AVON Product Case Study Analysis Avon Products

AVON Product Case Study Analysis

Avon Products Case Study Analysis

Avon Products was founded in 1886 by David H. McConnell, a door-to-door book salesman who had a knack for making perfume. As the company grew, it took on a regional approach to business and was one of the first pyramid-styled businesses, allowing agents the ability to maximize their success within the company. Up until 2005, the company was growing and very healthy. It was an $8 billion dollar public company and had been globally active for some time. In fact, 70% of the company's profits were obtained outside of the United States.

As with any fast-growing company, a problem emerged for the company, in 2006. This problem prompted the attention of the directors when the revenues of the company began flattening and operating profits started declining. These declines prompted an investigation into what could possibly be the causes, and the discoveries revealed some painful, but necessary changes within the company's overall operating and talent sectors. The changes both resulted in management cutbacks and some painful changes and moves away from the company's traditional model of doing business. The results, however, drastically improved the company and ensured further growth in the marketplace.

In order to improve their company's revenues, the company underwent what they dubbed a fundamental restructuring of the organization. In business, a fundamental restructuring happens when the core components and structures of a company are changed to better meet the company's modern needs. Additionally, the changes seem to be those of a punctuated equilibrium, being decisive, quick and complete (Brown, 1997). The changes are always drastic and involve complete change, leaving absolutely nothing of the past behind (Donaldson, 1994). While a physical restructuring can often lead to decreases in shares and harm a company, a fundamental restructuring is handled internally and need not even raise attention in the media (Langlois, 1995). This is the most common form of change done by modern companies, in fact management changes seem to drastically improve a company's overall success (Guha, 1997). It is for these reasons that the Avon Products company's change was a fundamental restructuring. The company took apart portions of the business and reshaped the business using more modern successful models. Additionally, the changes seemed to be done in a private manner within the company. None of the changes directly effected the business or their overall name in the market.

The fundamental restructuring of Avon Products took place in four areas of the company. First, the company changed from a regional to a matrix structure. The reason was that the company had grown very large and was not running at top efficiently in the international marketplace with regional setup. Next, the company reduced its management from fifteen down to eight layers. This allowed the company to also reduced compensation benefits by 25%. Third, the company entirely changed their approach to executive talent training and company talent growth. Previously, there was little clear guidance as to how an agent can work up to a management position within the company. Additionally, the company added extra benefits for top performing managers and "teeth" for those managers who failed to perform as expected. The final reorganization was to remove any unproductive portions of the company and reinvest in the productive portions.

The evaluation information centered around the company's overall premises and business practices as compared to modern business theory. For instance, the CEO attempted to view the manager 360-degree assessments in order to determine how effective the assessment tool was, however, she was not granted access, as she was told that the assessments were confidential. It became immediately clear that this was not in line with the modern purpose of these evaluations, so the assessment was changed and the policy changed to allow anyone within the company to view the assessment as a means of evaluating the candidate's overall talent within the company.

Another example of the restructuring was to emphasize hiring from within the company. Previously, employees were unaware of how a sales agent could enter management, and this resulted in many unqualified or external candidates being hired for management. Instead, the company created "The Deal." A simple outline of how a sales agent could become a management person within the company. It listed specific stat requirements and career goals and objectives, enabling agents to prove their talent. The deal also provided a set compensation plan for each level of employee and added teeth for those employees who were performing poorly.