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Avon is the world’s leading direct seller of beauty and related products, operating in over 100 countries. Launched in 1886 when David H. McConnell founded the California

Perfume Company, the organization was renamed Avon Products in 1939. Over the years, the company expanded its horizons and was listed on the New York Stock Exchange in 1964. Avon has 5.4 million Sales Representatives worldwide and 40,000 employees, 75% of whom are women.

Avon Canada, founded in 1914, moved to Montreal’s West Island in 1961. It has a head office staff of 900, commonly known as “associates,” including the District Managers. The 72,000 Sales Representatives across Canada are self-employed. Seventy-five percent of its employees and 99.8% of its Representatives are women. Representative turnover is known to be high at 80%; the company therefore has to recruit about 57,000 new Representatives each year.

Avon Products Inc is the number one direct seller in the world, posting sales of $9.9 billion in the US. In Canada, sales reached CAD$300 million, 44% of which are derived from beauty products and 56% from non-beauty products.

Since 2000, Avon Products has adopted a more global approach to its operational structure, clustering markets in five main geographic regions. Avon Canada has therefore been working with its North American partners, the United States, Puerto Rico and the Dominican Republic, to optimize work processes and business opportunities. One of the roadblocks to this optimization has been the fact that Canada sells 18 campaigns in a year, compared to 26 campaigns for its partners.

In 2006, the direction to take was clear: migrate from the cur-rent 18 annual sales campaigns to 26 as per the US model. This was identified as a key driver of growth for the company and a creator of significant efficiencies achieved through harmoniza-tion of the structures, products, processes and size of product lines. As for the Sales Representatives, albeit more work, a 26-campaign approach would result in more sales opportunities and better, less complex work schedules. It was the opportunity to redesign all business processes and to create a more simpli-fied, more harmonized and more intense experience for the Sales Representatives, especially with the top players in terms of sales revenues.

leader and trendsetter

[Case study] COnTExT

On March 14 and 15, 2008, the 22nd Excalibur Tournament welcomed students from 24 universities in Quebec and across Canada. The six finalist teams were asked to analyze an actual business case, that of Avon Products Inc. Following the Tournament, the case was also analyzed by a professor.

In the lIght of the hR actIon plan Implemented so faR:1. Identify five activities that should be reinforced

throughout the next year (2008) and why.2. What would you recommend to the HR team in terms

of activities for the oncoming two years to ensure success and sustained sales results?

3. Provide an impact assessment of your recommendations as it pertains to all “associates” in Canada and the company itself.

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that includes a base pay plus commissions on sales. As part of the original HR action plan, the compensation and reward programs had to be reviewed and adapted, while engagement and training had to be reinforced.

From idea to reality: 2008 represents the crucial year to complete the migration from 18 to 26 sales campaigns, and have it become an operational reality. However, Avon still faces a number of strategic challenges. Among these, its operating structure needs to be well established to face growing competitive global markets and overall organization effectiveness remains to be achieved. Furthermore, it

is determined a key success factor that a strong leadership culture of trendsetters must remain in place and present at all times.

Assuming that the key concerns related to the original 2006 migration project were properly identified and that the critical organizational development steps undertaken have been suc-cessful, it is now time to plan the activities necessary to support the “aftermath” to ensure ongoing engagement, stability and success for the whole change initiative, while continuing to respect the original Avon values.

Such a decision required major changes for employees in every department throughout the company, as well as major investments to support systems and operations. For example, the marketing department plans, designs and produces the sales bro-chure; each campaign became quite a challenge for all employees involved in this business process. Additionally, one questions whether the distribution channel of independent contractors would be able to deliver products as usual within the compressed time frame. Furthermore, the finance department had to look into the risk factors facing a possible drop in sales volume. Finally, the information technology group had to evaluate the need to redesign technology or adjust its platforms to support such a change.

Today, all key concerns have been addressed and the project plan is on target to launch the final phases in April 2008. The company has always abided by the same five values since its inception: trust, respect, belief, humility and integrity. Avon has carved a niche with products exclusively for women and has extended this focus through gen-erous donations in support of the crusade against breast cancer.

The Human Resources department had its role to play throughout the overall process. Its action plan was targeted primarily towards com-munications, mobilization, retention, recruiting and change management. The Canadian Avon HR structure is composed of one Vice-President, two generalists, one recruiter and two nonmanagement employees. They chose to assume a leadership role where close partnerships with all departments were required to form strategic teams able to direct the magnitude and realities of changes to come.

The main HR targets for an organizational development inter-vention were the District Managers, who represent the critical link to help the Sales Representatives get over the emotional impact of the proposed changes. This includes identifying the obstacles the Representatives would face and communicating the rationale behind the changes in order to ensure the continuity of sales activities. This was viewed as quite a challenge since the Sales Representatives are not Avon employees; they have no company benefits and there is no employee-employer relationship.

Therefore, Avon is depending on the strong leadership capabil-ities of their District Managers to maintain the integrity of the sales process and to continue to recruit and motivate their Sales Representatives, who are viewed as the key stakeholders in undertaking the change and ensuring a success for Avon. As Avon employees, the District Managers receive a compensation package

…it is determined a key success factor that a strong leadership culture of trendsetters must remain in place and present at all times.

[Case study] COnTExT

Avon now has to make an effort to ensure the ongoing success of new programs and new sales campaigns in Canada. The challenge is a significant one since it is

no easy task for a large corporation like Avon to sustain organ-izational effectiveness across the board, especially when major changes involve individuals who are not actual Avon employees. To achieve its objective, the company will have to reinforce five key activities.

the evaluatIon pRocess

First of all, it is essential to review the evaluation process. The first step is to determine whether the targets have been met (profits, reducing turnover). We can use quantitative values to evaluate the results. Avon needs to know whether raising the number of campaigns to 26 has increased revenue. That makes sense. The company should also make sure that its return on investment is actually worthwhile. Given that the change is operating at the organizational level, both the VP of the Canadian division and the HR department will be responsible for this evaluation, which will be quantitative in nature.

There are two other ways to assess whether the change pro-cess has been productive and whether the Representatives have adopted the new selling techniques. Their behaviour is the first element to examine. Have they embraced the new campaigns and begun to work with them effectively? This partly depends on how well they have been prepared and how easily they have accepted and implemented the changes. The HR department will be respon-sible for this component of the evaluation.

Furthermore, HR will need to assess the reactions of all stake-holders. This is a very emotional process. Everyone should be asked what they think about the change and how they feel about having their workload increased by having to manage more campaigns. That’s why it’s also important to involve the IT and

marketing departments and determine whether they feel able to handle this challenge.

Lastly, the HR department should also find out whether the Representatives think the change has actually been beneficial and whether their own profits are increasing.

compensatIon

As everyone knows, compensation is a key factor for employees. But Avon works with self-employed Representatives who are not really part of the company. How can the organization make sure that they contribute to its success? We believe it should offer incentives – apart from commissions and pay – to strengthen their commitment.

Avon should start by offering new incentives to promote sales. We know that the company works with charitable organizations, promoting such causes as the crusade against breast cancer. Suppose that a new pink lipstick was launched and that some of its profits were donated to breast cancer research. Offering a bonus for sales of this particular product could help Representatives feel they are being better compensated.

The company could also offer commission changes. For instance, if a Representative meets a certain quota, her commis-sion could be increased for a specific period of time.

Lastly, it is very important to make sure that the Representatives also receive non-monetary compensation. They need to feel involved in the organization. One way for the company to ensure their involvement would be to highlight top sellers in a region, group or category.

coRpoRate cultuRe and contRol Corporate culture and control are also crucial elements because they determine the Representatives’ performance. Remember, they are not actual Avon employees. How can their loyalty be cultivated? How can the company determine whether they have adopted the practices they

Good change management – to ensure engagement across the board

[Case study] STudEnTS’ analySiSBy the team from the University of ottawa

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The following is the case analysis of Avon Products Inc. pre-sented by the team from the University of Ottawa, composed of Arron Dobson, Rhéa Whilson and Maurice Le Maire. Competitors had only 90 minutes to study the case.

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have been shown to help them be effective sales people and whether they are reaching the goals targeted?

In this case, culture dictates performance. If the Representatives don’t want to sell, if they don’t want to push sales to people they know, their attitude can have repercussions on the organiza-tion’s earnings.

How can the company create a culture that encourages the Representatives to work for the organization? By communicating Avon’s values of trust, respect, belief, humility and integrity. These values should be shared with all workers to make sure they feel part of the organization. (NR : Le texte français saute cette valeur, mais elle fait partie des valeurs d’Avon.)

Furthermore, activities could be organized to communicate these values and cultivate this sense of belonging.

tRaInIng

Avon plans to migrate from 18 to 26 annual sales campaigns, using its current workforce. Numerous changes have been made to jobs and to structures, which have led to changes in work schedules. Both employees and Representatives may be wondering if they can meet this challenge, if they have the skills to bring their performance up to this level. That’s why they should receive the training they need and be taught best practices that will boost their self-confidence and give them the motivation they need to reach the goals targeted. One example is training on new selling techniques.

stRuctuRe

Avon is a very large corporation making organization-wide changes that employees are going to resist. And that’s only natural. However, if expectations and goals are clearly communicated, they will know that the process is fair.

The change process may create some confusion about every-one’s roles for a while. That’s why the company should make sure that the role of each departmental member is reorganized and redefined. It should also ensure that everyone understands the structure and identify structural gaps. For instance, if certain regions have a high turnover rate, attention should be focused on Representative recruitment and retention in these regions. Again, structure impacts on organizational effectiveness and that is one of the challenges Avon has to meet.

In addition, when turnover rates are high, it takes time to replace staff or Representatives, which in turn affects the company’s smooth operation. By focusing on the structure as a whole, the organization can eliminate any gaps in the recruitment process.

Impact of the RecommendatIons

Why an evaluation process? To take the organization’s pulse so that if things are not going according to plan, the company can identify the problem and come up with a contingency plan.

The impact of the recommendations on compensation will be to attract candidates and develop their loyalty. According to a Mercer study, candidates are attracted by three interrelated fac-tors: salary, the potential for promotion, and the quality of life in the workplace. Avon should therefore re-evaluate its compensa-tion system, with a particular focus on recognition.

Moreover, organizations like CGI and Canada Post, which rank among Canada’s 50 best employers, control their operations, production and objectives through their organizational culture, which they communicate to their workforce. Their employees are committed to the organization because, once they know its goals (especially during a period of change), they can picture its suc-cess. They will want to contribute to this success, and, who knows, help the organization join the country’s top 50 employers.

As for the impact of training, Avon employees will be more qualified to do their jobs, especially if new products are launched during the year. If new employees receive appropriate orienta-tion training, it won’t take them long to become top performers. Moreover, since the IT department will probably want to intro-duce new structures, training of all computer staff will become a must.

A clear and objective structure will improve operational effectiveness.

In short, the organization’s critical problem is labour turnover, which can be very costly. Avon has to be able to control this turnover because it affects all its processes, from compensation to evaluation to recruitment. In the end, by making changes to these various pro-cesses, the company will be able to lower its turnover rate.

Remember, Avon’s ultimate goal is to sell products. Thus, in making this shift, the organization must make sure that sales increase in order to push up profits and offset cost increases.

Lastly, the communication plan is vital. Management has a vision that it needs to communicate. If employees at the lower levels don’t have the same vision, don’t feel they have management’s support, and if communication is ineffective, they won’t follow its lead. That’s what Avon has to focus on in order to grow and succeed for many years to come.

[Case study] STudEnTS’ analySiS

[Case study] PrOfESSOr’S analySiSBy françoise morissette, EMEriTuS PrOfESSOr, induSTrial rElaTiOnS CEnTrE, QuEEn’S univErSiTy, KingSTOn

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Avon has set itself a substantial challenge: to raise the number of its annual sales campaigns from 18 to 26. To implement this shift, the company needs to update and align various marketing and operating sys-tems, which represents a considerable investment and an increase in its sales and distribution capacity.

Avon: an ambitious shift

However, the sales and distribution network is in the hands of Representatives who are self-employed workers rather than Avon employees. What’s more, at an annual rate of

80%, their turnover is high, forcing the company to recruit and train 57,000 new Representatives each year. The network’s ins-tability not only makes things more complicated and impacts on operations, but also makes the change process more difficult.

Like any company, Avon has direct authority over its employees. However the sales and distribution network is under its influence, rather than under its authority. The relationship is indirect and performance levers are limited by the workers’ legal status.

pRImaRy change agents Although the increase in sales campaigns impacts many depart-ments – finance, marketing, IT, etc. – the initiative’s success ulti-mately depends on two key groups: the Representatives and the District Managers.

Representatives: vulnerability and instabilityThe challenge would still be huge even if all the key players were Avon employees. In this case, the group the mostly likely to affect the viability of this initiative is not employed by the company and its composition changes almost entirely each and every year. Managing an annual turnover rate of 80% is a tall order even in a stable period. In the midst of a major change, it becomes a monumental task.

This change depends on Avon’s ability to ensure the Representatives’ continued engagement and to improve their performance. To do so, the company needs to adopt specific and appropriate strategies. I agree with the recommendations of the team from the University of Ottawa respecting training, compen-sation, communication of values, recognition, culture, etc.

Nonetheless, given the size and instability of the sales and distribution network, it is extremely important for the company

to clearly understand the Representatives’ point of view. A needs analysis is therefore essential. What do the Representatives think about this new challenge? What are their expectations and objec-tions? What do they need to prepare for and effect the change: information, tools, training, coaching? How should they be sup-ported during the transition period?

The better the company understands their viewpoint (reactions, intentions, objections, wishes), the better it will be able to introduce effective systems to accommodate them. To obtain the appropriate level and quantity of information, action research groups would be preferable to a survey. Avon shouldn’t have to “guess” what would help the Representatives migrate from 18 to 26 campaigns. It should “know”; and for that, it will have to ask them.

In addition, the company should pay close attention to the Representatives’ reactions to the implementation of their recom-mendations. For example, imagine that they want training in sel-ling techniques. How do they respond to the training? Or imagine that they want to see improvements to the purchase order form? How do they react to the new form. Close collaboration between the Representatives and the company will create a sense of par-tnership in achieving the change.

District Managers: key leadershipThis group acts as a link between the Representatives and the orga-nization. As such, it can communicate information in both directions and serve as an intermediary. The District Managers play a frontline role in building engagement, overcoming resistance and enhancing the Representatives’ performance. However, this role adds to their workload and responsibilities and increases risks. These are some of the questions that should be asked:• How do they view this change? • Are they all on the same page?• Do they have the skills and support they need to succeed?

[Case study] PrOfESSOr’S analySiS

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• How can their leadership be strengthened?• How can their engagement be supported and enhanced?• How can they be rewarded?

If the District Managers receive the training and support they need, the change process represents an opportunity to greatly increase their leadership potential over the long term. Otherwise, it could lead to burn-out, discouragement and resignations. The HR department is right to focus on this key group: their satisfac-tion should be ensured and their development promoted.

The fundamental dynamic affecting the organization’s perfor-mance is the turnover rate: why is it so high?

monItoRIng pRogRess

As the change process develops, its progress should be closely moni-tored. The team from the University of Ottawa correctly recommends maintaining tight control over objectives, performance measure-ment, results analysis and strategy adjustment, as applicable. There will be a transition period when many adjustments will be have to be made, influencing infrastructures, procedures and individuals. Once again, the reactions and performance of the Representatives and the District Managers will be key indicators.

cultuRe and values

The students are right: the communication of values and the creation of a hospitable and rewarding environment are crucial to building a sense of belonging among the Representatives and to retaining their services. The stronger and more attractive the culture, the greater its impact on loyalty. Even though culture is not the only factor to

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be considered, it does play a major role. What can Avon do to com-municate its culture to the Representatives and integrate them? The students recommend an effective orientation and communication strategy and the organization of major charitable events. These are a few avenues to explore. But once again, what do the Representatives think?

a cRucIal Issue

The fundamental dynamic affecting the organization’s performance is the turnover rate: why is it so high? What has Avon done to determine the causes? How has the company tried to reduce it? What worked and what didn’t? Why? For instance, does the company understand the reasons the Representatives quit or what attracts them to Avon in the first place? Does it clearly understand their orientation, training, support and recognition needs. Is there an efficient system in place for filing complaints and effectively solving problems?

A better grasp of the factors influencing turnover would give Avon the leverage it needs to lower it. If the organization could gradually decrease this rate, if only by 10% to 15% a year, the benefits would be considerable in terms of productivity, engage-ment and adjustment to change. By concentrating on turnover, Avon could both reduce its workload (recruitment, orientation, training, etc.) and improve its performance. This is the key issue.

conclusIon

Raising the number of sales campaigns from 18 to 26 is a sizeable, but not insurmountable, challenge. In the short- and medium-term, would this shift have the expected results; i.e., would it increase sales, cut costs and improve employee and customer satisfaction? It’s too soon to tell.

Nonetheless, if Avon is unable to lower the turnover among its sales and distribution forces, this rate will continue to inhibit the company’s chances of success over the long term. The orga-nization needs to develop a consultative strategy to deal with this critical issue. Avon must solve this problem if it wants to remain a leader and trendsetter. A participative and proactive approach would have a good chance of success.

The fundamental dynamic affecting the organization’s performance is the turnover rate: why is it so high?