L'Oreal S.A., in the course of implementing a global diversity strategy, is faced with challenges. These challenges include cultural differences among countries and low awareness of the advantages that a diversity strategy may bring.
Ken Mark; Cara Maurer
Harvard Business Review (910C26-PDF-ENG)
October 26, 2010
Case questions answered:
- How should Balustre-D’Erneville deal with the global roll-out of L’Oreal’s diversity policy? Answer this question as though you are a member of an internal project team that is directly assisting Balustre-D’erneville.
- State the key problem which Balustre-D’erneville has to address regarding the global roll-out of L’Oreal’s diversity policy.
- Evaluate possible, mutually-exclusive options in solving the key problem.
- Justify why your suggested option should be pursued.
- Propose a brief implementation plan that outlines what actions should be prioritized and why.
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L'Oreal S.A.: Rolling out the Global Diversity Strategy Case Answers
Executive Summary – L’Oreal S.A.: Rolling out the Global Diversity Strategy
This report is based on the case “L’Oreal S.A.: Rolling out the global diversity strategy”. It is directed towards Sylviane Balustre-D’Erneville, the Europe diversity director at L’Oreal, and advises on how to focus communication efforts and actions to build support and momentum for the global rollout of L’Oreal’s diversity policy, which includes multiple dimensions such as nationality, ethnic origin, socio-economic background, gender, disability, and age. It begins by identifying and analyzing the core issues faced by L’Oreal S.A. (L’Oreal) in 2007 in formulating the global roll-out of its diversity policy, evaluates two alternative options to resolve these problems, proposes a recommended course of action, followed by a brief implementation plan that can be easily adopted by L’Oreal moving forward.
The three key issues that were outlined are a lack of employee awareness and understanding of the diversity policy at L’Oreal, employee motivation, and engagement, and geographical and cultural barriers to diversity. Subsequently, alternative options to continue or discontinue with the global roll-out of the diversity strategy was presented, with advantages and disadvantages highlighted. Following this, it was justified that L’Oreal continues and proceeds with the implementation of the policy.
Suggested recommendations include cultivating a diversity mentality and introducing a culture of diversity at the company, increasing the involvement of top executives, providing readily accessible resources and material to the workforce, and collecting data to enable the company to set targets and goals. Further recommendations were the development of a hybrid diversity function and a global diversity leadership council, forming a link between diversity and business goals, and introducing voluntary diversity programs and collation feedback to track progress. Lastly, a brief implementation plan was produced to enable Balustre-D’Erneville and the L’Oreal team to effectively execute the global diversity strategy.
L’Oreal, the world’s largest cosmetics company, is a French multinational corporation that boasts an incredible portfolio of internationally renowned brands. Describing itself as the world leader in beauty, L’Oreal was founded in 1909 and is now present in 130 countries on five continents, with 77,400 employees. L’Oreal has an unparalleled commitment to technology, research, and innovation in cosmetics, and aims to provide high-quality products for women, men, and children of all ages and ethnicities (L’Oreal, n.d.). The group is dedicated to celebrating the diversity of beauty and has a broad range of spokespeople.
L’Oreal entered the global market over the years through licensing, a series of acquisitions, and joint ventures with other firms and have since grown into a multibillion-dollar corporation. According to Jean-Paul Agon, L’Oreal’s chairman and CEO, the very nature of their global business makes diversity absolutely necessary. Globalization has broken down many barriers and enabled L’Oreal to serve customers with different sensitivities all over the world, and the firm’s desire to innovate is based on understanding and respecting those differences.
Agon further states that a major part of L’Oreal’s success is due to the diversity of the brands in the group’s portfolio itself. Besides this, L’Oreal’s experience shows that variety breeds more creativity and innovation, and believes that diversity will prepare the company to meet the challenges that the 21st century presents. It was also mentioned that in order for L’Oreal to be global, the organization first needs to be global from within. As such, L’Oreal aimed to increase the overall diversity of the entire multinational organization since signing a Charter of Diversity in 2004. The next section presents a range of issues that Balustre-D’Erneville currently faces in looking to continue the implementation of L’Oreal’s global diversity policy, which includes multiple dimensions such as nationality, ethnic origin, socio-economic background, gender, disability, and age.
PROBLEM IDENTIFICATION AND ANALYSIS
The following key issues have been identified in the case study and are required to be addressed by Balustre-D’Erneville and her team in order to efficiently and effectively execute the rollout of L’Oreal’s diversity policy on a global scale.
Lack of employee awareness and understanding of the diversity policy. Firstly, it is evident that the diversity strategy as a whole was not as clearly communicated to the organization as employees have yet to fully embrace the concept of diversity at L’Oreal. There is still an unclear sense of purpose within the group of managers who participated in the diversity seminar, judging from the range of reactions and responses that were received. The responses indicate a lack of overall buy-in of L’Oreal’s diversity policy. It highlights a lack of managerial awareness and understanding of how crucial diversity is to L’Oreal, to begin with, why the company has chosen to embark on the diversity strategy, as well as the long-term sustainability role and benefits that diversity can bring to the organization.
Some managers questioned the relevance of a diversity strategy and the diversity training sessions, and assumptions such that this was a short-term “flavor of the month” type program and that diversity were “more of a French concept” and “irrelevant in some regions” were made. This is in line with Balustre-D’Erneville’s analysis that one of the main obstacles facing L’Oreal is a low-level awareness of the benefits that a diversity strategy could bring to the company. The implementation of the strategy will not be efficient and/or effective if the managers, who are in leadership positions and have the ability to influence employees, are not clearly aligned with the strategy’s objectives. This will result in further challenges when rolling out the global diversity strategy to the rest of L’Oreal’s employees and the wider business.
Employee motivation and engagement
Next, a lack of employee motivation and engagement is another key issue that was identified in the case. The goal-setting theory of motivation explains that individuals are more motivated when set goals are clear and direct, and demanding but attainable (Locke & Latham, 1990). According to Carlopio and Andrewartha (2012), individuals are more likely to be motivated if the goals that are established include their input and agreement.
This indicates that the goal must first be understood if they are to be effective (Carlopio & Andrewartha, 2012). Some of the feedback garnered from the managers at L’Oreal show that they do not understand why they had to attend diversity training, which presents a fundamental issue in itself – how can the firm keep their employees motivated in driving a long-term global strategy when they do not fully understand or agree with it?
Moreover, the expectation to have managers lead diversity initiatives in their respective teams after a one-and-a-half-day diversity seminar appears to be overly ambitious – is this enough to keep these managers motivated to drive diversity initiatives on their own, and without further guidance? Imposing the requirement for managers to attend diversity training on top of their work responsibilities may also pose risks to existing levels of engagement at L’Oreal. Some managers had expressed the challenge of implementing the diversity strategy on top of day-to-day pressures, explaining that they have no time for the program as they have too many things to accomplish in a day.
Furthermore, there are criticisms about using the diversity training method to improve diversity levels within an organization. Dobbin and Kalev (2016) argue that the positive effects of diversity courses rarely last and that individuals often respond to compulsory training courses with anger and resistance, with some studies showing that this can even activate bias or ignite a backlash. These issues need to be addressed as L’Oreal should aspire to keep their employees engaged with the strategy and motivated to drive global diversity in the organization.
Geographical and cultural barriers to diversity
In addition to the above points, the geographical distances and cultural differences between the many countries that L’Oreal operates in pose further concerns in executing a seamless rollout of the firm’s global diversity policy. Such barriers will need to be addressed by BalustreD’Erneville in looking to increase the overall diversity of the entire multinational corporation. The physical distance between the many offices that L’Oreal have presents a challenge as there will be a lack of visibility in ascertaining the quality of the diversity initiatives that the managers were expected to lead in their offices. It also makes tracking progress challenging.
As described in the case, L’Oreal’s Asian country units were described as having very homogenous workforces from an ethnic and cultural perspective, and they had not prioritized diversity in their workforce. Some local management teams had only paid little attention to the policy even after attending the training programs. Clear geographical differences affected how L’Oreal’s global units viewed the idea of implementing a diversity strategy. According to Bhardwaj (2016), the definition of what diversity comprises vary according to country and context, and firms in different nations may propose different diversity challenges. Nishii and Ozbilgin (2007) also argue that many global diversity initiatives fail due to corporations attempting to directly export domestic diversity programs abroad, as certain concepts do not readily translate into other cultures. Definitions of diversity are sensitive to the cultural context (Nishii & Ozbilgin, 2007). Multinational corporations such as L’Oreal have geographically dispersed subsidiaries all over the globe which brings forth the added complexity of cross-cultural settings. This highlights the importance of understanding the subsidiaries’ cultural context as many organizations risk implementing strategies that are predetermined to fail due to cultural inappropriateness (Nishii & Ozbilgin, 2007).
EVALUATION OF ALTERNATIVES
This section evaluates two alternative options that Balustre-D’Erneville and her team can take in solving the key issues in relation to the global roll-out of L’Oreal’s diversity strategy.
Alternative Option 1: Continue the global roll-out of diversity strategy L’Oreal should continue with the global implementation of its diversity strategy as it is an important investment for L’Oreal’s future successes and enables the organization to fulfill its responsibility as a “corporate citizen of the world”. Furthermore, this will attract and retain top talent, and position L’Oreal as the “brand of choice” for all consumers.
Table 1: Evaluation of alternative options to continue implementation
Alternative Option 2: Discontinue the global roll-out of diversity strategy L’Oreal should consider discontinuing plans to roll out its global diversity strategy. This is due to the implementation being time-consuming, costly, and difficult overall to execute.
Table 2: Evaluation of alternative options to discontinue implementation
Following the evaluation of both the alternative options above, it is recommended that L’Oreal continues to pursue the implementation of the global diversity strategy as the immense benefits far outweigh the costs. In considering the current global business landscape, it is clear that diversity is increasingly being used by organizations to push productivity and profits – allowing firms to outperform their competition (Fonstad, 2016).
Findings from a McKinsey study support this, discovering that racial and ethnically diverse companies were 35 percent more likely to outperform their industry equivalents, and those gender-diverse organizations were 15 percent more likely to succeed when compared to their competitors (Hunt, Layton & Prince, 2015). As such, although progressing with the global implementation of a diversity strategy at L’Oreal presents initial hurdles, it is the only way forward and will generate numerous advantages for the firm if efficiently and effectively implemented.
Furthermore, Fonstad (2016) argues that having diversity in a corporation and effectively making use of it is not only essential to success but may ultimately be crucial to a company’s survival. Given the higher returns that diversity is expected to bring, it is better to invest in it now and implement the diversity strategy, since winners will pull further ahead and laggards will fall further behind (Hunt, Layton & Prince, 2015). The case for greater diversity at L’Oreal is compelling and therefore justifies that the suggested option to continue with the global roll-out of the strategy should be pursued.
RECOMMENDATIONS & IMPLEMENTATION PLAN
The recommended course of action
To refine and achieve its diversity objectives, it is proposed that L’Oreal should follow and adopt the following recommendations.
A fundamental step that Balustre-D’Erneville and her team should begin with is to cultivate the diversity mentality and introduce a culture of diversity at L’Oreal. They need to educate the workforce on what diversity means at L’Oreal, raise awareness of the value and benefits of diversity, and also stress the importance of embracing diversity and executing a diversity strategy globally. A study from Deloitte showed that millennials and older workers share contrasting views of diversity, with the former viewing diversity as valuing open participation by employees with different personalities and views, and the latter defining diversity as the equitable representation and assimilation of individuals from different demographic groups (Burrell, 2016). As such, all L’Oreal employees first need to have absolute clarity of what diversity means at the firm; that it covers the multiple dimensions of nationality, ethnic origin, socio-economic background, gender, disability, and age. This is important for the long-term success of the strategy.
To achieve this, it is suggested that L’Oreal’s senior executives increase their involvement and play active roles in reinforcing the strategic importance of diversity in the organization. It should be clearly emphasized that a corporate goal at L’Oreal is to eliminate all forms of discrimination in their offices across the globe and to increase the overall diversity of the entire multinational corporation. Showing that the top executives are fully on board with the policy and that they share a strong commitment to diversity further highlights its importance to the rest of the workforce.
It needs to be clear that the company is willing to dedicate time and resources to drive this initiative for the long term, and that it is not just a “nice to have” or a short-term “flavor of the month” program. Additionally, all employees should have access to a resource and educational material that is accessible at all times, and the policy objectives should be constantly communicated and reinforced to them. This can be done through a combination of workshops, seminars, newsletters, and via the company intranet. This will ensure that the advantages of diversity are well established and that each employee clearly understands why L’Oreal has placed so much emphasis on implementing this policy.
Next, L’Oreal should collect data to enable them to set achievable targets and goals to be able to effectively implement the diversity policy. Once data is collected and studied to diagnose where the issues lie, changes can be made and progress can be measured (Morse, 2016). Focus can be placed on company practices such as recruitment and talent management, the number of promotions, and salary increments tracked. The tracking of progress should also be transparent and frequently updated and shared with the organization.
Additionally, it is proposed that Balustre-D’Erneville develops a hybrid diversity function structure where the central office establishes an overall global diversity strategy and set targets but also enables each country to establish its own local diversity initiatives in hopes to address culture-specific issues (“Driving Global Diversity”, 2013). This can be executed through a global diversity leadership council which has the role of setting priorities, tracking progress, and providing oversight for local diversity efforts.
Finally, it is recommended that L’Oreal links its diversity and business goals. According to Thomas (2004), this approach leads to a series of significant accomplishments at IBM and its diversity initiatives. By doing so, L’Oreal’s employees will begin to view the implementation of the policy as part of their roles at the company, and not as an additional requirement to their responsibilities. This also incentivizes them to be involved in the rollout of the strategy and hit diversity targets that have been set. L’Oreal should also look to reward teams that have overachieved their diversity targets to effectively motivate and engage their employees. Further, to encourage a new and positive outlook amongst the managers, diversity training workshops and programs at L’Oreal should be voluntary instead of being a requirement, thus giving the managers a choice to attend the sessions if they wish to.
Studies have shown that biases are strengthened when individuals are pressured to agree with something, however, bias is reduced when the choice belonged to the individual (Dobbin & Kalev, 2016). The managers that attend these workshops voluntarily should be encouraged and commended by top management to feel a sense of pride to be a part of a positive change, hence building stronger commitment and enthusiasm. To continue measuring the effectiveness of these diversity training workshops, Balustre-D’Erneville and her team should constantly capture feedback from attendees so that they can track progress.
Following the recommendations above, this section presents a brief implementation plan for L’Oreal to adopt, outlining which actions should be prioritized in the short, medium, and long term.
Table 3: Implementation Plan
In conclusion, it is suggested to Balustre-D’Erneville that the worldwide roll-out of L’Oreal’s diversity policy should be pursued and continued, despite its complexity and challenges. The encouragement and promotion of diversity offer immense benefits to the organization and are the only way forward. The three key issues which Balustre-D’Erneville has to first address regarding the global implementation of L’Oreal’s diversity policy are the lack of employee awareness and understanding of diversity which may prevent the efficient and effective implementation of the strategy, a lack of employee motivation and engagement with the strategy, as well as the geographical and cultural barriers to diversity that L’Oreal faces.
Recommendations to solve these issues include the following:
- Cultivating a diversity mentality and introducing a culture of diversity at L’Oreal;
- Increasing involvement and support from the company’s top executives;
- Providing additional resources and educational material to the entire workforce;
- Collect data to enable the organization to set achievable diversity targets and goals;
- Development of a hybrid diversity function and a global diversity leadership council;
- Forming a link between diversity goals and business goals; and
- Introduce voluntary diversity programs and collate feedback to track all progress.
Following this, a brief implementation plan that outlines what actions should be prioritized was introduced with short, medium, and long-term goals. Implementing a global diversity strategy requires a major corporate change. This will succeed with a few important factors in places such as the “strong support from company leaders, an employee base that is fully engaged with the initiative, management practices that are integrated and aligned with the effort, and a strong and well-articulated business case for action” (Thomas, 2004). Through this, I am confident that Balustre-D’Erneville should succeed in efficiently and effectively implementing L’Oreal’s diversity strategy worldwide.
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