IF WOMEN RAN THE WORLD IT WOULD LOOK A LOT LIKE AVON IN A BEAUTY CONTEST UNLIKE ANY OTHER, FOUR OF THE SIX CANDIDATES FOR THE NEXT CEO ARE WOMEN. THE WINNER WILL HAVE TO GIVE THE AVON LADY CULTURE A MODERN TWIST.
(FORTUNE Magazine) – Jim Preston, the chief executive officer of Avon Products, has opened up Pandora's box, and every day now he deals with the consequences. There are phone calls. Constant questions. Second-guessing from CEO colleagues. Handholding for some of his nervous top executives. So much speculation in the press that "it gives me headaches," he says. Not only has he set up an official, bona fide, old-fashioned succession race. But four, four of the six lead contenders--and many believe the ones most likely to succeed--are women.
The issue came into sharp relief last month when Preston's right-hand man, President and chief operating officer Ed Robinson, resigned suddenly. To the world outside Avon, Robinson had appeared to be the clear heir to the CEO job everybody thought Preston would vacate next year. But when Avon's board recently asked Preston to stay on for two more years, it was a clear signal that Robinson's star was fading. The reason given for the request is that Avon needs Preston's sales and marketing prowess (Robinson is a finance guy), but some people are wondering whether Robinson also lost out because he was a guy. Preston says no; Robinson says he has "no idea." But now the Avon execs who are concerned about whether they will get a fair shot at the top job are the men.
What planet is this?
This is Avon Products, and there is no other place in the FORTUNE 500 quite like it. You begin to get the picture when you walk into the lobby of its executive offices. No, there's not even a trace of pink. Rather, the setting is muted beige, wood paneling, soft light, all very understated except for the bronze statue of a bare-breasted woman athlete, commissioned for Avon's sponsorship of last year's Olympics and conveying the unmistakable impression that here, women are the power to be reckoned with. Tubes of Silicone Glove hand cream, perfume bottles of Imari and Natori, and makeup mirrors adorn the sinks in the women's bathroom. Courtesy is the order of the day; doors are held open by members of both sexes. Executive offices are more often adorned by collections of Steuben glass or designer teddy bears than by tombstones or golf trophies. Yes, you see some of those silly sayings around--you know, "If you are not the lead dog, the view never changes"--only in needlepoint.
Unlike the vast majority of FORTUNE 500 companies, Avon has no glass ceiling. Start with 2.3 million Avon Ladies ambling from customer to customer the world over. Ever since the first of them, the revered Mrs. P.F.E. Albee, began knocking on doors in 1886, they've stood for women's empowerment and financial independence. But that attitude now goes all the way up at Avon, where women are groomed for top jobs and entrusted with real power. Four of its eight top officers are women. More than 40% of its global managers are women. Four members of Avon's 11-member board are women; Preston wants a fifty-fifty ratio. There were ten female chief financial officers in the FORTUNE 500 when CFO magazine last counted in 1995; one was at Avon. There are only a handful of women corporate vice presidents in Mexico; Avon claims it had the first. "The numbers tell a story," says Sheila Wellington, president of Catalyst, a research and advisory group on businesswomen's issues. "Avon has been at this for a long time, and the women are bubbling upward."
The company has become a Shangri-la for women in corporate America. Here is a place where you don't have to dress like a guy, you don't have to talk like a guy, you don't have to play golf or know a thing about sports. It is a place where the CEO honestly believes the company wouldn't have run amok in the 1970s and 1980s had there been more women in top management. It is a place where differences are openly acknowledged, accepted, then forgotten. It is a place that has become a magnet for women from all sorts of places they found less hospitable, like IBM, the Limited, and Arthur Andersen. When Coopers & Lybrand assigned Lisa Barna to the Avon account, she didn't last a full year before deciding to jump ship, even though she was on the partnership track at Coopers. "Other companies can talk, talk, talk. But Avon is doing it," she says.
Avon has done a performance make-over too. Six years ago it had more the smell of death than of perfume. A disastrous 1980s effort at diversification made it the target of no fewer than three take-over attempts. By the time the last one was settled in 1991, the company was saddled with a mountain of debt, badly hemorrhaging businesses, and a beauty brand so neglected it had become a laughingstock. Avon was your grandmother's beauty company. But Preston and Robinson shrank the debt, boosted cash flow, and bought back stock. Preston also wisely dispatched Avon Ladies to such far-flung places as China, Russia, and Eastern Europe. There, Avon carries no baggage; instead, it symbolizes Western glamour and a chance for women to be capitalists. Success in emerging markets has driven growth (sales were $4.8 billion in 1996, up 7%, and profits from continuing operations were $318 million, up 11%) and has so dazzled Wall Street that Avon stock rose a breathtaking 52% last year.
Still, Avon has big challenges ahead. The new markets are getting more competitive. In older markets like the U.S., sales are flat (see chart). To get things rolling Avon must woo yuppies, who have so far preferred just about any other company. And that will be very hard indeed.
Avon remains an odd mix of past and present, of schmaltz and sophistication. Nowhere is that better embodied than in the contrast between the thoroughly modern businesswomen the company must win and the salt-of-the-earth Avon Ladies that sell the stuff. In some ways the Ladies seem as antiquated as the Pony Express. Selling door to door carries huge costs, both in commissions and in shipping. Avon sends out small packages; its competitors ship by the truckload. But more than 95% of sales come from Avon Ladies, and the human touch saves a lot on advertising. Avon has been able to stay competitive in the ultra-efficient 1990s. Kline & Co., a Fairfield, N.J., consulting firm, ranks Avon sixth in U.S. sales of cosmetics, toiletries, and fragrances, behind Procter & Gamble, Unilever, Cosmair, Estee Lauder, and Revlon, and ahead of Bristol-Myers Squibb, Colgate-Palmolive, and Mary Kay.
Even as its executives try to make the product more upscale, even as they explore selling via catalogues, 800 numbers, and the Internet, they must rely on the army of Avon Ladies who peddle the lipsticks and skin creams at work, at flea markets, and at Saturday night bingo to customers who tend to have high school educations and $20,000 to $40,000 household incomes. Carolyn Smoot, a Norcross, Ga., office administrator, is typical: She drops brochures in the restrooms at work, keeps the Avon logo as the wallpaper on her PC screen, and works the phones. She sold $31,000 of Avon products in 1996. "When your customers are having troubles, you turn into almost a therapist," she says.
No wonder it's easy to get Avon in rural and middle-class America. But each spring it's a big challenge for yuppie mothers to figure out how to snag a summer supply of Skin-So-Soft Bug Guard for their kids. Most have never laid eyes on an Avon Lady, and they shudder at the thought of having to develop a relationship with one. To reach those women, "we must change or we will slowly wither," says Preston. "We must change, and we will. Even if we have to drag people kicking and screaming."
That's the challenge for Avon's next leader. For all its dynamism and allure, the generation that will take over from Preston is very young. There are a couple of men in the race: 41-year-old Jose Ferreira Jr., president of the Asia Pacific region, and 49-year-old Alfredo Cuello, who runs European operations. But all eyes are on the women. Start with Andrea Jung, the glamorous 38-year-old Princeton magna cum laude and retail superstar who shot into the executive ranks at Bloomingdale's, I. Magnin, and then Neiman Marcus before Preston lured her to Avon, where her marketing makeover is better than anything you'd find in a beauty book. (She's married to Bloomingdale's CEO Michael Gould, so a two-CEO family could be in the offing.) There's Susan Kropf, 48, the NYU MBA with humbler roots (her husband owns a hardware store in Greenwich Village) but an equally dramatic story. She joined Avon as an administrative assistant 27 years ago, moved up through operations, and won her stripes as head of emerging markets before being named to run the U.S. business this year. There's Christina Gold, 49, a ladylike but driven Canadian who took over the U.S. business in 1993 and, by virtue of her empathy and charm, averted a near revolt of disgruntled Avon Ladies. She's now in charge of developing selling strategies around the world. And there's Edwina Woodbury, 45, the chief financial and administrative officer, who is working to streamline Avon from top to bottom.
Whoever wins the prize will owe a debt of gratitude to Preston. Avon wasn't always such an enlightened place. Founded in 1886 as the California Perfume Co. by a door-to-door salesman named David H. McConnell, Avon gave women a respectable way to earn money. But management remained a boy's club well into the 1980s. Women were allowed onto the lowest rung of the corporate ladder as district sales managers, where they were to inspire, coddle, troubleshoot, and otherwise try to coax sales from the army of Avon Ladies, who are independent contractors. But staffers rarely got much higher.
Preston watched all this with dismay. It goes without saying that he's not exactly your average guy; in the shorthand businesswomen use to describe such matters, he is one of those men who "gets it." He is courteous, unpretentious, straightforward, and secure enough to be completely out front about the fact that he, too, uses Avon (skin-care products, not makeup). Preston comes naturally by his egalitarian, globe-trotting approach; his father was a Czech emigre who worked as a coal miner, railroad man, and grocer. He was educated at a Cleveland high school where 26 languages were spoken. He worked his way through Northwestern University for a time as a short-order cook, where he toiled alongside an African American and a Polynesian. "I'm uncomfortable in a WASPish world," he says. It helped that his wife and daughter are both professionals and "big proponents of 'I'm a person too,'" he says.
But the thing that really gave him religion on women's issues was watching Avon practically destroy itself because the men at the top made a big miscalculation about women. They refused to believe the company's own market research, which even in the early 1970s pointed out that women were entering the labor force and would likely stay there. It was getting harder to recruit Avon Ladies because women had other job options. And sales were beginning to slow, since fewer women were home to answer the door.
Avon's top executives first denied the trend. Then they did the typical macho 1980s thing. Instead of pursuing women into the workplace, capitalizing on their higher incomes and lack of time, they went careening off on a disastrous acquisition binge. First Avon bought Tiffany & Co. to try to upgrade its image. Then it veered off into health care with acquisitions of Mallinckrodt, Foster Medical, Retirement Inns of America, and Mediplex Group. Then it turned around and sold them, setting Avon up for no fewer than three takeover attempts. Preston believes that if women executives had been in charge, they would have acknowledged that women were headed to work, embraced the trend, and said, "You're damned right this will continue. We'd better change."
The ordeal did change Preston. When he was put in charge of worldwide beauty operations in 1981, he told his team to right the imbalances. "We really, really filled the pipeline [with women]," says Marcia Worthing, head of human resources. There was a lot of discussion, soul searching, diversity training. "We set quotas," says Preston, and tied bonuses to them. At one point Worthing analyzed all performance reviews. She found that men were often not straightforward with women about performance and the need for improvement. "You tended to promote men based on what you saw as potential," she says, "but you promoted women based on what you felt they'd accomplished to date." The phrase, "she's not quite ready yet" became a contraindicator to Preston, who would know when he heard it that it was time to try out the candidate.
The ensuing metamorphosis is tangible. Preston did away with the annual hunting trips to the Clove Valley Rod and Gun Club, where executives would drink and play cards all night. He swapped the company's season tickets to the Knicks and Yankees for the New York City Ballet and the New York Philharmonic. When Avon moved to new headquarters several months ago, the women got showers and lockers in their bathrooms too. Most important, they feel at home. "I have the freedom to be who I am. I am no longer consumed with what I say and do and the impact it will have on my career," says CFO Woodbury. "Think about that. At best, it is a distraction to always worry about what people think. At worst, you don't do your best work."
The women's touch is now central to Preston's effort to get more competitive. It has come in handy in countless little ways: offering nail polish colors its own executives might actually want to wear, for instance, or lightening up the viscosity of one of its skin creams. Women have made even more of a difference in big ways. Consider how Christina Gold quelled that 1993 Avon Lady insurrection. Her predecessors (male) had upset the Ladies with a series of changes--effectively reducing their commissions, creating the mail-order catalogue and toll-free number, and worst of all, cutting back on the prizes and awards they covet. (This year top sellers won Mrs. Albee umbrellas and writing boxes, porcelain figurines, Oscar-like trophies called Albees. "Those Albees mean a lot to me. I have a cabinet full of them," says Smoot, the Georgia Avon Lady.) Sales fell and pretax profits plunged 22% that year before Gold reinstated awards, renewed the stroking, and repaired relations so well that she could keep the 800 number and catalogue.
The female perspective has also helped Preston put a new face on Avon, which has always had some very modern things going for it. It could never be accused of price gouging. It resisted the temptation to treat women as sex objects. Hokey as it may be, it had always been a proponent of women's empowerment. As Andrea Jung and her team tried to figure out how to repair the damage of the 1980s, they realized they could capitalize on that heritage by positioning Avon in the 1990s as a beauty company that takes women seriously, of all things. Avon is not, as Preston says, "about all those 18-year-olds with silicone-injected lips" he sees in ads in the women's magazines. It is not, says Jung, "so made up I have no place to go." It is not women as sex objects, women as vamps, women on pedestals, women as men like to see them.
The preponderance of women makes business practices different too. Avon is far less hierarchical than other companies. It's not that people don't care about titles or where they stand in the pecking order--oh, but they do. (Preston says he dreads having to put out next year's proxy. This year Gold and Woodbury were among the top five earners. Next year... He slaps his forehead: "I'm not looking forward to it.") Nonetheless, Avon people go out of their way not to pull rank. They slip in and out of each other's offices regardless of standing on the corporate ladder. It is almost un-PC to sit at the head of a conference table. The unofficial corporate dress code is to avoid looking too corporate. When Cindy Drankoski, vice president of global executive development, joined Avon in 1994 after ten years at IBM, her colleagues told her, "You're not dressing Avon," because she consistently showed up in long, pleated skirts with flat shoes. She has cut a foot off those skirts.
A lot of what gins people up around Avon is way, way bigger than concocting the next great antiwrinkle cream or beating the S&P 500, for that matter. The vision thing really matters, so much so that Avon execs can sound like zealots. This company helps women look good, smell good, feel good, and all of that. "But you've got to travel the world to see what we really do," says Lynn Gitlitz, director of global vision planning and integration. "We help women who are stressed out. We help women who don't have skills. We do this. All over the world." Pricing is a sensitive issue; the company is trying to nudge them up to reflect higher-quality concoctions. "Pricing is not so much what the market will bear but what's appropriate to pay for those kinds of products. That's an ethic," says Gail Blanke, a former Avon executive.
All this might be a little hard to take were it not for the corollary theory: Work hard, do the right thing, and the stock price will follow. And it has: Avon has produced a 30% compounded annual return to shareholders, including dividends, since 1989--outpacing the S&P 500.
It's no surprise that Avon is also team oriented, consensus driven to a fault. At a recent meeting of Jung's global marketing team, the introduction of a new skin cream was met with whoops and cheers because after endless debate, the new product finally had a name. One camp had favored Vertical Lift, the other Night Force. The compromise: Anew Night Force Vertical Lifting Complex. "It was like naming a child after your mother, your husband's mother, your grandmother, and your great aunt," says Jung.
There is no doubt you have to be a certain type of guy to hack it at Avon. "I've never been a buddy-buddy kind of backslapping kind of guy. It's that testosterone thing," says Russell Hardin, who coordinates global advertising. "I think some men could come in here and have a very difficult time. If you're guarded or you like to posture, you're not going to get along.
"Men sometimes don't want to lose face," he adds. "Here it's more trusting. People may not like your idea, but you know you won't get laughed at. You don't hesitate to throw something out." Which is just what he did when he proposed some of Avon's recent advertising, which can only be described as in your face. For starters, they let what had become their biggest skeleton out of the closet and made her the centerpiece of the "Just another Avon Lady" campaign. To try to counter the old stereotypes, she was surprisingly chic, beautiful, sometimes powerful, and often funny. Witness Olympic athlete-turned-Avon Lady Jackie Joyner-Kersee, who said in a 1996 ad, "I throw a nine-pound shot put 51 feet. I bench-press 155 pounds. I have red toenails."
This year Hardin and crew have gone even further, with a campaign urging those who might turn up their noses to "Dare to change your mind about Avon." The ads offer that 800 number; no Ladies required. It's all part of an effort to make Avon the Gap T-shirt of makeup: You can wear Avon lipstick with a Chanel lipliner or an Avon eye shadow with a Lancome mascara, much the way you'd wear a Gap T-shirt with Armani pants. "Whacky. Retro," says Hardin. "Avon's so far out it's in."
There's evidence the campaign is having some success. Avon gets more attention in the beauty trade press these days, where it is seen as a pioneer of alpha-hydroxy, the antiwrinkle concoction that's all the rage. Hard-to-find Skin-So-Soft has developed a cultlike following among yuppies. Several products were rated "best" by Allure editors last year. "Their image has improved," says Martha McCully, Allure's beauty director. "Their new skin-care line is much more upscale. Their ad campaign is daring. They are very pro-woman, and that matters to people." Mail-order calls are up 20% since January. Catalogue orders average $40, compared with orders from the Avon Ladies, which average $13 to $15--another sure sign, says Preston, that consumers are saying, "I want to do it my way."
But Avon is just starting to transform its image, to reach out to the new audience it hopes will restart sales in the U.S., England, and other mature markets. While it spent almost $70 million on advertising last year--doubling U.S. spending to $30 million--that's still just 1.5% of sales, vs. 15% to 20% spent by some competitors. In part to free up ad money, the company is trying to cut costs in other areas. That's difficult stuff for kinder and gentler Avon. The greatest challenge: handling the Avon Ladies with aplomb as the company moves ahead. When they're happy, they're a hugely potent force. But when angered, watch out. It was their letter-writing campaign that helped scare away potential acquirers, including Chartwell and Mary Kay in 1991.
To get a hint as to how Preston and his successor will address the issues, you have to look overseas. In those fast-growing markets, Avon is sold in all sorts of ways: through franchise outlets, boutiques, image centers, orders by fax, and, of course, by Ladies going door to door. Preston foresees going even beyond that to a new breed of Avon Lady who, in a half-hour at lunch, will give an instructional lecture on skin and skin-care technology. He's also, by the way, thinking of opening an Avon image center somewhere in midtown Manhattan "that will blow you away in terms of 'That cannot be Avon.'"
It all sounds very visionary and somewhat unrealistic when you think that this is not model makeup we're talking about. This is not Bobbi Brown or M.A.C. This is oh-so-humble Avon. But it is also, remember, a company that has defied death, a company whose stock has defied gravity, a company that has defied cultural and gender norms. It is filled with people of different classes and cultures knit together by their zeal. One of them, most likely a woman, will lead the company through the major transformation that lies ahead. And if there's anything that the history of this company has taught us, it's this: Don't underestimate the power of an Avon Lady.