(Written by me for a daily newspaper.)
By Rick Laney
July 08. 2007
Most people don’t think of commission-only, no expense reimbursement or door-to-door sales when they see advertisements for “executive and management” job opportunities.
However, that’s what many local professionals and recent college graduates say they applied and interviewed for with a Knoxville-based marketing firm targeting Blount County job seekers.
Winstead Marketing constantly advertises local job openings that are misleading, according to those who have had direct contact with the firm.
A Google search for “Winstead Marketing” turns up thousands of results, almost all of them advertisements for job openings. The prolific advertiser says it is one of the area’s “top marketing firms.” Recent newspaper and Internet ads from Winstead Marketing offer “Maryville Jobs,” “Townsend Jobs,” “Alcoa Jobs” and “Blount County Jobs,” although the company is located in a fifth-floor office at 408 N. Cedar Bluff Drive in Knoxville.
People who have interviewed for the advertised job openings with Winstead Marketing say the company hires strictly commissioned door-to-door sales representatives. One local man who interviewed with the company says the company “felt more like a cult than a corporation.”
Robert Lawrence FitzPatrick, a respected author and expert on multilevel marketing (MLM) based in Charlotte, N.C., said, “I’m not familiar with Winstead Marketing, but this type of hiring ad is usually false, and it’s usually a scam.
“Multilevel marketing is a plague that has come into the marketplace. The entire business model for multilevel marketing — as it is generally practiced — is a fraud, and it’s illegal.”
According to FitzPatrick, multilevel marketing companies are regularly prosecuted under a Federal Trade Commission Act pertaining to unfair and deceptive trade practices. He said in recent years, about 20 multilevel marketing companies have been prosecuted by the Federal Trade Commission and another 20 multilevel marketing companies have been prosecuted by individual states.
“If they are advertising for jobs, but they are really looking for independent contractors, that’s deceptive,” FitzPatrick said.
“It all depends on where their money is coming from. If it’s coming from the product or service they’re selling, it’s not multilevel marketing or a pyramid scheme. If the money isn’t coming from the product or service they’re selling, it is.
“It is a myth that anyone is making money with multilevel marketing … unless you’re at the top. The fact is that 99 percent of those involved never make any money at all, 72 percent of them quit within the first year, and 96 percent quit within the first five years. It’s just a myth.”
FitzPatrick, who has written books about multilevel marketing and testified before courts and regulatory commissions on the subject, said multilevel marketing fits the definition of a “pyramid scheme,” although most companies practicing multilevel marketing try to disguise the practice behind some form of product or service.
“It has nothing to do with sales or marketing,” FitzPatrick said. “It’s all about the 40 or 50 levels of managers and management that they have.
“Corporations are trying to eliminate layers of management — no real company has 50 layers of managers.”
FitzPatrick also believes the entire practice of door-to-door selling (or “face-to-face selling” as Winstead Marketing calls it) was abandoned by most successful businesses years ago.
“With the Internet and telephones, who uses door-to-door salespeople?” FitzPatrick asked. “By the time you cover the travel expenses and mileage, and pay the salesperson’s commission, there’s no money left — door-to-door selling simply doesn’t exist anymore.”
Winstead Marketing tells job seekers it has opportunities for “executive and management” positions, “sales and marketing manager” openings, “public relations” jobs and “account manager” positions. Some advertisements state “entry level” while others seek college graduates and experienced managers. There are even opportunities for “sports minded” individuals.
Winstead Marketing has been a regular advertiser in East Tennessee’s major daily newspapers and on respected Web sites including Monster.com and CareerBuilder.com virtually nonstop for the past two years.
While the countless job opportunities listed in local employment advertisements would imply Winstead Marketing has a large staff of employees, the Winstead Web site lists only two individuals under the “Our People” tab; Mike Palomba, the company’s president and founder, and Shanda Wyatt, the company’s human resources manager.
Wyatt told The Daily Times that her company “is associated with a larger company that acquires clients for Winstead.” While Wyatt would not disclose the name of that “larger company,” a regional sales manager with CareerBuilder.com, one of the companies Winstead Marketing advertises heavily with, said that Winstead Marketing’s parent company is Cydcor, a large multilevel marketing operation with a long history of problems and legal challenges.
Founded in 1994, Cydcor says it has more than 1,500 employees working out of 125 offices nationwide. The company started in Ontario, Canada, but is now headquartered in California.
Wyatt said the merger of AT&T and BellSouth had created great opportunities at Winstead Marketing. She attributed the company’s ongoing need for more managers to the merger.
A wasted day
“I wasted a whole day with Winstead Marketing,” said one man who interviewed with the company recently. The man, a University of Tennessee graduate, did not wish to be named because he does not want his current employer to know he applied for a new job.
“I responded to an Internet ad and sent them my resume in an e-mail. They called me almost immediately, and I agreed to meet them for an 8 a.m. interview.
“The interview only lasted about 5 minutes. It was very rehearsed and just seemed fake. I was uncomfortable from the start.
“After the short interview, they had me sit in their waiting room for about ten minutes before they came out and told me I got the job. Then they told me my training would start in about ten minutes.
“They called it a field interview, but it was really just driving around to different businesses in Sevier County making sales calls. The thing I didn’t like was that I had to ride with them in their car — so I couldn’t leave even if I wanted to.”
The man who interviewed with Winstead Marketing said the company pays no base salary, covers no travel expenses, does not take taxes out for its workers and claims people are making tremendous amounts of money working for them.
“The numbers just didn’t add up,” the man told The Daily Times. “I did the math, and even if you worked seven days each week and called on the largest accounts, you couldn’t make the kind of money they were claiming people made.
“What they were really pushing was becoming a manager — where you have people working under you. They said that’s when you would really start making money. If you succeed as a manager, and the people under you start bringing other people into the company too, then you could become an owner, and you’d get your own office.
“It was really weird and entirely focused on bringing more people on board.”
Winstead Marketing’s Web site says it was founded in 2005 and works with “some of the largest Fortune 500 companies in the world.” The only client Winstead representatives named was AT&T. The company also say it plans to “triple in size” during 2007.
Cathy Lewandowski, the AT&T market manager for Tennessee and Kentucky, acknowledged that AT&T has a relationship with Winstead Marketing. She said, “The products and services offered to customers through our door-to-door sales program are the same that customers can get through any of our other sales channels, including through our sales centers and online at www.att.com.”
Calls to East Tennessee’s largest marketing firms, advertising agencies, public relations firms and marketing associations turned up not a single person who knows anything about Winstead Marketing.
Cynthia Moxley, co-president of Moxley Carmichael, in Knoxville, said, “Advertising and marketing is a close-knit community. If there was a firm in town handling major national accounts or Fortune 500 companies, I’m pretty sure I would be familiar with them, but I haven’t even heard of Winstead Marketing.”
Dorothy Smith, the president of the American Marketing Association, Knoxville Chapter and Smith Marketing, could not recall ever hearing of Winstead Marketing or having contact with anyone who had worked for them.
The University of Tennessee Career Services Department reportedly had problems with Winstead Marketing and has restricted the company’s access to UT students for recruiting.
“We had students who came back from interviews very upset,” said Mary Mahoney, an assistant director in the UT Career Services Department.
“We restricted their access to our students and blocked their access to our students’ resume database.
“They were posting the same job listings three times each week. We told them they had to stop it.
“I really have reservations about them.”
By definition, multilevel marketing is “a sales system under which the salesperson receives a commission on his or her own sales and a smaller commission on the sales from each person he or she recruits to become a salesperson.”
Most companies involved with MLM convince recruits that the majority of their income will be generated by others working under them — so the focus of the business becomes recruiting rather than selling.
Critics charge that the endless chain structure of MLM businesses inevitably dooms the vast majority of its participants to financial loss. This is because more than 90 percent of the participants will always be in the bottom ranks where there are not enough recruits below them to provide an income. This is how the term “pyramid scheme” was developed because each level of new recruits requires more individuals “down line” in order for the top levels to make money.
An MLM company that requires each employee to bring in just five new recruits will need nearly 4,000 employees by the time it reaches five layers of managers. Even with 4,000 employees, only the top three layers (just 25 employees) would earn money from the sales generated by the other 3,975 employees. By the time the company created an eighth layer of managers, the company would need more employees than the number of residents of East Tennessee and only the top 600 employees would be generating money from the down-line sales.
While commission-only sales jobs are common, most companies advertise the positions as such and focus on selling products or services rather than recruiting new employees and managers.
“I felt like I was tricked,” the UT graduate who interviewed with Winstead Marketing recently said, “and I was uncomfortable with it from the very beginning.
“The phones at their office were ringing nonstop, but the calls had nothing to do with their business. All the calls were from people responding to job ads. I had never seen a business like that before.
“While I was out for my field training, the Winstead guy told me the company was like a family, and that he had completely stopped hanging out with all of his old buddies after he started working there. He said his only real friends were his colleagues — I thought, ‘OK, this is weird.’
“After I had been with this guy all day, he walked me out to the parking lot and stood there and talked to me for about 45 minutes. It was like he was reading from a script, telling me how great the company was and what a fantastic opportunity I had with them.
“I got home after being with that guy all day, and he called me again that night to see how my day had been and what I thought about Winstead. It was just creepy.”
The UT graduate decided to stay with his current employer.
