Avon Case Study Brief information about the domain of the company Avon is New York based 125 year old beauty product manufacturer that appoints the manufacture and marketing of beauty and fashion products, which has for over a century left a mark on millions of people throughout hundreds of countries The Company covers primarily North America, Latin America, Europe, and Asia Pacific. Avon’s products are classified into three categories: Beauty, Beauty Plus, and Beyond Beauty. The “Beauty” category consists of cosmetics, fragrances, skin care, and toiletries; “Beauty Plus” includes fashion jewelry, watches, apparel, and accessories; and “Beyond Beauty” comprises home products, gift and decorative products, candles, and toys. Avon earned a great reputation with its direct selling technique. This technique consists of selling the products directly to distributors or final consumers rather than trading companies or other intermediaries in order to accomplish greater control over the marketing function and to earn higher profits. The status of the company that led to its Determination that a change was necessary Several decades ago, Avon brought a perfect sagacity on many wives stayed at home, and some overprotective husbands didn't want them out shopping. Avon jumped up to the marketing arena with its growing fleet of representatives offering multifarious beauty products. Between the trailblazing women who signed up to be Avon reps and the customers who welcomed them into their homes, the model rocked for a long time. The foundation (including the talent formation) of the company was not strong enough to support its rapid growth. In 2005, Avon Products Inc.'s (AVP) success story turned horrible. After six straight years of 10%-plus growth and a tripling of earnings under CEO Andrea Jung, the company suddenly began losing sales across the globe. Avon has lost loyalty and brand recognition as a result of its decision to diversify into different industries and different product lines. This has resulted in a loss of market share drastically affecting annual profit margins (Malayath, 2010). Developing markets such as Central Europe and Russia, the engine of Avon's amazing run, stumbled just as sales in the U.S. and Mexico stalled. The global diversity that had long propped up the company's performance suddenly began to weigh it down (Businessweek.com, 2007). Another factor for the underperformance of Avon in the late 1990s is its failure to develop the online business. Avon did not use technological tools for its operational processes. They should rather use computerized systems to manage its inventory, control transactions and pursue sales activities more efficiently. Company used primitive old-fashion system instead: Excessive paperwork which consequently leads to mishandling customer orders. Related to the fear of alienating its labor force, Avon downplayed the importance of developing the e-business. A company cannot ignore the environment and expect to be successful in the long run. Sales rates were falling down, many customers were complaining regarding poor product packaging, irregular distribution and lousy advertising campaigns. Avon was faced with worst declining revenues and operating profits in early 2006s. Earnings growth for the past five years had decreased from 4 digits to single digits and was steadily declining year after year. We can summarize the specific problem areas as stagnated sales, low and slow earnings growth, disrupted and limited distribution capabilities, sheered consumer preferences due to the problematic transactions. Focusing on technology improvements and online sales, Avon would have an opportunity to emerge as a leader in this area, thus adding additional channels of distribution and appealing to the overwhelming need (Malayath, 2010). Avon also contained a lack of leadership displayed by all management areas. Employees were feeling insecure; lack of sense of organizational purpose was eradicating their motivation. Avon did not have a clear vision, strategic plan, and leadership approach which caused total failure; thence the company lost its image and reputation. Apparently, lack of strategic vision and straight forward objectives are the main points of the breakdown.
Avon’s Talent Challenge: After revising existing talent practices of the company, the talent management group identified six weaknesses which hurt their effectiveness: Opaque, egalitarian, complex, episodic, emotional and meaningless (Goldsmith & Carter, 2010). Neither managers nor associates knew existing talent practices including performance management and succession planning (Opaque), High performance were not being rewarded and low performers weren’t being managed effectively (Egalitarian), performance management form was long and complicated, succession planning was just a procedure and paperwork not implementation(Complex),employee surveys, talent reviews, development planning and succession planning were done and determined by individual manager around the world and never propagated company wide. Thusly, employee’s success was not shared and promoted (Episodic), decisions on talent movement, promotions and other important talent activities were influenced by individual knowledge and emotion as by objective facts (Emotional), and HR could not answer the most basic question a manager might ask about talent practices (Meaningless). These are the six factors of their failure story. After all those circumstances, finally the company realized that top to bottom restructuring was inevitable; otherwise, collapsing was imminent. By refocusing on the core competency, improving efficiencies, and adapting to the environment with new initiatives, Avon could overcome the hurdles of the past and turn the company in the new direction.

The model for change theory typified in Avon. General Organizational Changes in the company AVP Inc., desperately needed to revise the situation, pull out the problematic areas and execute the solutions urgently. Therefore, The Chief Executive Officer (CEO) Andrea Jung has tried to figure out what went wrong and how to fix it. In January of 2006, she had accompanied by a team of company executives and started plans for restructuring the company. After the review, Andrea hired an outside consulting group to get up a strategic plan for Avon. Their recommendation was: Avon has to implement three-step retail approach. 1. Distribution of high end spa products in specialty stores. 2. Sell a more affordable product line in discount stores 3. Extend unique kiosks in the domestic market [ (Malayath, 2010) ]. Consultants asserted that, by executing this “three step approach” will be an appropriate action for Avon because, specialty stores are growing 4% per year and are attracting affluent baby-boomers which are ever growing segment of the population; and full line discount stores have high customer traffic, pointing towards high volume sales of the more affordable Avon products [ (Malayath, 2010) ]. One of Jung's most important moves has been forcing managers to use initiative and make decisions based on fact rather than intuition. Jung has reorganized Avon's management structure, taking away much of the autonomy from country managers, in favor of globalized manufacturing and marketing. This restructuring program was a crucial pillar of Avon’s turnaround plan that radically transformed the company’s cost base and elevated organizational effectiveness. According to new solution decisions, their regional structure replaced with “Matrix Structure systems”. They decided to use the advantages of technologic tools, implement development of a management-reduction process which is called “Delayering process”. Executive team had determined that, a significant increase in executive talent, progressive approach to production planning to allow new capabilities should be immediate actions. Focusing on stronger brand management and higher quality advertising works, performing institutional market analysis and evaluations, strengthening up the supply chains must be other necessary steps need to be taken (Goldsmith & Carter, 2010 p:3). The Changes and Reforms in Talent Management Marc Effron is renowned for the innovation and successful talent management he has built at Avon. He is the founder of “One page Talent Management” process. Effron approaches work with the belief that, talent programs are most successful if strategic, fact-based and practical on a one page talent management process. If the organization creates simple, and understandable to every average manager and put everything on one piece of paper include the metrics, it will be easily done by manager because there is no complexity It might be painful at the beginning but , but it works fine and managers can get used to easily. Effron states that: There is the theoretically correct way of doing things and the way that really works. We need to get to the business outcome as easily as possible. This includes goal setting—the easiest possible way to make sure they have goals. Don’t design things to impress human resources but make sure line managers have useful tools (Effron, 2008). As a matter of fact, “One Page talent Management” is a powerfully simple approach that significantly accelerates a company's ability to develop better leaders faster. The authors outline a straightforward, easy-to-use process for designing results oriented One Page Talent Management processes (OPTM): base every process on proven scientific research; eliminate complexity by including only those components that add real value to the process; and build transparency and accountability into every practice (Harward Business Review). One Page Talent Management guides for how to identify high potential talent quickly, without complex assessments, increase the number of "ready now" successors for key roles, generates 360 degree feedback that accelerates change in the most critical behaviors, significantly reduce the time required for managers to implement talent processes and enforce accountability for growing talent through corporate culture, compensation, etc. (Harward Business Review). The talent management group identified six weaknesses which hurt their effectiveness as mentioned above, under the title of “Avon’s Talent Challenge”: Opaque, egalitarian, complex, episodic, emotional and meaningless [ (Goldsmith & Carter, 2010) ]. Six weaknesses, due to the reformist talent management approach which was brought by Effron, turned to six strengths:
From Opaque to Transparent (career development plans, development trainings and performance reviews etc.). From Complex to Simple (Managers learned to do the right things and used value added tools and information), from Egalitarian to Differentiated (effective communication to leadership, talent review process and performance review process). From Episodic to Disciplined with adding talent management globally, generating consistent global tools and processes and also committed CEO. From Emotional to Factual: More fact-based decisions making comprising qualitative and quantitative facts were injected. The sixth one is: from Meaningless to Consequential. Imposing managerial accountabilities (monetary, associate-led and CEO-led accountabilities) on talent management process and they were able to answer questions especially the answer of this question” Why should I do this”?

The types of evaluation information that were Collected and how they are used to benefit the company In order to issue an accurate appraisal, supervisors are required to assess the performance levels of the staff. Employees should not take a passive role in performance review. They must take the initiative, push for feedback from their managers and others. If there is not feedback and evaluation, there will not be improvements. Managers should be trained in performance reviews, then prepare their employees for the process (citehr.com). There are two groups of evaluation techniques:
1.Individual evaluation techniques are those techniques when the standards of performance are defined individually, without references to other person(s).Individual evaluation techniques include various methods such as graphic rating scale, forced choice, essay evaluation, critical incident technique, checklists and weighted checklists, behaviorally anchored rating scales (BARS) and behavioral observation scales (citehr.com).
2. Multiple person evaluation methods are those methods when the performance of one employee is directly and intentionally compared with the performance of other employee (citehr.com).
This technique suggests three methods: Ranking, paired comparison, and forced distribution. Avon used various methods of evaluation to collect information that greatly benefited the company in its turnaround efforts. They built noteworthy improvements in their talent management system. In addition to using all efficient methods mentioned before, they are exerting “Immediate manager’s evaluation- which holds clear goal setting, frequent feedback and development planning-and people effectiveness -which includes many Human Resources talent practices- had been increased. The company transitioned its leadership from being opaque to becoming open and transparent. Leaders became proficient and accountable in their awareness of present and potential performance ratings and how to alter those ratings [ (citehr.com) ]. Avon differentiated talent within the company and equipped each level of talent with the appropriate experience. High performers are recognized with their value within the company, and lower performers are provided training in the areas of improvement. Another positive result of the turnaround is a great discipline. The company now functions more methodically as processes are synchronized to operate consistently on schedule worldwide. The company has adopted a type of “standard operating procedure” for developing talent that ensures short and long-term success [ (Goldsmith & Carter, 2010) ]. To sum up the numerous of benefits of the company’s turnaround, we can juxtapose as follows: * Ratings of Immediate Managers have increased up to 17% having a near 90% approval rating. * Ratings of HR and Talent practices increased up to 16%. * Increased transparency enabled Talent to move more rapidly into major markets. * Less complicated promotional processes accelerated the development of leaders. * Increased accountability for leaders has improved the work experience for Associates. * All expense savings goals have been met. * Avon’s revenues grew from $8 billion in 2005 to nearly $11 billion in 2009 [ (Goldsmith & Carter, 2010) ]. Speculate about the success of the changes within the next five (5) years And how adjustments could be made if the results become less than ideal.

In the early 1990s, John P. Kotter and James L. Heskett formally measured and concretized the impact that effective talent management has on revenue, profitability, stock price and other key indicators of business success (Russellreynols.com ). They examined data over a ten years period and confirmed how those companies that systematically integrated performance into corporate culture outperformed similar organizations that did not do so. According to Russell Reynolds Associates: “Revenue at companies where the culture was well managed increased 682 percent versus 166 percent at those where it was not well managed” .They asserted that Stock prices were increased 901 percent versus 74 percent and net income was increased 756 percent versus 1 percent. Accordingly, job growth increased 282 percent versus 36 percent (Russellreynols.com ). Since that landmark research, Towers Perrin and others have shown a definitive link between the effective management of workforce, talent or culture initiatives and positive business results (Russellreynols.com ). They proved that, when employees are strategically managed and incentivized, performance and business improvements increase significantly. In order to meet the growing demands of a vocal investor community, management is under more pressure than ever to have effective and visible talent management practices in place (Russellreynols.com ). Marc Effron, Vice President of Talent management for Avon, notes that “successful talent management is about under-standing the firm’s core business objective and then creating a simple talent management solution that responds to that.” Effron continues, “For example, the goal of performance management is to communicate goals and fairly evaluate employees on their performance at year end. We can make that a very straightforward process, not a complicated and lengthy one” [ (Russellreynols.com ) ]. Increasing performance leads to increasing business and profit. Jung was the first female CEO in Avon's 126-year history, and that's an interesting distinction for a corporation that bills itself as "the company for women." Avon empowers women around the world by giving them an earnings opportunity. The company needs to use all the benefits of its unique chain direct marketing system but it also needs to improve its direct sales concept. Motivate the Avon business to reach its goals of promoting its products and gaining sales through advertisements, sales competition, participating in conventions and endorsing franchise. The more awareness from the public of the company likely to attract more buyers and the outcome is high sales. For promoting direct-sales through consumer and the business; one of the most efficient ways is to offer incentives to the customers; while promoting its products to larger messes by advertisements, establishing sales competition for direct sellers, participating in conventions, and by endorsing the chain system and franchising its products to retail stores. Incentives supply a positive motivational influence to encourage and stimulate buyers to buy the products. Some of the proper incentives could be conveyed coupons, rebates, product samples and awards. Coupons can be conveyed by mail, beauty magazines, newspapers, and advertisements on mail or on Avon’s official website. Consumers’ rebates can be offered also to attract more buyers to buy the products. Rebates can be advertised also on coupons through mail or the internet. Offering samples of Avon’s cosmetic products, which can be done door-to-door or attached on an advertisement through mail, is another successful way of attracting consumers. Finally, awards through prizes, contests or sweepstakes can offer consumers the chance to win something small or big like cash or free-trips. Also, prizes can be offering a free gift whenever a consumers purchase one of Avon’s products. This last incentive option attracts more attention from consumers than other options [ (Malayath, 2010) ]. Creating sales goals within a certain period of time, encouraging Avon’s sales representatives with awards/prizes that reached their sales goals is one of the most popular methods for sales augmentation. These Awards through prizes, contests or sweepstakes could offer consumers the chance to win cash, free plane tickets, trips and some discounts. A free gift could be given when consumers purchase Avon’s products. This option might be very attractive to consumers and motivate them a lot. Another way of sales increasing methods is, participating in conventions and this is more likely to increase sales through direct contact with customers. Endorsing franchise system of Avon’s products with small and big cosmetic-related retail higher quality stores with attractive price policies, including Macy, JC Penny, etc. All these methods will increase sales and bring profit which is any company’s definitive aim [ (Malayath, 2010) ]. Avon has plenty of proprietary products, but we live in an imitator world where online retailers with lean overhead can undersell Avon when it comes to mainstream beauty-care products. Hence, the company should not disregard this critical sharp edge and take measures. Based on the changing life styles, due to the world’s changing conditions, primarily, Avon should focus on product innovation and diversification to appeal to larger age groups in the areas recent tendencies such as anti-aging products, home goods, teen products, organic products, anti weight lose products etc. which are attracting people more than old style make up goods. Besides there are numerous kinds of beauty products offered by great brands with great prices in almost every neighborhood stores. Avon should extend its customer profile and offer its products accordingly matching this profile; from middle to upper class. Baby boomers, professional business people (men and women), and teens will be good lines of consumers for the company. Avon has a one of a kind industry and strives to remain fashion forward and trendy. If the company focuses on appealing larger age groups by diversified and innovated products and implements all the possible sales promotional strategies that suggested above, Avon will be able to continue to stay on the marketplace as a household brand at least in the next 5 years.

References:

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Effron, M. (2008). Under the Microscope: One Page Talent Management at Avon Products. Retrieved from http://www.humanresourcesiq.com/talent-management/articles/under-the-microscope-one-page-talent-management-at/ Goldsmith & Carter. (2010). Best Practices in Talent Management. In C. 1. Inc..
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