Estee Lauder: how HR delivers results in the business of beauty

Magda Lategan, VP of HR at Estée Lauder, outlines the role HR plays in the industry of beauty.

Craig Donaldson speaks with Magda Lategan, VP of HR Australia, New Zealand, South Africa at Estee Lauder group of companies, about what it takes to succeed in the competitive business of cosmetics

What makes a good HR leader?
You’ve got to have a vision and be very clear on what that is, so you have a compelling story to tell. You can have all the qualifications and technical skills in the world, but you’ve got to be able to understand where the business is going and communicate the dream of what this looks like. For example, at Estee Lauder, I am very clear in what my vision is and I engage my HR team with this and help align them with the bigger picture for the organisation. I’m a visual kind of person; even if you’re not visual and more of a numbers person, I include numbers in my vision to make sure people understand very clearly what my dream is. So once they engage with this, I step back and say: “You run with it now.” And I find that they will achieve the vision – maybe not in the same way I would have done it, but the end result is the same and that has been exciting for me to see. I think this has helped establish a brand for HR in the global organisation of Estee Lauder; I often think as HR professionals we don’t have a brand. We’ve got something very special so we’ve got to market what we’ve got.

What do HR leaders need to succeed?
It’s about balance. Formally, I report to the MD here and I meet once a week with the Estee Lauder leadership team, and I interact daily with both. I need to clearly understand what it is that they want me to achieve so I can help empower the people that I work with to help them realise that vision.

For example, we’re increasing our presence in the retail store space and we want to create an amazing retail experience for customers. But what does that really mean? It’s our job to help interpret that – we look at what other companies like Apple do and examine their strategies, we develop our own and then work interactively with the leadership team in helping make their vision come alive.

“Sometimes being an MD is quite a lonely job”

I know people talk about HR being business partners, but for me that is critical to the role. We have global strategies, which then come down to regional and then the affiliate level. Estee Lauder is a matrix organisation, so I report to our Australian MD for our Australian operations, but then I report to Hong Kong for the Australia and New Zealand region and then New York for the greater Australia, New Zealand and South Africa region. So I need to understand our global business strategies and priorities and help execute them at every level.

How do you manage the relationship with your MD?
One of the biggest things that I’ve learned here at Estee Lauder is not to take things personally. Maybe 10 years ago, if I made a recommendation to the MD and I knew it was the right one, I would take it very personally if they did not agree with it, for example. Then I realised something important. I am often the closest partner the MD has in some business decisions, but it is up to them to make the decision. In the end, I can only give them advice, and it is important to understand their priorities and trust where they are coming from – and then it is my role to support that decision.

Sometimes being an MD is quite a lonely job. Leaders face their fears and challenges and they often don’t have anybody to talk to. Sometimes they share confidential thoughts about issues or people in the business. Sometimes they just want you to listen, and sometimes we talk about issues and I provide advice. So the ability to listen is very important in this process, as is trust. There are times where I have to trust the MD and say to him: “I’m going to tell you something off the record, so that when it happens that you are prepared for it.” It’s a very fine line, because if somebody’s told me something in confidence, then that has to be maintained.

“One thing we’re currently looking at is a new service delivery model in which we are shifting from normal HR to become more strategic business partners”

How do you ensure HR is aligned with the business?
The business strategy is rolled out by the MD to the Estee Lauder leadership team. I also look at what our global HR strategy is, and I combine the two and put together a strategy. I then call the HR team in and get their thoughts on the strategy and business for the year ahead, and incorporate those – and that’s the basis for our strategy document. Strategy documents are often very plain and bland, but because I’m a visual person I include photographs and other images to help tell the strategy story. It’s like a Pinterest version of a strategy.

From there, we sit down and review the strategy and agree on how we are going to measure our success. One thing we’re currently looking at is a new service delivery model in which we are shifting from normal HR to become more strategic business partners. So this new model will incorporate elements of centres of excellence, employee service centres and business partners – but all three will be very separate. This is no small challenge, and it’s going to take time in helping the HR team make this shift successfully.

Part of this process is recognising niche skills within our team, developing those and taking ownership for delivering different parts of the strategy. We meet weekly and talk about this process as well as progress on deliverables, so we’re very clear on what our strategy is and how we’re achieving that.

How do you work with the MD to deliver on business strategy?
The business vision for Estee Lauder in Australia is to be number one in the prestige cosmetics market. To do this, we have to win big in department stores as a company and across every brand.

So what does that mean? If our MD, for example, says that he wants the best cosmetics floor locations in all stores, then we need to look at how we can position our brands to be preferably located in these spots. The Estee Lauder brands currently hold the top three positions in the Australian department store cosmetics category, however, in some key stores our brands may be ranking lower than these national results, so we then need to understand why that is and how we can change this as a business – that’s our challenge.

“We’ve undertaken a journey and developed a far more structured approach to talent”

We need to look at what is happening at the counter level and see if there is true engagement between the beauty advisers and potential customers, as this may be what is affecting the brand’s performance in-store. There are two key staffing models for us in selling cosmetics in-store. The first one is what we call the MAC model. If you go to a prestige department store, such as MYER, you’ll see a MAC counter. We own 100 per cent of the beauty advisers at these MAC counters, so we’re fully responsible for paying and looking after them. However, we don’t own the people at the Estee Lauder counters, and this is the second staffing model that you see in the cosmetics industry.

It’s a different relationship in that the department store owns them – but we pay 50 per cent of their wage and their commission. So, for example, when store management asks the beauty adviser at the Estee Lauder counter to serve a customer on a competitor brand, she has to because they are officially a store employee, rather than our brand employee. But other brands are starting to recognise that they want to engage these beauty advisers, so we need to look at these models and new ways of working to make sure that we keep these retail staff engaged. We’re working with stores to conduct more training and development for them, and we’re starting to look at corporate induction programs – something they’ve never done before – to help them to believe in our products and want to be part of the Estee Lauder story. So we’re looking at how we can help the brand achieve more sales by doing something with beauty advisers in-store.

It’s also important to engage them from a retention perspective, because people don’t want to work in retail. Our latest turnover internally year-to-date was 16 per cent – so for the industry it’s not bad. At the retail level, department stores typically run at 50 percent, but for MAC our turnover is 21 per cent and for our other retail brands it’s 30 per cent. So I wouldn’t say we’re decidedly better, but it’s a very competitive industry so I think there is always room for improvement.

What are your keys to successful talent management?
In the past, we have taken quite a flexible approach to talent management because of the kind of organisation we are. Talent management in Estee Lauder happened a lot more organically, I suppose. However, we’ve undertaken a journey and developed a far more structured approach to talent. The process starts formally in August, where a manager reviews talent within their team with their HR business partner.

“One of the biggest things that I’ve had to learn is not to take things personally”

They complete a talent review form for the person, then we sit together as a leadership team and talk about our talent, and I have to say this has been one of the most exciting developments internally. So we all talk openly about what talent is available across the business, we discuss the strengths and what the development opportunities are.

We then calibrate this with New Zealand, choose our top talent team and we then do development plans and each manager goes back to their employee and says “here’s your talent plan”. This happens throughout the organisation, right to the top. So the employee owns the process from here. Previously, development might have been about attending a course or undertaking a program, but now it’s very much about the 70, 20, 10 rule, and most development is on the job. So we look at what on-the-job rewarding experiences we can provide people with. At Estee Lauder we do a lot of project work in taskforces across the country. Our top talent is reviewed in February every year, and we filter the results down to make sure we’re on track and then the cycle starts again.

What advice would you offer aspiring HR leaders?
I love the word “authenticity”. To me, you have to be real. Sometimes people have a range of negative perceptions of HR, so I tell my team here at Estee Lauder: “What you want to be is what you’ve got to present to people. Be very clear about what it is that you want to be.” It’s also important to be authentic so people can trust you. If people don’t trust you, then it doesn’t matter what you do, you won’t get anything out of them.

I also believe you have to be honest with people. To me, that’s what an HR person is all about. Part of this process is also learning to be objective. For example, if we’re told something that requires further investigation, people can say all sorts of things. But I need to find out what the facts are. It’s easy enough for someone to say “so-and-so said …”, but I always tell my HR team that we have to make sure that we have the facts on hand.

So, it’s about authenticity, it’s about trust, and it’s about being clear about what it is that you like to do – and you have to like people. If you don’t like people, please don’t go into HR.