One of the most critical challenges today’s companies face is how to successfully navigate global growth. This means, among other things, finding the right balance between global and local markets, and wading cautiously into the waters of at-risk global economies where standard business practices may conflict with the legal and ethical obligations of American companies. I saw first-hand the complexity of this challenge during my six-year tenure at Avon, where I worked alongside the highly acclaimed CEO Andrea Jung.
Avon went global in a big and bold way at the beginning of the 21st century, recognizing that its future was dependent on creating a more integrated strategy in markets as diverse as South America, China, Russia and elsewhere. With Jung at the helm, their strategy initially seemed to be working extraordinarily well.
Ultimately, however, it failed to live up to expectations—they lost share to competitors, suffered from scandals, and had other problems. While numerous factors accounted for their global difficulties, the big problem was that they fell into five common global traps. Let’s look at each one of them and how to avoid them.
Trap 1. Reflexively becoming too local or too global. How does an organization leverage economies of scale while customizing its products and services to meet local requirements? At times, Avon committed the sin of trying to manage this paradox through wild swings in business direction—one year they went all out to decentralize the system, the next they swung back to centralized control. The result: Avon failed to meet customer demands, was seen as being overly reactive, and ultimately failed to find that delicate global-local balance. Instead, develop the agility to accommodate both sides and consider both as equally legitimate in the decision- making process. It’s not one or the other. It’s both.
Trap 2. Failing to align organization culture with strategy. Andrea certainly was aware of the importance of this task, but she may have underestimated the power of the culture to undermine even the strongest strategy. Instead, make sure you understand what your culture is all about, preserve what is crucial for the company and what engages the workforce, and then evolve the culture in the direction to drive the strategy.
Trap 3. “Blinking.” This is the term used to describe Andrea’s occasional refusal to follow through on holding a leader accountable on a controversial change or performance-related decision. In a global environment, especially, leaders must be clear, certain and consistent. This stance transcends cultures—it provides employees throughout the world with confidence in their leaders. An inability to follow through sends the opposite message.
Trap 4. Failing to recognize the new talent demands of global integration. During Andrea’s tenure, the company was evolving from a holding company to a more global, integrated enterprise. Consequently, the Finance function needed a CFO to upgrade and consolidate financial systems, implement consistent financial controls as well as processes and to improve margins and reduce inventory. Instead, they hired a CFO generalist and “deal maker”—skills that didn’t match up well with the organization’s continued growth in emerging markets.
Trap 5. Lacking vigilance in at-risk global markets. Emerging markets can be goldmines, but they can also be landmines, as was evidenced by Avon’s recent $135-million-dollar settlement with the SEC and DOJ for alleged bribery of government officials in China. Both CEOs and boards need to do a better job of screening hires to determine if they’ll adhere to corporate values and internal policies, educating them about these values and policies, and monitoring whether they’re adhering to them on the job.
Deborrah Himsel is a leadership consultant for Fortune 500 companies. She teaches at Thunderbird School of Global Management and The Helsinki School of Economics at Aalto University, and is the author of Beauty Queen: Inside the Reign of Avon’s Andrea Jung. From 1999 to 2005, she worked alongside Jung at Avon as Vice President of Global Organization Effectiveness.