mary kay ash - perfil y biografía

5/26/2018 Mary Kay Ash - Perfil y Biografa

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American National Business Hall of Fame, ANBHF

Mary Kay AshMary Kay Cosmetics

On September 13, 1963, 49-year-old Mary Kay Ash and her son, Richard,started what was to become a large and successful cosmetics business named

Mary Kay Cosmetics. The company specialized in the manufacture and sale ofa specialized line of skin cream and related products. What made the companysomewhat unusual was the use of a direct sales force that numbered about197,000 at the end of 1982. Most of these individuals were women working part-

time. All made their sales through demonstrations held in private homes.Within the direct sales market segment, Mary Kay, the company, was widelyregarded as having the most product sales force. And Mary Kay, the woman,

was widely regarded as an outstanding example of entrepreneurship at its best.This is that story.

Youth and First Marriage

Mary Kay Wagner was born in Hot Wells, Texas, 25 miles from Houston, in1915. Her parents ran a hotel and restaurant, which drew customers fromHouston, 25 miles away. When she was seven her father became ill withtuberculosis and had to enter a sanatorium. Her mother sold the hotel and

moved to Houston where she ran a small caf. Mary Kay did the houseworkand cooking, developing confidence in her abilities to take care of herself andothers.

Religion was an important part of the young girl's life. Later, as an adult, shebegan tithing once her income reached eleven dollars a week. Her tithing andattendance went to the Baptist Church. But she was truly ecumenical in her

love for others. Her three husbands were, respectively, Catholic, Protestant andJew.

In school Mary Kay developed into a fierce competitor. She attributed thattrait to a friendly rivalry with a neighbor girl who, "Had everything I wantedto have and did everything I wanted to do". So motivated, Mary Kay won a

junior high school typing contest and took second place in the stateextemporaneous speaking contest. She earned straight "A's" in high school.

After graduating from Houston's Reagan High School she wanted to enter RiceInstitute. But she had no money and was unable to get a scholarship.

Reluctantly, she gave up the idea of going to college.

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Instead, she married Ben Rogers, a guitarist whose radio program made him

something of a local celebrity. The marriage lasted eleven years and producedthree children. But Rogers was drafted during World War II and while awayon military duty asked for a divorce. Mary Kay later commented, "It was the

lowest point in my life. I felt like a complete failure as a woman".

Learning to Sell

Before the divorce Mary Kay had first taken a few premed courses at the

University of Houston and then obtained not one but two jobs. One was as asecretary at the Tabernacle Baptist Church. That paid $125 a month.

The other job was selling for Stanley Home Products. That company marketed

by direct selling. Its representatives put on "home shows" at the residences ofselected customers. A number of ladies would be invited to each show wheresalespersons like Mary Kay would demonstrate Stanley home products and try

to sell them on the spot. The salespersons were actually independent

contractors who bought the merchandise from Stanley and sold it at the home.

In Mary Kay's case the profit came slowly. After three weeks on the job her

"shows" were averaging $2.01 in net income, hardly enough to support herfamily. Many persons in that situation would have quit and looked for otherwork. But Mary Kay was convinced that money could be made selling Stanleyproducts. That led her to believe that her sales methods weren't right and she

dedicated herself to finding out what she was doing wrong.

In search of the answers she went to a regional sales convention in Dallas. She

asked many questions, made notes of ideas that sounded helpful and left theconvention a much wiser salesperson. A highlight of the convention was thecrowning of the "sales queen." That ceremony had a galvanizing effect onMary Kay. She set a goal to be the company's sales queen at the next

convention. She even got up the courage to approach the company president, F.Stanley Beveridge, to tell him of her goal. As she later recalled that moment,"He took my hand in both of his, looked me square in the eye and after amoment said, 'Somehow I think you will.' Those five words changed my life." A

year later she was named the sales queen.

Having mastered the art of selling, Mary Kay next had to learn how to recruitand manage other people. The direct selling business she was in was primarilyan occupation for part-time workers. A person wishing to make it a lucrativefull-time business had to recruit other salespersons. Stanley's policy was to paythe person doing the recruiting a small percentage of the sales revenue of each

person who was recruited.

Mary Kay was a good communicator. Not only was she able to recruit otherwomen as independent contractors for Stanley Products, but she was also able

to teach them her secrets for successful selling. Eventually she had a group of



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150 women whom she had recruited and who were succeeding in the business.

Her income was supplemented by a small percentage of the sales of each ofthose recruits.

At that point in her career Stanley insisted that she move to Dallas to developthat territory. In addition, the company refused to let her continue to receive"commissions" on the sales of the women she had recruited in the Houstonarea. She made the move and successfully recruited a new group of women.

But she deeply resented not being allowed to share in the earnings of herHouston recruits. Years later when she started her own company sheremembered that injustice and adopted a policy of letting her saleswomen keepcommissions without regard to geographical territories.

In 1953 May Kay left Stanley Products to embark on a business venture in St.Louis. The venture aborted and she returned to Houston where she became a

salesperson for the World Gift Company. World Gift was another direct salesorganization and her past experience made it easy for her to boost her earningsto $1000 a month by the end of the first year. Impressed by her performance,

World Gift eventually made her its national training director. Traveling threeweeks every month she developed 43 states for the company. She alsodeveloped a strong power base among the field personnel.

Mary Kay's success was also her undoing at World Gift. In 1963, "an efficiency

expert told the company Mary Kay's power was too great and the pot began toboil." The company offered her a change of assignment. It was, in effect, ademotion. Mary Kay refused to accept it and resigned, waiting for the company

to reconsider. But World Gift had no intention of doing so.

After 25 years in direct sales Mary Kay found herself suddenly andunexpectedly retired.

Founding A Business

Retirement was not healthy for Mary Kay. As she later explained:

The boredom of retirement caused a deepening sense of discontent. I had

achieved success, but I felt that my hard work and abilities had never been

justly rewarded. I knew that I had been denied opportunities to fulfill my

optimum potentials simply because I was a woman. These feelings were not

mere indulgences of self-pity, because I had personally known so many

other women who had suffered similar injustices."

She attempted to put herself in a positive frame of mind by, "making a list ofonly those good things that had happened to me during the previous twenty-

five years." In the process of making that list her thinking once again turnedpositive.



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Once the first list was made, Mary Kay realized that she might have thebeginnings of a book. But for such a book to be truly helpful to others, it wouldalso have to warn the reader of problems encountered in direct selling and

offer advice on how to solve them. And so a second list was developed.

As she reviewed the lists in the following weeks she began to develop a newdream. In her words,

I had been introduced to the skin care products by a local cosmetologist

when I had called on her during my direct-selling days. Her father had been

a hide tanner who noticed that the skin of his hands was like that of a young

man. Realizing that the tanning solutions he worked with every day were

possibly responsible, he began to experiment and eventually developed a

modified version to use on his face. His daughter became a cosmetologist

and using his formulas, she developed creams and lotions for customers of

her small, home-operated beauty shop. In addition to myself, many of her

relatives and friends had been using these wonderful products for several

years, so when the cosmetologist died, I bought the original formulas from

her family. From my own use and the results I had personally received, I

knew that these skin-care products were tremendous, and with some

modifications and high-quality packaging I was sure they would be big

sellers!"

With the product identified and a marketing plan in place, Mary Kay and hersecond husband prepared to go into business. Their life savings of $5,000 wasused to make arrangements for a small office with two desks and the

manufacture of an initial inventory of products. Ten saleswomen wererecruited as independent agents who would pay for their supplies in advance.And Mary Kay gave the new recruits a thorough introduction to the techniquesof successful direct selling under the so-called "party plan."

A month before the company was to open for business, Mary Kay's husbanddied of a heart attack. Realizing that the best way to overcome her grief was tobe busy, she went ahead with the scheduled opening. Her twenty-year-old son,

Richard, accepted a $250 a month job to run the financial and administrativeends of the business and on September 13, 1963 (a Friday)Beauty by Mary Kay

began its first official day of business.

Nature of the New Company

1. Basic structure of the Sales Organization

Beauty by Mary Kayfollowed the basic party plan model. The company

manufactured proprietary products, which it then sold through a network ofsaleswomen. They were, in fact, independent contractors. Mary Kay called



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them "Beauty Consultants". To become one, the woman had to sign an

agreement and pay for her initial product inventory called a "beautyshowcase." The new recruit would immediately be taught how to schedule andconduct the sales session at parties to be held in private homes. Then it was up

to the consultant to book the parties or "skin care classes."

The beauty consultant's income was to come from two sources. One was thesale of Mary Kay products to the consultant's customers. The consultant

bought the merchandise from the company at a fifty percent discount fromretail list price. The other source of income was the bonus paid for recruitingnew beauty consultants. In 1985 the bonus system paid a consultant 4 percent

of the GROSS product orders of recruits if one to four persons had beenrecruited and 8 percent for 5 or more recruits.

A beauty consultant was expected to work part-time (leaving time for another

full-time job or taking care of the family). Consequently, a consultant's incomewas expected to be low. In the period 1981-1983, for example, the average salesper consultant was $1,705 with 50% going to the company.

For salespersons intent on making a larger income, Mary Kay created theposition of Sales Director. A person in this position remained an independentconsultant. But she was given the additional responsibility of organizing the

weekly sales meeting for the beauty consultants in her unit. In 1982, the 4,100Sales Directors had an average annual income of just over $25,000.

2. Issue of Pyramiding

The structure of the sales organization at Mary Kay raises the question of

exploitation of the bottom level salesperson. Reporter Kim Wiley offers thisexample of the company's response:

The firm is sensitive to the fact that this manner of operation may be

interpreted as pyramiding and it sends out full legal documents explaining

why it isn't. In a pyramid scheme, the recruiter gets a piece of each recruit's

commission (or forces the recruit to buy products from her at a marked-up

price), thus making it necessary for the recruit to bring in recruits of her

own just to stay afloat. In Mary Kay, everyone receives the same 50%

discount on the cost of cosmetics; the recruiting bonus does not come out of

the recruit's earnings, but is paid directly from the home office.

3. Unique Features

With the exception of the care taken to avoid pyramiding, the organization was

similar to most other direct selling organizations. But Mary Kay expected herorganization to outperform the others because of the structure and procedures,which she had formulated.



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3.1 Structure

The structure was designed to help the independent contractor make the mostof the market opportunities. Key elements of the structure were:

(1) Limiting the product line so that the salesperson could be thoroughlyknowledgeable about each item and so that on-the-spot deliveries couldbe made at the time of the sale.

(2) Putting the emphasis at the sales parties on teaching rather than

selling. Mary Kay believed that not only would the teaching make theclaims for the products more credible, but it would make the experiencemore enjoyable for both customer and salesperson.

(3) Restricting the number of people at a party. Mary Kay had learnedthrough experience that women who actually participated in ademonstration were more likely to buy. But since a beauty consultant

could not give personalized attention to more than six women at a givenparty, that was the maximum number allowed.

(4) Insisting on delivery on the spot. By having the beauty consultantdeliver the orders at the time they were placed, the company took full

advantage of impulse buying. Furthermore, by having the beautyconsultant collect payment on the post, the hostess was relieved of theburden of trying to later collect from the guests.

(5) Not allowing the beauty consultant to buy on credit. This policyeliminated the cost of policing a credit system and protected theconsultant from getting herself too deeply in debt. Mary Kay felt thatother firms unnecessarily created bad feelings between the company

and sales force because of credit problems.

(6) Not limiting sales territories. Mary Kay believed that more beautyconsultants would be recruited if any consultant could recruit anywherein the country (or outside of it). As she explained the system in 1978,

"We have what we call the adoptive system. It works like this: say you

recruit a consultant while you're on vacation in Hawaii. You leave herwith a director of consultants in Hawaii who trains her. Meanwhile, you

draw a small percentage of your recruit's sales. But the company paysthat commission, not the recruit. The Hawaiian direct does not get anypercentage except to count on the recruit's sales as a part of her unit,but the Hawaiian director will have a recruit somewhere else, under

some other director and it balances out. Most of our 900 directors haveadoptees. Now this system is almost unexplainable to men, I've found.But it works. Everyone helps everyone else".



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(7) Offering superior compensation. "Gross profit margins forsalespeople were typically 35% to 40% when Mary Kay launched hercompany. She set that level at 50% to help attract career-oriented

women".

(8) Sweetening compensation with an array of performance bonuses.Sustained high levels of performance were, of course, rewarded by

promotions to positions of sales director or national sales director. Butshort run effort was further encouraged by a generous array of cashbonuses and such in-kind awards as the use of a pink Cadillac for ayear. "In 1982, 358 sales directors earned between $30,000 and $50,000

in commissions and prizes (in addition to their regular sales income).Another 166 earned between $50,000 and $100,000 and 45 earned morethan $100,000".

Those were the key elements of the structure within which the Mary KayCosmetics sales force would operate for the next two decades.

3.2 Corporate Culture

Mary Kay was fully aware of the fact that structure or formulas work only ifthey function in a manner that brings out the best in the people involved. Andso she sought to create a corporate culture, which encouraged people to make

that kind of effort. The culture contained a set of attitudes including:

(1) Pride in the organization

(2) A belief that one could not be satisfied with past accomplishments

but should seek to constantly improve

(3) A willingness to take risks

(4) A belief in the dignity of selling as a profession

(5) A view that work was the third most important element of a person'slife. God was first and family second.

(6) A belief that one could and should have fun at work

(7) A belief that the Golden Rule was a practical guide to conducting

one's business affairs.

The culture also contained a set of guidelines for anyone with a supervisoryfunction. Those guidelines summarized the way Mary Kay herself tried to deal



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with her employees. They included the following admonitions:

(1) Make each individual feel important

(2) Praise them frequently and in public

(3) Whenever necessary, criticize them but do so constructively and

sandwich the criticism between two layers of praise

(4) Be available to listen to them and hear what they are trying to say

(5) Make an effort to eliminate the factors that put stress on them

(6) Don't hide behind policy in dealing with their problems

(7) When developing a plan or project get the people who will

implement it involved in planning it so that it becomes their project.

Those were the principles learned by Mary Kay during her decades of

apprenticeship working for others. Her challenge was to make them a way oflife in her new company.

Two Decades of Rapid Growth

With her plan in place, Mary Kay lost no time in implementing it. Given herdecades of experience in recruiting and training direct sales forces for Stanleyand World Gift, she skipped the trial and error period which many new

business founders must endure.

In 1964, the company's first year of operation, sales totaled $198,514. Thenumber of consultants stood at 318 at the end of the year. That pace was rapid

enough to cause Mary Kay to think of ways of covering the nation. Sheconsidered franchising, but decided against it because she thought womenwould have to get a man to put up the capital and that would make the man theboss. Instead she decided to offer stock to the public and use the proceeds to

fund a company-directed expansion. The offering was made in 1967.

For the next 14 years the company's sales grew at an average annual rate of

28%. There was a sharp slowdown beginning in 1975 and lasting through 1978.But the company reacted by increasing compensation for consultants andgrowth rates returned to a range of 29% to 82% for the next four years.

Growth required some capital investment. In 1969 the company built a 275,000square feet manufacturing and packaging plant in Dallas. In the early 1970s



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four regional distribution centers were built. And in 1977 an eight story home

office building was opened in Dallas. By 1981 that facility would house 400 ofthe company's 1,000 payroll employees.

From the beginning Mary Kay Cosmetics held an annual convention torecognize the top performers in the company. By the end of the 1970s this hadbecome a stunning emotional event for the participants and a highly effectivepublic image builder for the company. Mary Kay once described this

motivational tool as follows:

Every August we have what we call Seminar. It's a grand party, three days

of spectacle - part beauty pageant and part Academy Awards night. It's the

climax to a whole year of Mary Kay enthusiasm.

But there's more than spectacle. There is a chance to share ideas and

techniques with people from all over the country. There are classes in

selling, goal-setting, leadership, charm and poise and even bookkeeping. We

also have a workshop for husbands on how to be a helpful Mary Kay spouse.

On Awards Night we get 8,000 people, all of whom come to Dallas at their

own expense. Thousands of prizes are awarded, ranging form the keys to a

(pink) Cadillac to diamond bumble bee pins (the company's symbolic way of

saying that the recipient did more than anyone thought she could). We

crown the queens of sales and recruitment and present them with prizes and

flowers and scepters, accompanied by standing ovations and musical

fanfares. And there are also inspirational speakers and top-notch

entertainment."

Seminar was the centerpiece of a well-orchestrated program of motivating the

sales force. As one observer put it, "Mary Kay Ash urges managers to 'praisepeople to success' and she does not take the maxim lightly. Her consultants,from the most lowly to the most exalted, receive tremendous recognition.Monthly prizes are mailed to their homes. Each consultant gets a card on her

birthday. And top performers are listed in Mary Kay's monthly magazine,aptly called Applause.

The company's expansion was directed by two persons. Mary Kay herself set

the direction, created the culture and served as a highly visible cheerleader.Richard Rogers, her son, handled the management functions. From thebeginning Mary Kay needed her son to handle that aspect of the business

because all of her experience had been in selling. Rogers gradually built amanagement team that by 1985 consisted of the following full-time executivesin addition to the chairman of the board (his mother) and president (himself):

1. Vice president of marketing



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2. Vice president of finance

3. Vice president, secretary and general counsel

4. Vice president for administration

5. Group vice president for manufacturing

6. Vice president for research and development

7. Vice president for quality assurance and engineering

8. Vice president for manufacturing operations

9. Treasurer

10. Director of personnel

11. Director of public relations

12. Director of public affairs

13. Director of product services

14. National director of distribution

15. Four directors of the regional distribution centers

By the mid-1980s the company was no longer a small entrepreneurial venturebut a mid-size corporation which depended for its success on a team of morethan a dozen professional executives.

Tough Times in the 1980s

The heady success of the 1970s was not to last. Changes in the American laborforce caused direct selling in general to run into difficulties and Mary KayCosmetics experienced a decline in sales in both 1984 and 1985.

The basic problem was an increase in full-time job opportunities for women.The number of beauty consultants working for Mary Kay fell from over

200,000 to 100,000 between 1983 and 1985. As a result, the company's sales fellfrom $323 million to $260 million over the same period. The reason? Thecause? In the opinion of reporter Mei-Mei Chan, "(The industry) simply lost



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their vast pool of workers. By 1982 when inflation fell and the economy

improved those who had wanted 'pin money' during the lean times droppedout. And job opportunities for women opened up dramatically in the late '70sand '80s, prompting more and more women to snap up 9-to-5 positions instead

of part-time sales work. Not only weren't they available to sell the product, butthe USA's 53 million working women weren't home when firms like Avon, theindustry giant, called".

The company responded first by developing an improved compensationpackage for the consultants. Then, as the founder and her son looked at thecosts involved, a decision was made to buy all of the outstanding stock and

make the firm a privately held corporation once again. In December 1985, thetwo paid $315 million to buy the company back. And in 1986 the newly-createdMary Kay Cosmetics saw sales rebound to $280 million.

Conclusion

One era ended and another began when Mary Kay Cosmetics experienced itsfirst sales decline in 1984. The old era was a case study in entrepreneurship.The new will be a study in the efforts of an established corporation to retain its

excellence in a changed business environment. Mary Kay Ash created aremarkable corporate culture in the old era. Her son, Richard, who helped hercreate that culture faces the challenge of adapting it to the changedenvironment.

There is no question that Mary Kay Cosmetics is a business success story - astory of the creation of wealth through effective implementation of a sound

business plan. But it is also clear that the company's founder had an additionalgoal in starting the business. As she put it:

You can do it! So often a woman comes to us who desperately needs to hear

that. Frequently she is a housewife who has been out of the job market for

many years, or who has never worked outside the home.

When I see a woman like this, I want to do for her what nobody did for me,

in the way of providing opportunities We make sure she learns the

necessary skills. We encourage her to improve her appearance so she looksthe part of a beauty consultant.

And when she does that, she begins to improve in other ways, too. Her

confidence builds. She becomes more efficient and begins to set goals. Very

often a Mary Kay career is a self-improvement and a way of life - not just a

way to earn money."



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*This article originally published in The Journal of Business Leadership

Volume 1, Number 1, Spring 1988.

*Copyright 1988. The American National Business Hall of Fame. All rightsreserved. No portion of ANBHF may be duplicated, redistributed or

manipulated without the expressed permission of the ANBHF.

REFERENCES

1. Ash, Mary Kay.Mary Kay on People Management.N.Y.: Warner Books,

1984.2. Chan, Mei-Mei. "Mary Kay Ash." USA Weekend, July 18-20, 1986.3. "Flying High on an Idea."Nation's Business, August, 1971.4. "Leaders in Sales and Sales Management." The Journal of Selling and Sales

Management.May, 1983 (Reprint).5. "Mary Kay's Sweet Smell of Success."Reader's Digest.November, 1978.6. Rosenfeld, Paul. "The Beautiful Make-Up of Mary Kay." Saturday EveningPost.October, 1981 (Reprint).7. Wiley, Kim Wright. "Cold Cream and Hard Cash." Savvy, June, 1985.(Reprint).8. Value Line Investment Survey. N.Y.:Value Line Inc., May 20, 1983.

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mary kay ash - perfil y biografía

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