MBUS803 - Strategic Thinking and Execution Assignment

Assignment Task

Section 1: Your first section should outline the core issues (both internal and external) in the case. Is there a core underlying problem? What are symptoms of this problem? What disconnects exist?

Section 2: Analyze the situation both internally and externally. Utilize the course concepts and frameworks from your strategy toolbox and course readings to understand the core problems and their root causes. Analyze the culture and the organization’s readiness for change. What opportunities and barriers exist? How can you apply the various frameworks to get a deep understanding of the core issues in the case?

Stakeholder Analysis:

External :

• Competition - The competition in the beauty market is fierce. There are multiple brands competing for the same clients and the market is saturated with choices. Threat High/Impact High
• Society - Western countries are growing more diversified, and society is becoming more open to variety and inclusion. L'Oréal's "Beauty for All" objective will benefit as diversity gains momentum. As demonstrated in 2003 with the ColorLines commercial by Cheerios, or more recently in Gap’s July 2018 back-to-school ad featuring a young girl wearing a hijab, s (Dean, 2021) (Naffi, 2018) Threat High/Impact Medium
• Media - Media change affects L'Oréal's market. Their UN, Equileap, and Bloomberg recognition is the opportunity. Social media threatens their reputation as a "huge mess" and unpleasant employers can hurt the business. -Threat High/Impact High
• Shareholders - They have a low impact on DEI, so long as results are coming in as anticipated, they generally are neutral. There is an opportunity to grow shareholder awareness of DEI initiatives which could become important as the momentum grows. Threat Low/Impact Low
• Customers - L’Oréal’s clients want a diverse, inclusive product. This is a high impact area but an area of opportunity. With beauty standards being different in every culture there is an opportunity to continue growing the business into emerging markets growing the client base. 

Internal :

• Board of Directors – The BoD is there to ensure shareholders are happy; they also set the mission and strategy. Ultimately if the company faces too much backlash, the board may decide to change the company strategy which includes hiring practices and other aspects of governance. Threat Low/Impact High

• Management – Senior management is responsible to implement the direction of the company, while middle and lower managements ensures that direction is actioned by employees. Le Grand’s commitment to D&I and passion for HR at L’Oreal has had a mixed reception, divided primarily by bébés and non-bébés. He may stay the course, but the future of management initiatives is always at question. A change in direction may be demanded by Board of Directors or, should he move on, and a new SVP appointed, they could likewise make changes. Threat Medium/Impact High

• Employees – There are two distinct groups of employees at L’Oreal to analyze:
  • Bébés – Bébés have similar backgrounds and have been at L’Oreal for the entirety of their career; most enjoy the competitive nature of the company and see no need to change the culture. The monoculture enjoyed by the bébés leaves L’Oreal with a reputation of being difficult to integrate mid-career. Threat High/Impact High

• Non-Bébés – These outsiders are hired to be curious, diverse talent in a very tigh-knit traditionally white male company. L’Oreal is a company where you must be prepared to fight for your role in the company making it difficult for many non-bébés to find their way. The future success of the company lies in the non-bébés. Threat Low/Impact High

Input Elements:

As part of our analysis, in addition to the environmental factors identified in PEST (below), we further used the input elements of the Congruence Model to identify additional current organizational elements. Understanding the present state allows us to understand our resource base as we enact our action plan and understand the tools we have in our toolbox. 

L’Oreal’s accessible resources are significant in terms of physical manufacturing, financial, technology through patents and as Le Grand believes, its people, who are the core part of the company’s strength.

With their large manufacturing footprint of 41 manufacturing plans and 155 logistics sites worldwide, they have been able to make changes to their product mix and enter into new markets while still maintaining their key products.

They have significant financial resource. L’Oreal’s revenues and profit have been climbing while investing in the acquisition of new businesses. From 2013 to 2017 there was an increase in net profit from €3.032M to €3.749M. Further, in the same period, earnings per share increased significantly from €4.99 to €6.65. Lastly, L’Oreal reported revenues of €26B in 2017, that is a 5% increase from 2016.

L’Oreal has a strong innovative culture, it as a Research and Innovation (R&I) division which comprises of 20 research centres and employs over 3,800 employees. R&I is an important asset to them, they regularly file multiple patents, as an example Research and Innovation filed 498 patents applications in 2017 alone. They continue to inject funding into this division, €877M in 2017 alone.

Employees are L’Oreal’s biggest resource, they have a mix of life long L’Oreal employees (bébés) and new employees (non-bébés). Both groups bring something different to the table, while the bébés bring the competitive nature that has served L’Oreal well for the past 110 years, the non-bébés bring curiosity and diversity that the company needs for the presence and future.

Looking at their ‘less tangible’ resources, they have garnered a positive reputation in the marketplace for their D&I initiatives. This has been recognized at the global scale by the UN but also industry level with Bloomberg and Equileap. This recognition was received due to their work to create a business that spans ethnicity and economic status, with brands for niche markets and that run in multiple segments* Meanwhile, they have earned a negative perception in the industry for the organization climate as being difficult as a newcomer to work for, making it difficult to attract staff.

*Brands:

• Luxe (Lancome, Biotherm, Yves Saint Laurent, Clarisonic, Kiehl's etc.)
• Consumer (L’Oreal Paris, Garnier, Maybelline, Nyx etc)
• Professional (Kerastase, Reken, Purelogy)
• Active (Vichy, La Roche-Posay, CeraVe etc.)

Further, L’Oreal’s history plays a big role in how it operates today. Although the company has been operating for close to 110 years at the time of this case and only grown outside France via acquisitions roughly half of that time. The monoculture of the first half of the company’s existence allowed it to grow considerable but the offset is that culture is hard to change. L’Oreal was influenced by some events over the years but none so great as World War I. At the end of WWI, their hair products become popular internationally, starting with other European nations, followed by North America and then South America.

Section 3: Provide a set of 3-4 distinct recommendations (short-run and long-run) (3/4 – 1 page)

After analysis the business case in details, our short- and long-term recommendations are as follows:

Section 4: Devise a plan of action/execution using ideas from the course. Be sure to address issues of timing (short- and long-run), resources, responsibilities, buy-in, etc…

Recommendation: Create a dedicated unit within the D&I team, that aligns with HR, and focuses on identifying, developing, and retaining diverse talent.

Action plan: In order to successfully implement change within L’Oreal, we believe a movements-based approach will be effective. A movements-based strategy involves 5 key steps: Frame the issue, demonstrate quick wins, harness networks, create safe havens, and embrace symbols (Walker & Soule, 2017).

Frame the issue:

• Based on the case, the disparities in the company culture are apparent to most of those in the organization. However, it's evident that although many believe change is necessary, there isn’t an urgency to evolve as the company is doing well.
• (L'Oréal growth came through both acquisition and entering new geographic markets. 0% of revenue came from emerging markets. 'Oréal needs to increase the demand for diverse and inclusive workplaces to manage the impact of demographic changes in the emerging marketing from diverse local backgrounds and multicultural origins.)

Demonstrate Quick Wins:

• Leaders too often fall into the trap of declaring culture shifts they wish to see," Walker and Soule write. Instead, they should highlight cultural behaviors they want more of. "These examples sometimes occur in the culture, but on a limited scale" (Walker & Soule, 2017)
• Encourage top management to become adopters and live in alignment with their mission statement of Beauty for all. It will help build some change momentum initially to help propel the change forward.

Short term:

• Introducing mentoring programs and lunch-and-learns to help integrate the Bebes with the non-Bebes. This can be executed somewhat quickly and demonstrates the type of culture L’Oreal is striving towards.
• Appointing a diverse leader like Nathalie Roos to lead the coalition that will guide this change and implement these types of programs – programs that have helped with her success in the past – is a great way to create more momentum for this
• Commit to an investment in the D&I team. Increased budget and resources will help drive initiatives such as the online makeup tutorial for the visually impaired and blind done in Brazil. This will enhance L’Oreal’s reputation as a leading organization that focuses on diverse initiatives.

Long term:

• Other changes may take longer to implement such as creating a unit within the D&I team aligned to HR, however you can communicate your vision to make these changes up front and celebrate your wins along the ways in line with Kotter’s framework. (Kotter, 1995)

Harness networks

• L’Oréal has a very diverse operation working across many different cultures and backgrounds. It will be important for the D&I unit focused on diverse talent acquisition to work closely with the network of managers across various countries to support growing a diverse workforce.
  • Short-term – host summits or gatherings that bring these managers from around the world together to work with the D&I team and share ideas.
  • Create awareness, build coalitions, move the group towards implementation, and drive interest and awareness of the change. We should also pay attention to the resisters, who may come on board later as more of the organization moves towards adoption.
  • Engage modelling agencies to hire more diverse models for their advertising campaigns. Ensure that the modelling companies vet the candidates thoroughly to avoid the controversies L’Oreal faced in the past.
  • Long-term – create a dedicated unit/team within the D&I organization to support talent acquisition and development. This may take time to find the right people, create a strategy and set objectives for the team.
  • Acquire more ethnic and diverse companies such as SoftSheen-Carson. In doing so, L’Oreal will be able to target customers within ethnic communities and establish their reputation as an inclusive company. In addition, this will allow L’Oreal to create distinct products for specific communities, positively impacting their P&L.
• Take advantage of the strong network and reputation that a change agent like Nathalie Roos has established at the organization.
  • She challenges the status quo and is not afraid to be different, and she has created a reputation and gained the respect of many around the organization. She also wishes to see cultural changes and would likely support a push for a cultural shift.
  • Her connection to the gaps in the culture (gender and willingness to change and try new things) help solidify the message for

Create safe havens

• “If your hope is for individuals to act differently, it helps to change their surrounding conditions to be more supportive of the new behaviours, particularly when they are antithetical to the dominant culture” (Walker & Soule, 2017).
• The dominant culture at L’Oreal was engrained in the bebe L’Oreal, male-dominated roles at the top of the organization. The only way to shift this culture is to create “safe havens” where this envisioned culture of “Beauty for all” could thrive.
• The mentoring programs and lunch-and-learns aimed at integrating the Bebes with the non-Bebes are designed to break down the barriers that made entering into the business complex.
• Regular employee engagement surveys are another excellent way to keep a pulse on the employee experience and ensure that people are heard and feel they can express their concerns.
• Having Roos as the face of change helps promote an environment where diverse individuals are comfortable. They may be more willing to participate If they see someone like them at the top or as part of the change coalition.

Embrace symbols.

• We do not think L’Oreal needs to rebrand or shift from its “Beauty for all” mission as that does align with its change vision. However, as mentioned above, they need to position key change agents and symbols at the front of their strategy – leaders who exemplify the change. This helps build a level of trust that the vision for change is genuinely being committed to.
• Walker and Soule write that symbols should “create a feeling of solidarity and demarcate who they are and what they stand for” (Walker & Soule, 2017). Leaders such as Roos, symbolize the change they wish to see at L’Oreal and can effectively define the movement the wish to begin.
• Le Grand is passionate about the change, but ultimately his profile (male, bebe L’Oreal, elite educated) is the status quo and is what they want to change. More supporters will come on board if they see themselves in the change agent, in this case, Roos.
• Regular, consistent, and appropriately timed communication is highly effective. Toward the end of our action plan, we want to empower others to act on L'Oreal's vision, as mentioned by Kotter's learning (Kotter, 1995).

• Encourage top management to become adopters, and live in alignment with their mission statement of Beauty for all
• Use learnings from EIS to follow Kotter’s steps for successful change, using a top –down strategy, and face to face conversations to influence stakeholders and encourage them to make the changes needed as learnt from Gladwell’s Rule of 1 (Gladwell, 2000) and to understand their motivations.
• Create awareness, then build coalitions and move the group towards implementation and drive interest and awareness of the change. We should also pay attention to the resisters, who may come onboard later as more of the organization moves towards adoption.
• Use a variety of communication methods like internal magazines, staff meetings and workshops which was effective in our stimulation. “Use every vehicle possible to communicate the new vision and strategies for achieving it” (Kotter, 1995).
• Regular, consistent and appropriately timed communication is highly effective. Towards the end of our action plan, we want to empower others to act on L'Oreal's vision, as mentioned by Kotter's learning (Kotter, 1995).
• The strategy behind this action plan is made to understand that L'Oréal's social groups and networks are critical to execution. Every relationship is valuable, and many roles are gatekeepers to others. It is important to get rid of obstacles by removing outdated structures that disrupt and undermine the vision of L’Oreal.

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