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AVON Products Case Study
AVON PRODUCT CASE STUDY
Avon Products Inc. is a global company specialize in the production of women consumer products. Founded by David H. McConnell 122-year ago, Avon Product started with the distribution of sample perfume, and based on the success David H. McConnell realized from the sales of perfume, David H. McConnell concentrated on the sales of diverse women consumer products. Presently, the company has grown to become a leader in direct selling of fragrances, cosmetics and skin care products. At the end of the fiscal year 2005, Avon Product total worth was more than $8 billions. Between 2000 and 2004, Avon Products recorded 10% cumulative annual growth rate (CAGR) in operating profits and 25% cumulative growth rate in revenue. While Avon Product operates in the United States and in other several countries, 70% of the company revenues are earned outside the United States. Measuring Avon Product with all financial metrics, Avon Product was a very successful company.
However, in the first quarter of the fiscal year 2006, Avon Product faced several challenges, and the company recorded declining in the operating profits and flattening revenues. "While the situation had many contributing causes, one underlying issue was that Avon had grown faster than portions of its infrastructure and talent could support." (Effron, 2009 P. 2). To sustain the company historical financial success, the company proposed changes that would affect every aspect of its business process.
Objective of this paper is to provide description that led to the determination of changes within Avon Product Inc. The paper uses a leadership skill/competency model to discuss the determination of changes within the company
Leadership Skill/Competence Model
Leadership Skill/Competence model describes the capacity to lead through possession of skills and competency. In the contemporary business environment, having capacity to lead is very critical to achieve organizational success. Leadership Skill/Competence model argues that skill and competency of a leader is very critical to achieve business growth. A leader should be able to demonstrate competencies such as valuable skills, abilities, behaviors and knowledge to enhance leadership success. A competent leader should have ability to lead others, implement self-management and task management as well as enhancing innovation within a company. (Wagner, 2011).
The study identifies leadership skill/talent model as an essential model to implement changes within Avon Product because there are talent challenges within the company, and the challenges were affecting the effectiveness of the company. Within Anon Product, there is several overriding weakness hurting the progress of company.
First, management of Avon Product was unable to identify the existing talent practice such as succession planning and talent management.
Moreover, the egalitarian practice within the organization is hurting the growth of the company because performing employees were not being managed effectively. Identification of challenges in the leadership skill/talent practice necessitates urgent implementation of leadership skill/talent model to enhance organizational effectiveness.
To implement changes, Talent Management (TM) group was formed to build the company talent practice on the two key guiding:
First, TM was to implement simple well-executed talent practice to produce great leaders and produce consistence earnings for the company. Typically, fundamental talent practice is very critical to enhance organizational performances. Implementing effective talent practice is an essential factor to deliver flawless program. To implement changes, TM decided to build talent practices that was easy to implement.
More importantly, TM also decided to implement academic/therapy model to improve leaders and turn them into powerful proven effective machines. To enhance effective leadership goals, Avon Product decided to implement The Turnaround transformation in the talent practice. Evaluation of change practice implemented by the organization is critical to determine its effectiveness.
Evaluation Information of Information Collected
The research collects information through secondary data. The study collects data and information through secondary research because secondary data are widely available and they are cost-effective. The study searches academic database to collect information. From the academic database, the study searches for academic books, academic journals and research articles to collect data for the study. While there are may be many benefits derived from using secondary research data, the shortcoming of secondary data is that it may not be well tailored to address the research problem. Despite the shortcomings, the study identifies that secondary data is effective as source of information for this study. (Trochim, & Donnelly 2007).
To ensure that information collected benefit the company, the study implements formative evaluation process for the information collected. "Evaluation is the systematic acquisition and assessment of information to provide useful feedback about some object." (Trochim, & Donnelly 2007 P5). Types of evaluation process used for the information collected are formative evaluation. The evaluation process examines the feasibility of the program and the effectiveness of the program in order to enhance organizational effectiveness. More importantly, structured conceptualization defines the program, the target population and possible outcome. The implementation evaluation monitors the program delivery for the organizational success. Finally, process evaluation is used to investigate delivering process and delivering procedures. (Ballantyne, & Hughes, 2007).
Using these evaluation types for the evaluation of information collected, Avon Product stands to enjoy several benefits:
First, the evaluation of information collected assists Avon Product to determine the effectiveness of the program to be implemented for the skill/competency and leadership development. Illustration from the case study reveals that Avon Product has implemented simple and powerful changes to bring much transparency to the company. Evaluation of the previous program implemented within the company was one of the causes of the financial challenges that the company faced in the 2006 fiscal year. To enhance financial performance within the company, Avon Product evaluated the Avon 360-degree and found out that Avon 360-degree could not provide transparency that the company desired to ensure financial performances. The shortcoming of Avon 360-degree was that "the fact that the most critical behavioral information about top leaders was not visible to the TM leader." (Effron, 2009 P. 5).Identification of the shortcoming in the 360-degree program led to the launching of the Turnaround program. One of the significant changes in the Turnaround program is its significant investment in talent management. The Turnaround integrated broad-based transparency into every talent process in varieties of methods:
First, The Turnaround program introduced career development plan with more transparency which Human Resource called "The Deal." Objective of The Deal was to make clear what was required by Avon and require every associate to deliver results to enhance organizational performances. Moreover, The Deal also made it as a matter of mandatory for all associate to display proper leadership behaviors to move the organization forward. (Effron, 2009).
The implementation the Turnaround program will make Avon Product to enjoy several benefits. Speculation of the benefits that the company stands to enjoy is discussed in the next section
Speculation about success of the changes within the next five (5) years
The target practice implemented by Avon Products has provided significant results and will generate positive results in the next five years. Significant success of Turnaround is that ratings of immediate manager have increased by 17% and Vice presidents and directors have given the immediate managers 90% rating. More importantly, people effectiveness increase to up to 16%.
More transparency has accelerated the development of leaders, and the company has been able to lower the cost base. Since 2006, the company has recorded the increase in the total revenues from $8.5 billions in 2006 to $10.8 billions in 2010. In addition, the company total assets have increased from $5 billions in 2006 to 7.8 billions in 2010. (Annual Report 2010).
"Avon has achieved all of its expense savings goals since the start of the turnaround and has recently reinforced its commitments to even greater expense reductions. Even with this lower cost base and 10% fewer Associates, Avon has grown from revenues of $8B in 2005 to nearly $11B in projected…[continue]
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