In celebration of Chief Executive magazine’s 20th anniversary, we’ve been asking CEOs who’ve held their positions for the better part of that period to reflect on the changes they and their companies have experienced during that time. In our sixth installment, Jim Preston, who has run the core beauty business at
When I joined
But all that disappeared in the late ’70s and ’80s. I became CEO of Avon during some very dark days. It was 1988. We had more than a billion dollars in debt; we were bleeding; we had just been hit by the first of what would be three takeover attempts in three years. Our credibility with Wall Street was zero because we had not had a good record for 10 years.
Someone asked me then, “What do you hope to accomplish as CEO of Avon?” I said, “Well, step one is survival.” In the back of my mind, there were a couple of things that were very important. In particular, I hoped we could restore
Since 1988, when we refocused the company on beauty, selling off a number of health-care businesses, there have been three forces at work that have changed both the industry and Avon:
Consolidation. Until the late ’80s, the beauty and fragrance industry was fragmented, made up primarily of small and medium-sized companies. But with a low birth rate in the
This forced companies like ours to look harder at how we were doing business. We had to become a lot more efficient and effective to be profitable and compete globally.
Globalization. Many companies realized that while the
We’ve entered about 16 new markets since 1990. We’ll be in the
The demands in these markets for the kinds of products we sell are great. But without a well-developed retail structure, it’s hard for consumers to find them. The ones consumers do find in stores are high-priced because import duties are so stiff. We often open a small manufacturing facility or bring in the raw materials and fill the bottles and jars in that country to qualify for manufacturing, so we don’t have to pay the duties. That, of course, allows us to set lower prices, which, in turn, gives us a better shot at gaining a larger market share.
Today you can buy
We used to see the working woman phenomenon as a liability. We thought, “They won’t be there when our representatives call. They’ll have other employment options, so our recruiting will be more difficult. Although that’s been true to an extent, the flip side is that when more women enter the work force, they have more money to spend on products like ours and more need for the kinds of products we sell. What they don’t have is time. We can provide a service, convenience, and value. And that’s one of the reasons you see improvement in our performance in the
We have also proven we can selectively add new products to our line that generate incremental sales and profits. Ten years ago we weren’t in the apparel business-this year we’ll probably do more than $700 million in apparel. Two or three years ago we weren’t in home furnishings. This year we’ll probably do $200 million or more in that category. There is a limit to how many products you can carry, and we’re approaching that limit, but that has been a major driver in our ability to continually grow business over the past few years.
Until recently, our line and our packaging were not contemporary enough. We hadn’t done advertising in a number of years. People saw
You have to be very concerned with what goes on in the world. Fifteen years ago, I didn’t read The Economist. Now it’s required reading. I’ve had to break away from a culture at
The job of the chief executive has also become more complex because of changes in dealing with our own government. OSHA didn’t exist 30 years ago. Some of the complicated tax regulations didn’t exist 15 years ago. The number of bills coming out of the Congress that can affect business today require that you stay close to legislation or regulations that can affect your industry and be willing to sit down with a congressman, or a senator, or a regulator, or a legislative aide, and make your case in a cogent, coherent manner.
A lot of people talk about their legacy as “look what I did.” Brought the stock back from 19 to 160 or whatever. I think a person’s legacy should really be determined by what he’s built. It’s one thing to, say, “Okay, we had a great eight or nine or 10 years.” But if those years were great solely because of one person’s personality or smarts, you haven’t done anything for the organization-except maybe hurt it. I’d rather be measured by what this company does in the five years after I leave. If I’ve done my job right, it’ll be better than when I was at the helm, and it will be better because it’ll have the strength in management and a foundation that is solid.