Andrea Jung and the Turnaround of Avon Products

April 13th, 2009 | 1:02 pm Voice of Experience: Andrea Jung, Chairman and CEO, Avon Products Inc.

This profile is part of the Financial Times's 2010 Women at the Top ranking of 50 prominent businesswomen around the world. Nationality: American Company: Avon Products Sector: Beauty and cosmetics Location: US

Andrea Jung (born 1959 in Toronto, Ontario, Canada) is a Chinese-American business executive. In 2001, she was named one of the 30 most powerful women in America by Ladies Home Journal. Jung was born in Toronto to first-generation Chinese immigrants, but her parents moved to the US when she was two, to pursue a better education for their children Jung is chairman of the board and chief executive officer of Avon Products, Inc., promoted to the position in November 1999. prior to this, she was president and chief operating officer over all business units of Avon worldwide. She has been on the company's board of directors since 1998. Andrea Jung celebrates 11 years as chief executive of Avon Products this year. The world's largest direct seller, founded in 1886, Avon sells cosmetics and fragrances door to door in more than 120 countries, through roughly 6.2m representatives, reaching an estimated 100m consumers

Jung first came to Avon in 1994 as the company's president in its product marketing group. She became president of global marketing in 1996 and executive vice president/president of global marketing and new business in 1997. Her responsibilities at that time centered primarily around market research, joint ventures and strategic planning. Jung tells the story of how, a few months into her first job as a retail trainee at Neiman Marcus, she told her parents that putting clothes on hangers was not the future she had envisaged for herself, and that she was thinking of quitting. "'Quit?' they said. 'The Chinese don't quit. You learn more from bad than good experiences that's how you grow.' I don't think I've ever let the word leave my lips again." Jung's perseverance was to be tested when, in 1997, she was narrowly passed over for the top role and had to decide whether to leave. She stayed, she says, because of her passion for the company, and was rewarded less than two years later and she was promoted. Avon was a $4bn company by revenue when Jung was appointed chief executive; it is a $10bn-plus company now. "As you get bigger it's harder to maintain growth," she says. "You need a different mind-set, different processes and different structures as the corporation becomes more complex." While Avon has a largely female direct sales force and customer base, Jung was its first female chief executive, and men had dominated management before her arrival. Now, Avon has one of the most diverse workforces among the world's biggest companies: women account for roughly half of each of the top two layers of managers, and four of the nine members of its external board. "All 150 top jobs in the company are reviewed regularly," Jung says, "and shortlists for each one drawn up. There is an explicit expectation that those lists include at least one woman. I can't say whether the next CEO of Avon will be a woman, but I can say that women will be on the shortlist." "For me, the biggest emerging market isn't a country, it's women. We have 600m people living on a dollar a day, and two-thirds of those beneath the poverty line are women. When a woman takes on an earning role, family health and education improve. The societal impact is huge," Jung says. Im a firm believer that when you have this job you have the privilege and responsibility of influence influence to every constituent, to your associates, to your community, influence to your consumer. And that influence can be translated into passion in the work. It gets you through all the tough parts of the job the extraordinary ability to change womens lives through the work, said Andrea Jung, Chairman and CEO of Avon Products Inc. during her

luncheon keynote dialogue with Ilene Lang, President of Catalyst at the recent Catalyst Awards Conference on March 30th. When asked of how she felt about the purported dwindling number of young women going for MBAs because the perceived lack of social utility in business, Jung responded, Its killing me that the CEO role is being perceived as it is at this moment. [The job has] got huge responsibility and privilege but these are critically important jobs for the continued growth of America and the world. So Im proud to be a CEO. Im proudI think we can make a difference. Its not just my company but all of our companies can make a difference in the community and in this country which needs it. And if anyone can do it, Andrea Jung at the helm of Avon can. CEO of AVON since 1999 and Chairman since 2001, Jung holds the title as the longest-tenured CEO of the 15 women currently serving as CEOs in the Fortune 500, an interesting point in light of the fact that it is never a position she went into business with the intention to reach. I neverset out to be CEO. I think you have to want to be in a role where you can make a difference. For me I realizedthat I wanted to be a leader and make a difference in the future of the company and that really was the important thing for me. It was that perspective that allowed her to stay on at Avon when she was first passed over for the CEO role in 1997. With all the media hype around ita New York Times article called extra attention to it as yet another example of a woman being passed over for promotion to C-suiteJung began to get offers from many outside companies to become CEO. She was torn as to whether to stay with Avon and possibly never become a CEO or to leave to take advantage of the various advancement opportunities. Ann Moore, CEO of Time and my mentor for many yearssaid something that changed my life. She said, Follow your compass, not your clock. Make this decision from your heart, not your head.And I made a decision I felt that it was a tough moment for the company and that the company needed meIt really was a moment [where I thought] I can add value in the role as [number 2]. And I decided in that moment even if it meant [never] being CEO that I would do that because I love the company. It was the best decision I ever made.She ended up getting promoted to CEO 18 months later but she says she wouldnt have regretted the decision even if that hadnt happened. You really learn that.you have to have a passion for the company a deep love affair for the work you do or it doesnt matter what will happen. For the first five years of her tenure as CEO, Avon saw, in Jungs words, 5 years of major double digit earnings. And then, in 2005, they hit the wall and Jung was faced with a potential crisis of confidence. We had missed earnings guidance twice the pressure was on. Ram Charan came into my office late one Friday nightand said, Look, they love you. Everyone wants you to win but if you cant fire yourself [on Friday]and come back in on Monday morning as if [you were just] put in the job to do a turnaround and do all the objective things that somebody with fresh eyes canIf you cant do that, this is going to be a tough haul. Jung took that advice, returning to the office on the following Monday morning ready to revisit all teams, programs, perspectives in place at the time as if they werent hers.

This fresh point of view allowed her to implement changes resulting in the delayering of the organization through the removal of several superfluous levels of management. This reorganization resulted in an elimination of 28% of the management team and, ultimately, a savings of over $250 million to the company. Its not even about the money, she added, Were more efficient. We make decisions more quickly. We were actually able to cut the time a decision gets up to me toa few three days, a few hours. Despite the business case for it, the implementation of the decision was, in her words, excruciating. She continued, The great thing about having been with this company for so long is that I knew these people. [It is tough] having those painful conversations you dont want to have with people who have been extraordinarily loyal and have been with you for years and years. She traveled around the world, talking to the Avon employees en masse in meetings to explain the reasons behind the restructuring, even before it started. I would tell them one out of three of you will be gone because this was going to be about [making the company more efficient]and this is why. City after city. I had walking pneumonia at the time it was so much stress. [But] I wanted to be face to face. That honesty paid off, as evidenced by the emails she received thanking her for her forthrightness. [They would say,] I hope it isnt me [being let go] but if it is, I understand why. Those were tough meetings and there were some extraordinary people who left the company at that time. The current economic crisis presents challenges of its own. Jungs advice is this: Be bold. Be courageous. Find the work that you love. She continued, In these moments, people will define themselves on how bold they are. People who are breaking through, delivering results right now [really do shine]. You really notice them so much more right now. And she herself is focusing on boldness as well. At the end of the day, these times require you to do things more boldly and more quickly that you yourself imagine they can be done. And I think thats what this environment is all about. The killer is when you are doing the right things but not enough and a year too late. You can get into a situation you dont want to find yourself in and ask yourself why didnt I [do more, faster] So I have my own mantra right now which is [to avoid the] too little, too late. In response to a question on work-life balance, Jung said, I have found simply this formula (if people can do it all at once bless them) You cant have it allnot in a single day. You have to make a choice. I believe very much that there are days where my children dont win and Avon wins, but there are also days where my children win and Avon doesnt win and I dont feel guilty about it either way, otherwise youll be guilty on both sides of the equation[But] Ive never missed the most important things on either side. When asked if she has faced any challenges as the result of being a woman of color, she spoke of the impact her Chinese upbringing had on her and her leadership style. I grew up in a very traditional Asian family conflict was avoided. Fast forward to this role. I have had to evolve. I dont think Im aggressive but Im far more assertive than I was brought up. [but] I am the same person. Im proud that I still have the values that were beaten over my head about humility. Jung shared a story about a letter she had received from her father at the beginning of

her tenure as CEO, in which he counseled her not to change, writing we raised you to be tolerant and humble. The world and the job could change you [to be otherwise] so hang onto it and dont forget that we are not going to value at the end of your life whether you were a rough and tumble CEO but whether you were able to be successful in maintaining your humility. Jung added, And I try to counsel [Asian Americans executive mentees] not to change who they are it can be done. And of the reports of late that the number of women on boards and in C-suites remains flat, Jung said, Im a realist but I would still call myself an optimist on this subject matter. The numbers would say that there is still somewhat of a gap. [But] if I look even 5 years ago (let alone 10 years ago) at women in seniors ranks of a company, top operating jobs and CFOs versus other staff roles, it is fundamentally [better] so I think there is no question that the pipeline is significantly differentThere is clearly progress on that front and I am optimistic and hopeful that youll see more women taking on CEO roles at huge companies. (My company is small compared to some of the recent CEO appointments of women.) My attitude is that if 10 years later Im leading the smallest market capital company among all the women who are leading Fortune 500 companies, how great!

Avon was one of the prominent direct sales companies in the beauty products industry. Started in the late 1800s by David McConnell, the company sold a wide variety of beauty-related products to homemakers through its direct sales agents. However, by the 1980s, the company had lost its luster and performance began to falter. A failed diversification strategy made it the target of several takeover attempts. Turnaround efforts were initiated in the 1990s under then CEO James Preston and continued by his successor Charles Perrin, however, they failed to make a significant impact. Performance began to improve only after Andrea Jung became the CEO of the company in 1999. This case discusses the revival of Avon under Andrea Jung.

Jung was a retail industry veteran, who joined Avon as the head of US marketing in 1994. She was reportedly attracted to Avon's women-oriented culture. She grew rapidly within the company and was eventually made the CEO. When she became the CEO of Avon in 1999, the company was in a bad condition. Jung then took a head-on approach to reviving the company's businesses. This case details Jung's game plan for turning around Avon and explores the various steps she took towards this end including, changing the company's product strategy, reviving its sales representatives, exploring new channels of sales, aggressive global expansion, cost-cutting initiatives and an image makeover. By 2004, Avon's performance was a vast improvement from the 1990s and Jung was widely credited with the company's turnaround.
Issues:

Career of a successful woman CEO. Strategy adopted by a woman CEO in turning around a large, global beauty products company.

 Challenges faced by women business leaders in their rise to the top.

"I'm proud of my heritage and certainly my gender. I think it's a privilege being a minority woman leading a Fortune 250 company." - Andrea Jung, Chairperson and CEO, Avon Products Inc. in 1999.1 "She's a young woman with a very big job. She has an opportunity to really demonstrate her abilities, and if she does well, others will undoubtedly reach for her." - Herbert Mines, executive headhunter for Herbert Mines Associates in 2000
Andrea Jung in Fortune's List

In October 2004, Andrea Jung (Jung), the chairperson and CEO of Avon Products Inc. (Avon), was listed at the third position on Fortune magazine's annual list of the '50 Most Powerful Women in Business'. She was ranked behind eBay's Meg Whitman and Hewlett Packard's Carly Fiorina (a longtime top position holder now ranked second).3 It was the fourth time that Jung had featured in this list, and analysts said the honor was well deserved. Jung was credited with transforming Avon, which was mockingly called the 'Graying Goliath', into a modern company that catered to the beauty needs of women across age groups and social strata. Under her leadership, Avon's image in the market changed from "frumpy" to "fashionable".4

Jung was appointed the CEO of Avon in 1999, after the departure of her predecessor Charles Perrin (Perrin), who had earlier been the CEO of Duracell. She was the first woman to become the CEO of the company, which was more than a century old. At the time of her appointment, several people, both inside and outside the company, were of the opinion that Jung was too young and inexperienced to lead a global company like Avon. However, Jung's dynamic leadership and comprehensive turnaround plan soon silenced their doubts. By the early 2000s, it was universally acknowledged that Jung had been the ideal person to lead Avon out of its difficulties.
Background

Jung, the older child of immigrants to Canada (her mother was from Shanghai and her father from Hong Kong), was born in 1958 in Toronto, Canada. Both her parents were ambitious5 and they inculcated the same ambition and drive in their children. As a child, Jung took piano lessons and attended Mandarin classes. She was a dedicated student and was also involved in class politics (she was class secretary at her high school).

Jung believed that the values inculcated in her as a child played an important role in the approach she took to achieving tasks later in life...
She recalled an incident from her childhood when she asked her parents to buy her a set of 120 color pencils. Her parents had made a bargain with her and promised to buy her the set if she got straight A grades in all her subjects at the end of the year. Jung remembered how she dedicated herself to her studies for a whole year at the cost of entertainment and recreation, and managed to achieve her goal. "I'll never forget that. My parents ingrained in me early on that the perfect score is always something to strive for. I want to win and I want to succeed no matter what," said Jung.6 She also recalled that her parents encouraged both her brother and her to have careers. "They told me I could do everything my brother could," said Jung.

On completing high school, Jung attended Princeton University, where she studied English Literature. She graduated magna cum laude8 from Princeton in 1979. Jung's career plan at that time was to work in the retail field for two years before attending law school. She believed that working in retail and interacting with different kinds of people would give her the real world exposure required to become a good lawyer. She interviewed with a recruiter for Bloomingdale's9 immediately after college, and was selected for the company's management training program.

Retail fascinated Jung from the start and she became completely involved in the thrill of marketing. Eventually, she decided to drop the idea of law school and pursue a career in retail. Her parents, both of whom were professionals, were not happy with this. They believed that retail was not the field for an educated and ambitious person, and that Jung was dropping herself to the level of high-school dropouts by staying in selling. "No one in my family had a retail or marketing background. They were professionals. They didn't understand just what I was doing by going into retailing. After I started, though, it got into my blood. I knew this was what I wanted," recalled Jung...10

Early Career at Avon

Jung joined Avon as a consultant in May 1993. Avon's then CEO James Preston (Preston) was considering selling Avon's products, which until then were only distributed through direct selling, in retail stores, and wanted Jung to study the impact of such a move...
Jung's Game Plan for Avon

Plans to turn Avon around had been formulated in the mid-1990s when Preston was the CEO. Perrin also did his part to help improve the company's business, notably embarking on a business

process reengineering, and trying to improve the company's image in the market (Jung collaborated with him on this). However, there was no impact on the company's performance. By 1999, the company had an annual sales growth rate that was less than 1.5 percent and its share prices were declining when the general economy was booming...
Being a Woman CEO

According to analysts, Jung's success proved that a woman was the best person to lead Avon. Although the company had begun making turnaround efforts in the mid 1990s under the leadership of Preston and continuing under Perrin, it took a woman to bring them to fruition...
Looking Ahead

Analysts generally agreed that Avon blossomed under Jung. For a company that was thought to be well down the road to decline, Avon revived quickly to post remarkable results. Between 1999 and 2004, Avon's sales increased 45 percent from 5.3 billion dollars in 1999 to nearly 7.7 billion dollars in 2004. The company's stock value increased 164 percent during the same period. Despite Jung's own views to the contrary, analysts said that being a woman was Jung's main advantage in turning Avon around...