Andrea Jung Case

1. Describe Andrea Jung’s leadership style. How did her upbringing influence that style? What assumptions about human nature does she hold? Andrea Jung is the quintessential transformational leader. Jung showcases her transformational leadership style through her charisma, delegation of authority, consideration of subordinates, and her ability to constantly modify the organizational structure of Avon. Jung’s charisma is seen in the strong passion she has for Avon. This passion was clearly manifested when Jung turned down a CEO position at another company to remain the number two person at Avon. The genuine love that Jung has for Avon and its impact on society serves as a motivational leadership tool. The influence of Jung’s positive attitude toward Avon promotes an atmosphere of cooperation and teamwork. Much like fellow transformational leader Howard Schultz, Jung is firm believer in delegating authority. An example of Jung’s trust in delegation was seen in her 2001 appointment of Susan Kropf to COO. Despite Kropf’s young age, 31, Jung believed she was the right woman for job. Jung’s instincts proved to be correct, as Kropf saved Avon roughly $460 million. In working her way through the many levels of Avon, Jung was able to understand the importance of sales representative moral, as they were the heart of Avon. It was through this knowledge that Jung decided to increase representatives’ commission payouts. This action is a clear example of her consideration of subordinates and Jung’s transformational leadership style. Jung’s leadership at Avon has always been characterized by her belief in modifying the organizational structure. Never were these modifications for her personal benefit, rather the benefit of Avon as a whole. From her initial changing of the vision statement in 2000, to her new business model in 2005, Jung has always put company goals ahead of any personal interests. Andrea Jung’s upbringing has had a clear influence on our transformational style of leadership. Andrea’s parents instilled in her a strong work ethic at a very young age. This work ethic, combined with her Asian parent’s high belief in â€Å"in-group collectivism,† set the stage for Andrea to take great pride in groups that she holds near to her, such as her family and Avon. On the contrary, Andrea’s upbringing was not one characterized by high individualism. A 2006 USA Today story states, â€Å"(i)ntroversion might be partially explained by culture, genetics and upbringing. More men are introverts than women. Masatoshi Ono, who resigned as CEO of Bridgestone/Firestone during the tire scandal of 2000, lived in Nashville for seven years but was practically unknown even by neighbors when he returned to Japan. Avon Products CEO Andrea Jung told USA TODAY in a rare interview in 2000 that she is not shy, but grew up in a traditional Asian household and was, therefore, ‘reserved. † As the above statement explains, the modest climate that Andrea was raised in was not one were she was able to showcase her assertive and confident side. In Jung’s rise to CEO one of her main obstacles was revealing her aggressive side, a side that was clearly surpressed as a youth. Andrea Jung possesses an array of assumptions on human nature. Jung is a f irm believer in having a genuine love for what you do in life. She assumes that not doing what you want to do is a sacrifice that affects both men and women. Andrea also believes that innovation is the key to finding success in business, however, Jung assumes that this innovation can not be used in a means to hurt the company. Jung’s strongest assumption on human nature is a person’s sound principles and passion will guide them through both the good and bad times. Jung’s charasmatic demeanor, combined with her modest upbringing, enable her to have these optimistic assumptions on human nature. 2. Does Jung practice high involvement management? Explain your answer. Andrea Jung practices a high involvement style of management. Jung’s high involvement management is seen through her reliance on decision power, information sharing, and incentive compensation. The delegation of all operational decisions to Susan Kropf is an example of the belief in decision power that Jung possesses. The delegation paid off in the long run for Avon, as Kropf saved a large amount in reducing the amount of suppliers. For Jung to put such responsibility in a subordinate is a testament to her high involvement approach. Avon is characterized by an open flow of information for all its employees. Key among this data is Avon’s spreading of facts on female social and health issues. Jung’s continuation of Avon’s traditional spreading of information pamphlets enables both her workforce and customers to share in Avon’s values. The distribution of these pamphlets enables Avon to form a special bond with their customers. High involvement managers believe in compensating their employees based upon their performance. Avon’s compensation is based on a piece rate system, where associates are compensated based on the amount they sell. In another manifestation of her high involvement style, Jung decided to increase representative payouts. Some areas Avon even pays commissions to existing sales members, based upon reps that they personally recruit. 3. To what degree does Andrea Jung demonstrate the attributes of emotional intelligence? The five attributes of emotional intelligence are highly visible in Andrea Jung’s leadership style. Through her day to day demonstration of self-awareness, self-regulation, motivation, empathy, and social skills, Andrea Jung proves that she is a manager characterized by a high degree of emotional intelligence. Jung understands that her behaviors affect her workforce’s feelings and beliefs. The productivity of her employees is a direct result of her optimistic demeanor. A prime example of her self-awareness is evident when Jung states, â€Å"(i)f people can’t tell that I love this company, then it’s hard for me to be a lasting leader. † This quote serves a symbol of Jung’s ability to understand that her attitude, alone, is a key motivational force for Avon. Emotionally intelligent leaders are able to remain calm in both the good and bad times. From her time as a Bloomingdale’s management trainee, to her current role as Avon’s CEO, Jung has always been able to control her emotions. The self-regulation that Jung has shown through her ups and downs has encouraged her associates to handle their difficult situations in the same calm and open minded demeanor. Motivation is synonymous with Andrea Jung. She possesses a passion for Avon and its vision of elevating women in the community. Jung has a track record of constantly looking to improve processes at Avon. Her delegation of authority to Susan Kropt and her proposed correctional action plan are clear illustrations of this fervor. Through her search for feedback from associates and burning desire for constant improvement at Avon, it is clear that Jung is an emotionally intelligent leader. Jung’s understands the importance of a healthy balance between a professional and personal life. It is this empathy that enables her to be an effective manager. Her ability to balance her personal and work duties sets an example for her workforce. Jung also has shown that she is not afraid to make decisions that directly improve her employee’s moral, as was the case when she raised commission payouts for her direct salesperson workforce. Jung’s ability to see the big picture enables her to understand that a happy sales team will pay far great value in the long term than the short term balance sheet savings. Jung has established an array of effective working relationships with current and past colleagues. Her past relationships with Barbara Bass and James Preston laid the framework of her proficient social skills. Her belief in the importance in social relationships is depicted in her decision to keep Avon’s tradition of sales representative personally delivering roducts to their customers. It is through these social skills that Jung has been able to lead Avon to her desired outcomes. 4. What is Avon’s business model? How has the business model changed over time? Avon’s business model was built upon independent sales representatives selling cosmetics in a door to door sales approach. This model lasted for over 80 years, when two key economic forces caused Avon to change. The competition fro m large discount stores, as well as the trend of women joining the workforce, forced Avon to change its business model. In the 1980’s Avon, unsure of its direct selling method, went through a period of acquisitions where it bought some health care businesses and Tiffany & Co. , a high end jewelry retailer. In 1988 Avon’s new CEO, James Preston, recommitted the company towards its direct sales of personal care products. After selling off non core business departments, Preston focused on a restoration of growth at Avon. Avon was characterized in the 1990’s by a vision centered on a global understanding of women. Their recommitment to their direct sales model was seen in their global sales force of roughly 1. million independent sales representatives. The Andrea Jung era of Avon began at the start of the new millennium. Jung’s model was characterized by an even deeper emphasis on women, a reduction of suppliers, and an open mind regarding innovation. Despite much success in her early years at Avon, 2005 posed as a pivotal year for Jung, as Avon’s demand was in decline. Given the changing market conditions, Jung proposed a new business model that focused on increased R&D, channel support, and advertising. 5. Is Avon a learning organization? Explain your answer. Avon possesses many of the key attributes of a learning rganization. Through its constant ability to react to market conditions, openness to innovation, and guiding ideas, Avon is a clear example of a learning organization. Learning has been a cornerstone of Avon’s historical success. As their market has experienced a variety of drastic changes, their ability to react to market conditions has enabled Avon to survive for over a century. A great deal of learning at Avon comes from their process of having all executives spend time as a direct sales representative. It was during this experience, that a young Andrea Jung learned the complexity of Avon’s marketing materials. For a company to be considered a learning organization, it has to have an environment that fosters innovation. Andrea Jung single handedly influences Avon to adopt an innovative approach to their business practices. Jung possesses an open mind regarding any innovation that Avon could adapt to its advantage. It is this learning environment that has permitted Avon to experience such success. The most influential factor in making Avon a learning organization is the clear guiding ideas that management communicates to all employees. From James Preston to Andrea Jung, Avon has had a history of motivating, team building vision statements. The tradition of female focused mission statements is a perfect match for Avon, as the majority of Avon’s workforce is female. 6. How does Jung leverage human capital for Avon’s competitive advantage? Is this competitive advantage sustainable given the prevailing competitive pressures and forces driving industry change? Avon’s direct sales distribution is an inherent human capital leveraging characteristic that gives the company a competitive advantage. Jung’s increase in the amount of independent sales reps from 1. 5 million to 5 million is a clear illustration of her leverage of human capital. This sales headcount increase is but one of Jung’s human capital influences. Jung also motivates her sales force through her international travels, showing to her associates that each and every one of them is valued at Avon. Perhaps Jung’s most valuable leveraging of human capital is her ability to cater Avon’s highest principles and values to her largely female workforce. Understanding that Avon is a female centered company, Jung is able to keep company moral high, as employees connect their job with Avon’s vision of enhancing women’s value in the community. Avon’s competitive advantage is sustainable given the prevailing competitive pressures and industry driving forces. It is important to recognize the influence the Avon brand has on consumers in its developed markets. Despite Avon’s recent softened demand in these long standing markets, they will always have a loyal customer base thanks to their decades of personalized business. Avon’s growth potential is in the international markets. As India and China continue to industrialize their economy, their cosmetic and toiletries spending is set to skyrocket. Avon’s increased international sales headcount is the key in addressing their growing international opportunities. As long as Avon continues its innovative nature and stays committed to its bread and butter, direct selling with independent sales representatives, they will continue to perform well. 7. In 2005, what strategic and/or organizational problems exist for Avon Products? How are these reflected in the financial performance of the firm? Avon had two key strategic and organizational obstacles to overcome in 2005. The first issue facing Avon was the softened demand in their developed North American markets. Avon’s second problem was the increased competition in their growing international markets. This was an exceptionally troubling for Avon, as these markets were the key to their future growth. These two problems are clearly reflected in Avon’s financial performance. Exhibit 1 of the case, Avon’s selected financial data 1995-2005, reveals these issues as they relate to headcount. Avon’s number of US employees decreased 700 employees (7%) from 2003 to 2005. The decreased headcount in the US is a clear indication of softening demand in a developed market. The international headcount tells a different tale. Avon’s international headcount nearly doubled from 1995 to 2005, growing from 23,800 to 40,300. The growth in headcount is a clear manifestation of the growth of sales in the international markets, as total net income at Avon increased from $256. 5M in 1995 to $847. 6M in 2005. However, the ratio of net income to international sales headcount takes a turn for the worse between 2004 and 2005. Despite an increase of 1,500 international employees from 2004 to 2005, net income only rose $1. M. This is roughly an additional $1,000 in net income per new international headcount. Compare this ratio to the 2003 to 2004 numbers, where one new international headcount yielded an additional $79,000 in net income, and you see the problems Avon has experienced. The severe decrease in additional net income per international headcount is a direct result of Avon’s increased competition in their growing worldwide markets. 8. As CEO in 20 05, does Andrea Jung have the leadership qualities necessary to address these challenges effectively? Avon’s challenges call for an innovative, charismatic leader, a manager who is not afraid to sacrifice his or her personal gains for the better of the company. Fortunately for Avon, Andrea Jung is that transformational leader that has the qualities to guide Avon through these current challenges. Avon’s current obstacles are present in all their global markets. The solution to these deeply systemic challenges will be addressed by Jung’s strategic vision. Throughout her career, Andrea Jung has always been able prioritize long term answers over short term quick fixes. From her time at Bloomingdales, to her leadership as CEO, Jung was a proven track record focusing company resources on the appropriate issues. The high emotional intelligence of Jung will also enable her to properly address Avon’s current dilemmas. She understands that in order for Avon to tackle their current difficulties, she must not only keep company moral high, but also maintain a calm demeanor during this difficult time. The key to Avon success is in the interactions between their direct sales team and customers. From her visits to worldwide Avon offices, Jung is able to have a constant understanding of this interaction. It is this consistent understanding of Avon’s sales channels that will enable her to effectively make the necessary decisions for Avon. Jung’s ability to continuously reinvent her management style is perhaps her most crucial quality in terms of addressing Avon’s current problems. As Avon’s market has experienced a variety of influences throughout her tenure as CEO, Jung has needed to alter her way of thinking. Much of Avon’s past success is due to Jung being able to put her ego aside. This humble nature will enable Avon to successfully address their current concerns. 9. Evaluate the proposed correction action plan Jung and her leadership team have developed. What recommendations would you suggest to them? Avon’s four tier proposed correction plan is made up of a renewed commitment to brand awareness, a focus on their commercial edge, an elevation of commercial effectiveness, and a transformation of their cost structure. Although I feel this is an overall effective plan, I do have some recommendations on how to make this more successful. Avon’s commitment to brand competitiveness is characterized by a focus on Skin Care and Color as well as a boost in advertising. Although I feel that this proposal is solid, there are two key items that Avon must focus on for this initiative to be successful. Avon must do the necessary market research to ensure that their Skin Care and Color lines are sold in the most effective channels. Their past launches of â€Å"beComing and â€Å"mark† had issues because of the weaknesses in their selected channel of distribution. The second point Avon needs to pay close attention to is that they are getting the most out of their advertising dollars. As their North Americans are already mature, advertising efforts here will be less effective than in their more promising international markets. Avon must focus the majority of their advertising budget towards these global markets. This focus will enable them to establish a stronger brand recognition that will transfer into future sales. Avon’s second piece centers on them improving their merchandising and shopping appeal in their direct-selling approach. I agree that the direct-selling approach is their strongest asset, and that enriching it would create a lot of value. I do, however, recommend that Avon does not stray too far away from their traditional mode of direct-selling. Drastic changes to this will erode the traditional bond that Avon has with its customer base. I also recommend that Avon does not increase their merchandising too specifically. As was shown in their prior marketing brochure, Avon has had a history of flooding their customers with too much information. Avon’s plan to elevate its organizational effectiveness is characterized by an increase in training in people development. This proposal matches quite well with Jung, as she is an emotionally intelligent leader that believes in the development of her associates. My suggestion regarding this organizational elevation is that they do it in a way that does not affect the time that their sales force spends in front of customers. As personal interaction with clients is the cornerstone to Avon’s growth strategy, it is crucial that this time is not significantly decreased by various trainings. The plan for a radical transformation at Avon is made up of a realigned cost structure and a strategic leveraging of assets. Obviously, these are valuable initiatives to strive for. From Avon’s perspective, I would recommend that they develop multiple action plans based upon the financial effects of these changes. As their market is not predictable, they need to develop a worst case scenario plan, in the event their sales revenue does not meet expectations. History of â€Å"wooden-headedness† behavior at companies such as Sony and Snow Brand has proven that failure to plan for such problems can cause severe problems within a company. Having this plan set in place will enable them to immediately react to any adverse future performances.