A Company Makeover

Sunday, June 1, 2008 - 10:10

Under CEO Karen Matthews, the skincare company Ella Baché adopted a new business model in 2002, protected its brand fiercely, and turned the company's fortunes around. By Darren Baguley.

Brand is everything in the ultra competitive world of cosmetics and in the late 1990s, Ella Baché's was second to none. Yet, When Karen Matthews became the chief executive of the skincare company in 1999, the business was languishing.

Hard to believe, but at the time of Matthews' appointment, the company had no contracts in place for its business arrangements, even though their products were being sold in 260 Australian salons; Ella Baché had just recorded a loss of $1.5 million.

Since taking the helm, Matthews has revitalised the organisation. In 2002, she launched a new business model that offered traders two options: they could adopt a franchise, or sell Ella Baché's products under a 12-month renewable contract. This measure resulted in a near doubling of revenue with a turnover of almost $20 million in 2006.

Matthews expects by 2010 that Ella Baché will turnover $30 million in its wholesale business – with an additional $90 million moving through its franchises – and for 80 per cent of the business to be franchised by the end of 2008.

The charismatic Ella Baché leader, one of the youngest CEOs in the country, describes herself as hyper and having a classic Type A personality; impatient and highly competitive. In the course of revitalising the flagging brand Matthews has garnered a string of awards including Telstra New South Wales Business Woman of the Year 2004, Franchise Council of Australia NSW/ACT Franchise Woman of the Year 2005, and Franchise Woman of the Year 2007.

Role preparation

In some ways, however, Matthews has spent her whole prior career preparing for the role. After completing a Bachelor of Commerce at the University of New South Wales she joined Grace Brothers under its graduate trainee program. "That was a crash course in buying," she says "and I got some valuable experience in assistant buyer and buyer functions."

Her career took a sideways move in 1990, when what had become the Myer Grace Brothers Group consolidated all its buying and administration functions in Melbourne.

"I moved to Melbourne into a marketing role as marketing was becoming a priority in department stores at that point. I spent some time as marketing manager for fashion accessories, which included cosmetics, and when I left Myer Grace Brothers in 1994, I was marketing manager across women's apparel and fashion accessories."

By 1994 the Sydney born and bred Matthews was ready to come home, so she left Myer Grace Brothers to join the FJ Benjamin Fashion Group, which is a fashion retail distribution business for high-end fashion labels such as Gucci, Moschino and Hunting World. "At that point, the group had just secured the exclusive licence to develop fashion accessories under licence for the jeans brand Guess. I came into the business to set up the product development and licensing of that range.

"That role grew into a bigger licensing role where I was involved in doing a number of ranges, and really where I got my whole experience in licensing, franchising, wholesaling and branding. Myer Grace Brothers was the theory and learning how to live in corporate life; FJ Benjamin was much rawer, much more emotional, much more about understanding retail, passion and branding."

Protecting the brand

On joining Ella Baché, Matthews quickly realised she would need all those skills and more to turn the company around. "We had 260 salons out in the market using the brand name and there was not one piece of paper formalising any agreement between Ella Baché and the salons. We had examples of salons using the name on their door, magnetically bringing customers in, who sometimes didn't even have our products inside."

With her background in branding, retailing and licensing, Matthews identified she was going to have to do a major restructure of the business; but the priority was to safeguard the brand. "It smashed me in the face that the very first thing we needed to do to have a future was to protect the brand."

Ella Baché's Australian operation is owned by the Hallas family and operates independently of its Parisian parent. The arrangement gave Matthews a free hand to do what needed to be done to turn the business around.

In 2000, little more than a year after she had started as CEO, Matthews announced the company would franchise. It was a radical change and Matthews realised that there was little point in destroying the business to save it, so it would have to be handled very carefully. "We actually put together a committee of salon owners, all of whom had been working with the company for at least two years, and used those people to help us build the franchise agreement.

"In doing that, I was respecting their loyalty and knowledge, admitting my lack of knowledge and also getting their buy-in so they were talking really positively about what we were doing." Ella Baché's CEO launched the new franchise agreement in 2002, along with a distribution agreement for salon owners who were not ready or willing to sign up to a franchise.

Achieving such a radical change-management program was a challenge, and one of the ways Matthews managed to get through it was to treat the transformation like a start-up. "It was my vision, my baby, it was me starting on my own solo, so it was a start-up mentality. The complication with it was that we were also running a business. It was like patting your head and rubbing your tummy at the same time. We had to keep operating and selling products while we were totally recreating the company."

Doing this successfully required leadership, a topic that Matthews is passionate about. "Leadership has to come from within: somebody who is a great leader has this bucket of skills, and a great leader knows when to pull out what skills at what time. And you have to have a dream. Leaders are dreamers and great storytellers, they know how to sell their dream, how to take people along with them, how to motivate people and get people to buy in with their dream."

Executing the vision

While dreams are incredibly powerful, Ella Baché's CEO knows that being able to execute the vision effectively is also very important. "Leaders know how to put the right people in the right job, how to build a good team around them to fulfil their dream. They know how to set goals and milestones, so people are working in measurable chunks, and importantly, they know how to celebrate and reward at each of those stages, so they know when to pull back and stop driving and celebrate what has been achieved."

Even when a leader has an exciting vision and assembled a great team Matthews warns against complacency. "Leaders know how to monitor, measure and check in with the decisions they've made. Importantly, they're big enough to know when they make a mistake and if something is wrong. They're very open, never get complacent and think, "I know it all". I think great leaders are constantly reinventing themselves and constantly questioning, 'How do I do this better?', 'How can I be a better leader?', 'How can we get better results? whatever the context is'."

Matthews also believes that it's vital for leaders to be compassionate. "Leaders often have to make tough decisions and deliver difficult messages. If a leader is compassionate, then they understand what the person on the other side of the table is going through. It doesn't change the outcome, it just means they're a little bit more respectful."

At the core of what Matthews is talking about is the concept popularised by author and psychologist Daniel Goleman: emotional intelligence. "Emotional intelligence is more and more important, it's not just a girl thing anymore," she says. "It really is an important concept for people to grasp, whether you're talking about working with women, men, generation Y, customers or franchisers."

So are these skills learned or innate? "Most aspects are innate," says Matthews emphatically. "The learned part is learning how to manage them, putting more sophistication around those raw skills. Determination is a great example. It is an innate strength or drive, but what you learn is how to manage your determination, which means you don't walk over people and you don't push for what you want. You learn to take different paths depending on who you're working with, and you take people along with you.

"What can't be learned is passion. To be a great leader, you have to find something you innately love."

Management and leadership

This forthrightness is further typified by Matthews' approach to the notion of a glass ceiling for women. "I am sure that it exists to varying degrees in other instances and other industries, but I think people are starting to use it as an excuse.

"You need to find a way to stand out, to get what you want. If, at one company, you come up against an obstacle that can't be managed, then go to another company. Don't stay in that company with that glass ceiling. Move on. There are so many businesses and companies today that would be supportive of anybody with skills."

Ella Baché's CEO also believes that there is a big difference between management and leadership. "Management is doing, leadership is creating. Both are critical in a business, but a manager is somebody who makes everything happen and they may work more in a three-month or a 12-month time frame.

"Leaders set the goalpost and are the coaches, while managers are the captain of the team. Anybody who wants to be a leader needs to learn those coaching skills as opposed to the doing or fixing skills. The doing and fixing is [up to] the captain of the team, where you're on the field and if the game isn't going well, the captain and the players have to fix it.

"There's not a lot the coach can do when the game is happening, but what the coach does after the game is sit with the captain and say, 'okay, what have we learned? What would we do differently next time? If we were to play that game again, what would we do differently?' You need both, but they're different."

Despite her belief that much of what makes a leader is inherent, Matthews believes in formal management training. "Where business and management courses have their greatest strength is in the ability of the people who sit in the classroom, or the lecturers for that matter, to apply real-life experience. The most effective courses are the ones where people are telling their own story, real life case studies.

"People saying, 'here is an example of where I crashed and burned, here's what I learned and how I do it now'. You need theory, but you also need the practical experiences to give you the wisdom to go out into the world and do. A lot of the young MBA graduates are not that useful if they don't have some experience around their qualifications." A rule of thumb that Matthews believes can be applied to training, a conference keynote or a lecture is to be able to walk out of there with one or two things she's going to do differently tomorrow.

So what doesn't Matthews like about being CEO? "I don't like it when I'm told we can't do something. I hate that sometimes you need to go slowly. I'm someone who wants to do everything at once and doesn't understand why you can't. I don't necessarily love the detail of making things happen, but I've learned a lot about how important detail skills are.

"I've also learned that the pieces that I'm not good at or I don't like are probably the most important things to make sure that I'm aware of, because they're the areas that I need to have good people around me."