Twenty months later, in 2000, she was appointed CEO. She implemented her vision of Avon as a company that empowers women — both employees and customers — and had a great five years.
Then, in the fall of 2005, the company faltered. Revenues grew just 5 percent that year, and earnings were flat. Andrea had to look inside herself to figure out how to make her passion for empowering women become a more profitable business for Avon. She changed the whole structure, took out US$300 million in costs — much of it by flattening the organization and reducing management by 25 percent. She then told the stock market that she was investing in growth and putting none of those savings toward the bottom line in the near term and that she was going to suspend earnings guidance. The stock plummeted 30 percent, and the shareholders were not happy. But her board bought into her vision and supported her as she stayed true to what she believed.
Andrea has put another million representatives out there, including 300,000 in China. She has boosted advertising, realigned manufacturing, and outsourced a number of functions. Avon’s results indicate her strategy is working; the stock has increased 40 percent from its 2005 low point.
S+B: What happens when a leader gets derailed? How do you get back?
GEORGE: You come back the way Kevin Sharer did. Sharer had run GE’s satellite business and then went to MCI as marketing chief, thinking he had a straight shot to the CEO’s desk. Six weeks into his tenure, he marched into the chairman’s office with a plan for reorganizing the global marketing group. That arrogance earned him nothing but scorn from his colleagues, who had put years into building the company.
Kevin spent two miserable years at MCI that nearly brought him to his knees. During that period he had to face his own demons, his own arrogance, and say, “You know, being a leader is not being a star.” When he got the opportunity to move over to Amgen, the biotech company, he got a biologist to teach him the science and became a true student of the business. He did not go in and pronounce what the company should do. He took seven years understudying the CEO, working in the labs, visiting competitors’ labs, riding around with salespeople.
When he became CEO, his first move was to meet with the top 150 people at Amgen and ask, “What do you think we should do?” That probing gave him a mandate, he says. He had a great run for seven years, but he’s now facing more difficult times with a challenge to one of Amgen’s drugs. That’s the ebb and flow of business. Kevin is a solid leader, and he will step up to these challenges as Andrea Jung did.
S+B: You’re saying that the difference between his MCI and Amgen experiences was the humility to recognize the business’s context.
GEORGE: Not just the business, but also the personal context, including other people in the company, and the broader societal context. Sam Palmisano, the CEO of IBM, says that in the 1990s we saw leaders who set themselves off from others, who were autonomous, and who tried to achieve greatness by doing everything themselves. Today, we need a much more collaborative model.
Sam’s a great example of the importance of context. For IBM to succeed, it has to collaborate with governments, nongovernmental organizations, and other companies. He’s transformed IBM from a task-oriented organization managed by goals into one led by values, which the employees themselves helped identify. They came out of a “values jam” that IBM held with its employees over the company Intranet in 2003. For three days, tens of thousands of people worked together to hone the values down to three: dedication to every client’s success; innovation that matters, for the company and for the world; trust and personal responsibility in all relationships.