Responding to Transitional Crisis
For the first time in the history of Mary Kay, in 1984 the company experienced a decline in sales. Changes in the American labor force had finally caught up with the company. Losses also were experienced in 1985.
What had happened? Job opportunities for women in the general workforce had increased, making involvement with Mary Kay not as needed by a number of women. Between the years of 1983 to 1985 beauty consultants working for Mary Kay dropped from over 200,000 down to 100,000, with sales decreasing from $323 million to $260 million during that same time.
The other problem was working women weren't at home to sell the products to.
Now instead of competing primarily with the direct marketing industry, she was competing with the entire workforce to keep her consultants.
The response by Ash was to increase the compensation for her consultants, making the company competitive with other businesses. By doing that, her people were still able to keep the flexibility that was a strength of working for Mary Kay. She also made the decision to take the company private and bought back all the shares. Not too long afterwords in 1986, the company started growing again bringing in $280 million in sales.
Now the Internet has made some of these problems obsolete by having products available 24/7. At the time though, it was an assault upon the original business model Ash had developed.
Knowing there was a crisis wasn't difficult to see, anyone can see that by honestly looking at what our numbers are telling us. How we respond to the crisis is what separates long-lasting, successful companies from the losers.
Ash responded by being willing to change the structure of compensation and take the company private, so she could focus on long-term strategies and solutions rather than the share price in the stock for the next quarter.
In times of disruption and transition, it's usually not the core purpose and values of a business that is challenged, but rather the business model itself. It is in operations, systems and structures that many of the changes will need to be made. Mary Kay was willing to adapt to the existing realities and keep the business growing.
It was important that she was willing to change where it was needed, while keeping the core values and purpose of the company in place. Knowing the difference between the two is the key.
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