Ding-Dong! A Changing Market Sends Avon Calling for a New CEO

In an effort to rejuvenate itself amid slowing sales, Avon is shaking up its executive suite. Andrea Jung, who had headed the direct sales giant since 1999, will remain executive chairman, but the company will name someone to take over her role as CEO.

The longest-tenured woman CEO of a Fortune 500 company, Jung is credited with modernizing the 125-year old brand from its “Ding-Dong, Avon calling!” days in the 1950s by revamping its product line and expanding the company globally. But the company’s stock value has dropped 44% this year, and Avon’s profits have missed analysts’ projections for four of the last five quarters.

“Avon hasn’t been performing well,” Wharton management professor Lawrence Hrebiniak says. “It’s not doing well in emerging markets, such as China and Brazil, although the potential upside in these growing markets is strong.” The company has also drawn the scrutiny of the U.S. Securities and Exchange Commission and is internally investigating possible violations of the Foreign Corrupt Practices Act over charges of bribes to officials in China that led to the firing of four executives.

Avon’s current challenges point to a need to shake up an entrenched culture and operations, Hrebiniak notes. “Andrea Jung has been strong over the years in marketing, but the company needs someone to take the reins and focus on execution and operations. A new CEO — really more of a COO — will provide this operational focus.”

The splitting of the CEO and executive chairman roles allows Avon to retain the pluses that Jung brings to the table, Hrebiniak says. “She has ‘face value’ and legitimacy, given her reputation and position on the boards of GE and Apple, and she can help with strategic planning and marketing advice,” he notes. “A new CEO is needed to continue what was a successful cost leadership strategy, to focus on small-town growth in emerging markets, get salespeople excited again about the Avon brand and recreate the ‘can-do’ culture that made the company successful.”

Jung joined Avon in 1994 as president of its product marketing group. Before coming to the company, she was an executive vice president at Neiman Marcus and a senior vice president at now defunct department store chain I. Magnin. According to the most recent data from Catalyst Research, a nonprofit that promotes expanded opportunities for women in business, Jung and other women CEOs account for just 3.2% of leadership at Fortune 500 companies, and women hold 16.1% of positions on Fortune 500 boards.

In a 2004 speech at the Wharton Women in Business (WWIB) Conference, Jung noted that when she arrived at Avon, although all of its sales force — the iconic “Avon Ladies” — were women, and so were all of its customers, there “were no women past middle management.” The company now has several women on its board and on its executive leadership team.

“For years, when I used to sit down to do the New York Times crossword, there was a common word in the puzzle that was four letters, second letter ‘v,’ and the clue was ‘Ding Dong,’” Jung told the audience at the WWIB conference. “That’s how Avon was seen. Now I am proud to say that last year for the first time, I saw those same four letters, second letter ‘v,’ and the clue was ‘The Company for Women.’ That’s who we are.”

Whether Avon chooses a woman or man to replace Jung, the new CEO should be given “leeway to define the way forward for culture and operational change at Avon,” Hrebiniak says. “The new CEO position should be attractive to candidates with an operational bent, regardless of their current industry.”

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