The CEO of Avon Jung Booted

Andrea Jung, the longest serving female CEO at a major American corporation, will soon be out of a job. It was announced today that Avon Products is launching an executive search to replace its 12-year chairman and chief. Once found, Jung will step aside.

The Wall Street Journal today notes that it is very unusual for a company to publicize a CEO search while the current one remains, but also points out that the 125-year-old beauty company has seen its stock drop by 45% this year. She will remain and help the board recruit her replacement next year.
While 2011 started off well for Avon, as Jung cheered first-quarter profit that nearly tripled from a year ago and a growing independent sales force of 6.5 million representatives, a third quarter earnings report said sales targets would be unattainable and admitted two ongoing SEC inquiries as problematic.

The three-year probe into an alleged bribery of foreign officials has already caused the firing of four Avon executives and increased investor concern. When approached earlier this year, Jung wouldn’t comment on the matter.

I am always curious about these issues. Having lived all over the world and knowing the types of markets where AVON is trying to expand, I am sure that bribery is part of the everyday way to do business in some of those countries at very high levels. It is a reality that many US corporations face abroad.

This year has shaken up the small percentage 3% of women in the high-powered executive ranks. Yahoo‘s Carol Bartz was fired over the phone just months ago, on the same day that Sallie Krawcheck left her post at Bank of America. Meanwhile, IBM hired its first female chief, Ginni Rometty, in its 100-year history, and Meg Whitman returned to the spotlight as CEO of HP.

Jung, 53, has been a longtime champion of women’s empowerment, often emphasizing Avon’s role in offering entrepreneurial employment opportunities to the 95% female reps who sell its products. She is also one of the few female faces on the boards of Apple and General Electric. She was ranked at No. 64 this year on the FORBES list of the World’s 100 Most Powerful Women.

Avon Calling and CEO Jung

Last week someone posted a weblog regarding women in business and I mentioned four successful women who have faced enormous challenges as CEOs of troubled companies. Avon was one of the companies.
Since 1886, Avon has offered high quality beauty products through a unique direct sales distribution channel. In 2000, Avon’s CEO, Andrea Jung, was faced with a rapidly changing marketplace and disappointing growth rates. Andrea Jung decided to implement a number of grand strategies changing the face of Avon. These grand strategies included expanding the product line to gain greater diversity in customer ethnicity and age group. In addition, Avon began using a greater variety of distribution channels, entering the retail space and launching Internet sales capabilities.

By 2002, the company’s finances and growth rates were far more positive. In a SWOT analysis conducted of the company in 2006, Data Monitor declared “Avon posted a three year (2002-2005) revenue growth of 9.1%, significantly better than its competitors.

Moreover, the company’s return on average investment for the period of 2001 – 2005 were recorded at 35.7%, significantly higher than the industry average of 17.2%” (Data Monitor, 2006). One of the key enhancements made as part of Andrea Jung’s grand strategy was expansion of Avon’s product offering. This decision was supported by market research studies conducted by the consultants Andrea Jung hired to help her rejuvenate the company. A diverse product portfolio was credited for the above average growth experienced by Avon between 2002 and 2005.

Further contributing to Avon’s positive turn was a newly implemented web-enabled electronic ordering system. “This increased the speed and flexibility of delivery of an online order, while at the same time enhances the sales effectiveness.” Launching a website where Avon’s direct sellers could efficiently expedite orders was one of the key initiatives of Andrea Jung’s grand strategies.

Once implemented, this system not only met its initial goal of enhancing the effectiveness of Avon’s salespeople, but it also improved Avon’s order accuracy, reducing operating costs. By making it easier for reps to communicate with Avon, supplying them with contact-management tools and sales data for increasing their own business, and creating more information flow between independent sales reps and the head office, Avon hopes to pioneer a new-and-improved, Internet-fortified direct-sales model.

Jung has made a strong push for global growth. In 2003, Avon had a large presence in Russia and sales jumped 70 percent. In China, products were sold from over 5,000 storefronts with a new opportunity approved in 2005 to include direct selling. Shares of Avon traded at 25 times its estimated 2004 earnings, which is well above the market average of 19.5 percent. According to a Merrill Lynch analyst, future annual earnings could average 15 percent, making today’s share price look like a bargain.