It has always struck me as affected to introduce someone by saying, “Here is a man who needs no introduction.” (If that’s true, then why are you giving him one?) Yet here I am—writing an introduction for a man who needs none! Perhaps the only valid reason for these prefatory words is to effect a gesture of respect for the subject, rather than inform the reader. Chances are, you already know that Dr. Covey penned one of the most famous leadership books of all time. The 7 Habits of Highly Effective People went on to sell over 15 million copies, and Stephen went on to author such additional bestsellers as First Things First, Principle-Centered Leadership, and now, The 8th Habit: From Effectiveness to Greatness. He is knowledgeable and articulate about the profession of network marketing and is, along with Hyrum Smith, one of the two guiding pillars of FranklinCovey (NYSE:FC), a global leader in effectiveness training, productivity tools and assessment services for organizations and individuals. Ladies and gentlemen: Dr. Stephen Covey. — JDM


This latest book takes us in a bit of a different direction from the previous books, doesn’t it?

It does. We’ve moved from an industrial age to a knowledge-worker age, and that has changed everything. A lot of people don’t yet realize this, but 70 to 80 percent of the value added to goods and services today comes from knowledge work. Only 20 years ago, that number was no more than 20 to 30 percent. It’s been a dramatic, sweeping shift, and it’s impossible to overstate its impact.

In today’s economy, intellectual and social capital are key assets. As a business, you have to deal with people as knowledge workers, not physical laborers. In the industrial age, people were considered an “expense” in our accounting system, and in most sectors of the world we’re still accounting for them that way. But that makes absolutely no sense! People are not a liability, they’re an asset. In fact, they’re the only asset that can make all the other assets work.

We haven’t caught up to this shift, and this is the reason there is so much disempowerment and alienation: people have simply lost their voice.

The whole concept behind the book is that we should deal with people as whole people—body, mind, heart and spirit. Otherwise, you have to carrot-and-stick them, applying that great jackass theory of human motivation, which is so characteristic of the industrial age and has become so utterly obsolete.

We tried to illustrate this by treating our readers as whole people, too; this is why we included a DVD with 16 videos, one for every chapter: this was an effort to communicate with the reader visually and emotionally, rather than through purely cognitive learning.


You often speak about network marketing in terms of the more human values it promotes. Are we on the cutting edge here?

To some extent. People in network marketing intuitively grasp this shift. They know they can’t just throw their weight around with formal authority; they have to use moral authority.

If I could give one piece of advice to network marketers, it would be this: they have to make sure they learn how to listen to people deeply, to discover what each person’s unique talent and passion is—rather than just lay on people their own autobiographical story, which is a common tendency.


What kind of impact does this shift you’re talking about have on network marketers—or put it another way, in what ways have we not yet grasped this shift?

This change emphasizes the interdependency part of life, rather than independence. Most people tend to think in terms of being independent, and if they do think interdependency at all, it’s usually more about transaction, but not about genuine transformation.

Network marketing people need to embrace genuine transformation, to create a synergistic culture of empowerment, a culture where their own unique strengths are made productive and their individual weaknesses are made irrelevant, because of their interdependency with the strengths of the other people in their immediate culture.

It’s kind of a complementary team approach, like a basketball team that has everyone playing their role. And this is a little bit challenging for network marketers, because their natural instinct is independence.


The rugged individualist.

Exactly. But I’ll tell you what, that won’t meet the needs of the new knowledge economy, which is a social ecology, with all its forces interdependent. It takes more maturity, greater character strength and deep integrity.


And listening skills.

Absolutely. Very few people have learned how to really listen. They’re preparing their replies, waiting their turn…but that’s not really listening. To genuinely listen within the other person’s frame of reference is the key to human influence.


In the parlance of your book, this relates to helping people find their voice?

Exactly, you’re helping them find their voice, rather than just telling them what their voice is.


And that’s in essence how you’re defining leadership.

Yes: leadership is communicating people’s worth and potential so clearly that they are inspired to see it in themselves.


This rather turns the conventional view of leadership on its head.

Absolutely. The traditional approach is that leadership is authority by position, not moral authority. The traditional approach is that leadership stems from formal authority.

But that’s not the case. When you study anyone who’s really had influence in the long run, you find they are always people with moral authority. Whether or not they have formal authority, authority by virtue of their position, doesn’t mean a thing.

Gandhi never held formal authority, yet he was the father of the second largest democracy in the world. Nelson Mandela only attained formal authority as President of South Africa after he emerged from prison—but he had earned his moral authority long before that, while he was still in prison.

George Washington had tremendous moral authority, and that’s why he was selected as our first President. It was the strength of his character that enabled such brilliant but sharply differing minds as John Adams and Madison and Jefferson to all work together. It was his uncontestable, acknowledged moral authority that created his formal authority, not the other way around.

This is what network marketing people need to learn and apply most.


That distinction seems to speak especially to home-based businesspeople, because as a self-employed entrepreneur, you’re not part of a corporation, there is no position to give you authority.

Exactly. Honestly, this paradigm is ideally situated for your market.


The matter of “time management” always seems to evoke the dual nature of achievement: there’s the pragmatic, which says, “How do I get it done?” and the spiritual, which says, “What are the important things I should be doing?”

This is why I like to use the image of the compass and the clock. These two objects are like icons in the way they exemplify these two complementary issues.


How so?

The clock simply marks time in an endless cycle; it implies no values, but is purely objective.

The compass, on the other hand, is governed by a natural force: it points north. That’s what principles are: they’re natural laws, you can’t violate them. They point in a specific direction.

People have grown up learning how to violate these principles and still have success. Think of the people who have crammed their way through school. They get a degree, but don’t get an education. I know, because I’m one of them! Which is why, when I was pursuing my doctorate, I went back and got the equivalent of another undergraduate degree at the same time. I knew I’d crammed my way through the first time, and I knew the hens would come home to roost!


So it wasn’t just a finish line to hit, you were actually interested in the process of learning!

Exactly. Taking the best classes with the best teachers, having a synergistic team on my committee. It was a tremendous educational experience.

And by the way, parents can do this with their kids, if they’ll have their kids teach them what they’re learning. Then they don’t have to get on their case, or bribe them for good grades, and it’ll help them break that habit of cramming.


In an interview in 1999, you said that network marketers constantly face the moral challenge of whether or not to choose actions that are purely expedient, or actions that they honestly believe in, such as whether or not to promote hype or stick with the unvarnished facts.

And that’s an excellent example: to hype or not to hype? When man found the mirror he began to lose his soul. He became more concerned with his image than with his self.

Peace of conscience is far greater than peace of mind. Peace of mind comes when you pay your mortgage off. Peace of conscience comes when you’re totally honest in all your business dealings.

This is where the compass comes in.


Is this a particularly apropos challenge for network marketers because we are so utterly self-regulating? That is, we have more freedom, and therefore more ability to explore and mess up?

I think that’s so. You also have more influence with people who are needy, and who are therefore quite vulnerable, and this puts you in an advantaged position.

In the movie Gandhi, at one point he’s in a prison in South Africa, and the warden has him brought in, in chains, and pleads with him to cooperate. Gandhi says, “I don’t know if it would be fair of me to take advantage of you this way.” [laughs]

People in network marketing need to remember that their long-term reputation will come from their character, not short-term psych-up speeches or cutting corners in order to impress others or to get people into their organizations.


So put down the mirror.

Exactly! And pick up the compass. Make up your mind: this is what my life is really about. Be sure that you put the family first on that list—and also, get very focused on your customers, not just on those in your downline who are making money. You have to derive a sense of meaning from adding genuine value to customers. Otherwise it’s just a shell game.


There was a period there, in the late 90s and early 00s, when a lot of people seemed to be seized with the fear that the Internet was going to make network marketing obsolete. That hasn’t happened—but it has certainly changed the environment.

Here’s what I think the Internet has done: we’ve always known that the customer was king; the Internet coronated him. Today, particularly with major purchases, most customers are far more knowledgeable than they used to be. Because of the Internet, they often know the alternatives, they know the prices, they’re not as naïve.

This is why, the more network marketers pay the price to really understand their products, understand the needs of their customers, and work to create a marriage between those two, the more successful they’ll be.

And to extend that to the organization: the more you make the effort to understand in depth the unique talents and strengths of your downline members, and the more you make the effort to create more of a team spirit and interdependency, rather than a collection of independencies, then the more you will help people to find their voices, find their strengths—and the more their individual weaknesses will become irrelevant.

If you stay with the old model of the industrial-age network marketing approach, which is more top-down control, external motivation, psyching people up by saying, “Here’s how we’re gonna make you money,” rather than talking about the value we’re going to add to customers, the less you’ll win. Over time, today’s more knowledgeable, more aware consumer will realize he doesn’t feel the value added of service and quality of the relationship, and that will detract from your marketing power.


There’s the paradigm in network marketing that the way to be effective throughout a large group is to push down a system: everyone does it the same way. How does this kind of more interdependency-oriented culture you’re describing move through a large organization?

I think it is not as efficient—and that in the long run, it is more effective.

Efficiency is essentially speed. The traditional approach is faster, simpler, it’s more what people are used to. But now that intellectual and social capital are becoming much more valuable than ever before, and that people are so much better informed and less naïve, because of the new technologies, I think the more efficient approach will prove to be ineffective in the long run.

You can be efficient with things, but not with people.

Have you ever tried to be “efficient” with your spouse on a tough issue? You can’t do it. And you can’t do it with other people, either.

Networkers have to look upon the Internet as their friend, not their adversary, so that they themselves are more knowledgeable, they spend more time listening. It is not as efficient, but downstream, it’s more effective.

Efficiency is a clock concept; effectiveness is a compass concept.


In terms of a network organization, what does that “more effective” look like?

It looks more like the people’s involvement in making it what it looks like. A little less like top-down control of what it looks like. Working as a team to put this thing together. It’s tailored-made, based upon what the people come up with. It’s not a matter of saying, “Well, since the world has changed, now I’d better come up with a new structure to lay on the people.”


Do you think we’re experiencing a sort of identity crisis?

I do. I think there will be a transition period where what I’m saying will seem not to work, where people will go back to the old proven ways and they will work…but little by little, they will start to lose their marketing power. There’s just too much knowledge out there because of the new technologies and you cannot so readily work on the assumption of people’s ignorance and naiveté. It’s better to build for the future.

Now, that doesn’t mean you can switch everything overnight. You start investing in people more and more, in their knowledge and skills, listening to them more and more. And doing this, you start creating a culture where people start feeling, “This is a tremendous organization I belong to! I love the way we serve each other, the way we contribute to each other and compensate for each other’s weaknesses.” That’s the way it’s going to go.

I predict that in five to ten years, you’re going to see a whole different structure in network marketing. And those who are at the vanguard will start experimenting with this knowledge-worker approach, start learning more what intellectual and social capital is really made up of. They’ll be less into quick-fix and efficient motivational techniques to get people psyched into making more money.


Do you think that we are experiencing something like that same identity crisis as a nation in the world?

Definitely. We’re learning that we live in a social ecology, and we can’t think as independently. We have to learn to synergize with other nations, rather than just pleasantly announce and then sell them on our decisions.

When the infrastructure shifts, everything rumbles, everything is altered. That’s what’s happening.

It’s just like when we moved from farming into the industrial age. A new mindset, skill set and tool set took over—but it outproduced the other 50 times. The same thing will happen in this knowledge economy: it will outproduce the industrial-age economy 50 times.

It’s happening already. Toyota is eating Detroit’s lunch. United Technologies is doing the same thing, and so is Dell. They have a business model that’s based on empowerment of people, so it’s more effective in the long run.


Dell has become an icon for the idea of giving the customer what the customer wants. How does Toyota reflect that?

They treat their suppliers just like their employees. They go for sole-sourcing and then treat these source-suppliers like their partners, like part of the team. I think you’re going to see Wal-Mart forced to go in that direction. They have a marvelous, low-cost business model, but the public reaction is arising against it, and I think you’re going to see them adapt to a far more social ecology and interdependency.


That’s going to be fascinating to watch!

It will be. The suppliers have to be perceived and treated as partners, not as win-lose negotiators.


The single most challenging aspect of network marketing has always seemed to me to be the relationship between the corporate office and the distributors; what you’re describing reminds of this. Corporate tends to see distributors as employees or customers, but they’re really partners.

They are, and the corporations should use moral authority in respect to the field, not formal authority.

Leadership is different than management. Management is where you focus on efficiency. You manage things efficiently. But you lead people through affirming their worth and potential, partnering with them and synergizing with them. This is a different beast altogether. This is where moral authority lies, and moral authority is the key to the future.

In fact, even formal authority won’t work over time without moral authority.


Reminds me of my two favorite movies about leadership: Gandhi and Patton. Two contrasting styles!

But you know, even Patton had a feeling for the soldier. He somehow articulated the deepest pride in the soldier, and the soldier felt that from him. Gandhi did the same thing. The people didn’t have a vision of an independent India at all, but they identified with Gandhi, and therefore they identified with his vision.

Even though the two seem so different, that one was arrogant and the other was truly submissive and humble, there are really common elements between the two of them, similar aspects.

The whole study of moral authority versus formal authority is a fascinating subject, and it’s one that people who aspire to be leaders in network marketing can learn a tremendous amount from. The challenge is to institutionalize principles that enable the maximum degree of creativity, innovation and freedom on the part of the people they’re working with; rather than to have a very strong, controlling system of one model. Even though that one model has demonstrated its effectiveness in the past, little by little, because of the knowledge economy and how much more aware customers are, it will lose its effectiveness.


What is the biggest challenge ahead for network marketing?

I think it’s the one we’ve identified here: coming to realize the importance of partnering rather than external managing. This whole concept of moral authority and learning to affirm people’s worth and potential. As Jim Collins puts it in Good to Great, “to get the right people in the right seat on the bus.” To help them find their voice.