Case Study Undergraduate 1,102 words

Avon Products Fundamental Restructuring Case Study

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Abstract

This case study examines how Avon Products responded to declining revenues and falling operating profits beginning in 2006 by undertaking a fundamental restructuring of its organization. The paper covers Avon's historical background as a pioneer pyramid-style direct-sales company, explains what distinguishes a fundamental restructuring from other forms of organizational change, and details four key reform areas: transitioning from a regional to a matrix structure, reducing management layers, overhauling executive talent development through the "The Deal" program, and divesting unproductive business units. The paper concludes by evaluating the effectiveness of these changes against academic literature on management restructuring and succession planning.

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What makes this paper effective

The paper grounds its analysis in specific theoretical frameworks — punctuated equilibrium, fundamental restructuring — and ties each directly to Avon's documented actions, preventing the analysis from becoming vague or anecdotal.
It uses concrete, quantifiable details (revenues growing to $10 billion, management layers reduced from fifteen to eight, compensation benefits cut by 25%) to substantiate claims about the restructuring's scope and impact.
The paper honestly engages with a counterargument — academic skepticism that management restructurings merely cut costs without producing real improvement — before refuting it with outcome evidence.

Key academic technique demonstrated

The paper demonstrates applied case analysis: it takes a real corporate event and maps it onto established academic concepts (Donaldson's internal restructuring model, Rothwell's internal talent development framework) to show why those concepts are relevant. This technique moves beyond simple description by requiring the writer to justify each theoretical label with specific company evidence.

Structure breakdown

The paper opens with company background and the problem that triggered change, then defines the type of change using academic literature, details the four reform areas with specific examples (including "The Deal"), and closes with an effectiveness evaluation that weighs supporting evidence against academic criticism. The Works Cited section follows APA-adjacent formatting. The structure is roughly problem → theory → evidence → evaluation → conclusion.

Introduction to Avon Products

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 adopted a regional approach to business and was one of the first pyramid-styled direct-sales companies, allowing agents the ability to maximize their success within the organization. Up until 2005, the company was growing and financially healthy — an $8 billion public company that had been globally active for some time. In fact, 70% of the company's profits were generated outside of the United States.

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

Defining Fundamental Restructuring

In order to improve its revenues, the company underwent what it dubbed a fundamental restructuring of the organization. In business, a fundamental restructuring occurs when the core components and structures of a company are changed to better meet the company's modern needs. Additionally, the changes resemble those of a punctuated equilibrium model — being decisive, quick, and complete (Brown, 1997). The changes are always drastic and involve complete transformation, leaving nothing of the past behind (Donaldson, 1994).

While a physical restructuring can often lead to decreases in share value and harm a company's public image, a fundamental restructuring is handled internally and need not attract media attention (Langlois, 1995). This is the most common form of change undertaken by modern companies; in fact, management changes appear to drastically improve a company's overall success (Guha, 1997). It is for these reasons that Avon's change qualifies as a fundamental restructuring. The company dismantled portions of the business and reshaped them using more modern, successful models. Additionally, the changes were carried out privately within the company, and none of them directly affected Avon's brand or name in the market.

The fundamental restructuring of Avon Products took place in four areas. First, the company transitioned from a regional to a matrix structure. The reason was that the company had grown very large and was not operating at peak efficiency in the international marketplace under its regional setup. Second, the company reduced its management layers from fifteen down to eight. This also allowed the company to reduce compensation benefits by 25%.

The Four Areas of Organizational Change

Third, the company completely changed its approach to executive talent training and internal career development. Previously, there was little clear guidance on how a sales agent could work toward a management position within the company. The restructuring added extra benefits for top-performing managers and introduced accountability measures for those managers who failed to meet expectations. The fourth and final reorganization involved removing unproductive portions of the company and reinvesting resources in its productive segments.

The evaluation process centered on comparing the company's existing practices against modern business theory. For instance, the CEO attempted to review manager 360-degree assessments in order to gauge how effective the assessment tool was; however, she was denied access on the grounds that the assessments were confidential. It became immediately clear that this policy was not aligned with the modern purpose of performance evaluations, so the assessment process was revised to allow anyone within the company to view a candidate's results as a means of evaluating overall talent.

2 Locked Sections · 300 words remaining

Talent Development and Internal Hiring · 155 words

"The Deal program and internal promotion pathway"

Evaluating the Restructuring's Effectiveness · 145 words

"Outcomes weighed against academic criticism of restructurings"

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Conclusion

Avon Products is a long-standing historic company that has proven itself on the cutting edge of the business world. It has successfully expanded internationally, made necessary management changes, and — more recently — has used the press and celebrity partnerships to present a more socially responsible and publicly engaged corporate image. Avon was among the first pyramid-style direct-sales companies and has successfully grown its own management from the ranks of its sales staff, resulting in a healthy, growing organization.

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Key Concepts in This Paper

Fundamental Restructuring Matrix Structure Punctuated Equilibrium Internal Talent Development Succession Planning Management Layers Direct Sales Model The Deal Program Organizational Change Turnaround Strategy