), which has also been a cosponsor. Those in attendance have included corporate executives of major network marketing companies as well as faculty members from universities in the US, Canada, and the United Kingdom.

UTEP maintains a model center for franchise research and education. Private funds now are being raised to create a similar independent research center at UTEP. The Center for Network Marketing will initiate network marketing research and education.

Early Academic Rumblings

There has been some research on network marketing by those in the social sciences. At this year’s meeting of the Academy of Management (the premier association of management scholars), network marketing was discussed in a special session on non-traditional forms of entrepreneurship, which also included co-ops and franchises. The chairman of the panel was Dr. Frank Hoy from the College of Business Administration at the University of Texas, and featured the ISF’s Dr. Harry Domicone of California Lutheran University and others.

Dr. Charles King of the University of Illinois at Chicago developed and has taught a seminar in network marketing since 1994. The class, which combines a functional approach to theory, methods, and practice for the network marketing distributor has attracted more than 1,100 participants.

The first college textbook focusing on direct sales (including network marketing) has been written and published by Dr. Keith Laggos, whose company sells a number of periodicals aimed at home-based entrepreneurs. This text has been adopted by Utah Valley State College for use in a network marketing program it hopes to offer on campus in the year 2000.

Why isn’t network marketing taught in business schools? For one thing, business school professors are not businessmen, but academics. Their passion is theory, not practice. Their understanding is based on corporate statistics. Network marketing businessmen have never been seriously analyzed, statistically or academically.

According to Dr. Domicone, “Social scientific research, including investigation into business phenomena, first appears in academic journals. These academic journals have very high publication standards and a rigorous and lengthy editorial review system.”

This rather cumbersome process is deliberately structured to insulate the intellectual community from fads and fashions, sometimes called “management by best-seller.”

Unfortunately, the downside for network marketing and other nontraditional organizational forms is that scholars sometimes overlook valid and valuable emerging business practices.

The Need for Research

Research is the key to opening the academic mind to the potential of the network marketing model. But, could it also be the key to Pandora’s Box?

“Is the MLM industry ready to explore “The Good, The Bad, and The Ugly?”‘ was one of the thought-provoking questions posed by Dr. Hoy at the first summit meeting between university faculty and network marketing industry executives in April 1998.

“At the first conference, titled ‘Organizing for the Future,’ the academics were skeptical and wary,” recalls Hoy. “By the time we had sponsored a second conference, the climate had changed considerably.” After numerous hours of dialogue and education, Dr. Hoy felt the academics began to view network marketing as a legitimate means of distributing goods and services.

For courses on network marketing to be held at respected universities, someone has to educate the teachers. Today, the academic world doesn’t have enough hard data on network marketing. At the conference, representatives from Tulane, California State University, the University of Westminster, Fairleigh Dickinson University, the University of Ottawa, Baylor, The London School of Business in America, and many others all agreed: objective academic research is essential if we are going to propel network marketing into the mainstream college curriculum.

That’s why Drs. Hoy, Domicone, and Montanari advocate the creation of a Center for Network Marketing to solicit grants for research.

Ray Bagby, Ph.D., associate professor of management at Baylor University is an avid advocate of the need for network marketing research. Bagby edits the quarterly academic journal, “Entrepreneurship Theory & Practice.” At the second UTEP conference, he said he would devote an entire issue of his journal to network marketing — if he could obtain sufficient high quality research manuscripts.

“The need for good research is paramount,” Dr. Bagby said to conference attendees. “In time,” he predicts, “it should be as ordinary as franchising.”

Who’s Doing What?

Since 1973, the Direct Selling Association (DSA) has worked through its educational arm, the Direct Selling Education Foundation (DSEF), to foster awareness of the profession through distributing educational materials, sponsoring seminars, and initiating on campus visits between academics, students, and direct sales practitioners.

The academic world’s interest in network marketing and direct sales was evident at a recent conference at Utah Valley State College. According to Ian Wilson, Dean of the School of Business, “We created this conference to create interest and enlist support for launching a course of study on network marketing in the year 2000.” This one-day event was well attended by local network marketers and corporate executives.

During “Organizing for the Future II,” academics reminded industry leaders that other types of business — including accounting, financial services, real estate, and franchising — languished until a certification program was developed and administered by a knowledgeable and interested (but independent) entity.

Some of this work is underway. Dr. Laggos is working on a certification course using his landmark textbook, Direct Sales:. An Overview, to create an online training program. The London School of Business in America is designing certificate programs for industry executives as well as distributors. Utah Valley State College plans to launch their program early next year on a trial basis. It looks as if this is an idea whose time has finally come.

About That Harvard Business Thing …

Has the day finally arrived when direct sales and network marketing are addressed in the classrooms of traditional business schools? Hardly. There is still a long way to go. But there is no doubt that this is a very exciting time for network marketing professionals: the industry is truly coming of age.

University of Illinois’ Dr. Charles King has become a well-known figure to network marketers for his historic championing of the business in academic circles. He appears on Tim Sales’s best-selling education-and-prospecting video, “Brilliant Compensation.” King, a Harvard Business School graduate himself, recently addressed his alma mater on the subject of network marketing. For that matter, I was also recently honored to speak about our industry to a Harvard Business School Alumni Association convention.

Is network marketing now being taught at Harvard? No, but we are making progress — it has been taught to Harvard.