A quick thought on JC Penney and the firing of their CEO. The bleeding was too much and now the CEO, a guy named Johnson, is gone.
Without investing a lot of energy researching the details nor insuring I have all the facts right … here is a quick summary of the situation and my own penny and a ½ thought.
A year and ½ ago. JC Penney is showing profits but becoming increasingly irrelevant in the category and shrinking as frightening levels.
They hire a new CEO <from outside the industry>. He decided to make “the big change.”
- On joining the firm, he said, “In the U.S., the department store has a chance to regain its status as the leader in style, the leader in excitement. It will be a period of true innovation for this company.”
They institute the ‘big change.’
- Abruptly scrapping dubious pricing policies of marking up prices and then offering discounts, with heavy promotions, and coupons as well as incorporated new more fashionable items at reasonable prices all the time.
- The approach didn’t fare well with Penney’s customer base of bargain hunters. They rebelled, traffic declined.
Penney slowly returned to the prior era of pricing, with lots of promotions, lots of price-focused ads, and marked-up prices that would be later marked down.
JC Penney reports a $20+million loss.
<note: all his happens in 17 months>
I buy the fact the immediate priority for JCPenney is survival. Stop, or slow, the bleeding.
And I can guarantee a boatload of pundits will rush to the forefront suggesting the CEO didn’t understand the “woman buyer” or “how women like to shop.” <in other words … they will pull out Paco Underhill – the master of shopping psychology – and start saying ‘it’s the thrill of the hunt, not the buying. “>
He knew exactly what he was doing.
And you know what?
He may have been right and judging after 17 months is ludicrous.
Particularly after a knee jerk “whoa! Let’s go back to lots of promotions to bring people back” action.
The CEO was well aware of the mismatch between the vision, strategy and the existing management and culture.
But he was also aware that radical changes needed to be made <assuming everyone wanted to have a radical result>.
Penney’s aggressive discount practices had not only cut into pricing strategy <it had actually become their pricing strategy> but the company <and brand> had diminished in consumers’ heads.
Macy’s & Kohls were stealing Penney’s business.
The guy came in and decided to clearly re-position the company, and brand, in the marketplace.
Was it a misalignment with the portions of current customer base? You bet.
But wasn’t that the point?
And the new strategy was about authentic & honesty.
Geez. That’s a shitty strategy, huh?
I bet good ole Jacque Penney himself <assuming there was one> was standing up in heaven applauding that someone was actually implementing the original vision.
The vision was incredibly sound.
I was not in the board room but I envision no one forecasted this huge a loss … but, you know what? That is where conviction gets tested.
Shit. If Margaret Thatcher was a CEO she would have been fired after 17 months if this was the way of judging.
I am not suggesting the decision to move forward would have been right, nor easy, but judging in 17 months is ludicrous.
A boatload of people are going to rush to judge this event.
In fact what inspired me to write about this was one of the talking heads on CNN who unequivocally stated “this is going to be a poster case study in MBA schools for what not to do.”
That is not only silly but crazy.
The CEO had a clear vision to delight Penney customers. Nothing wrong about that.
But delighting customers is tricky.
And it gets even trickier when:
- The organization is not aligned
- And the organization <and outside financial world> panics.
We will never be able to judge this CEO nor the event.
Someone at JC Penney will bastardize the vision. People will be quick to point out the failure … but WE WILL NEVER KNOW if it was a failure or not.
How can we?
17 months for a massive organization like JC Penney? It would be crazy to think you could make the tanker sized business shift almost 180degrees in 17 months.
I love the vision he had.
I love the fact he actually was going back to the heritage of JC Penney. What it originally stood for.
I love the fact he recognized that brand is not a brand if it is simply promotion <or what some people may call ‘bargain’>.
Would I have implemented it differently than he did? Maybe. I don’t know. It is the infamous debate of gradual change versus quick change.
All I know is that change is painful.
Oh. I also know that dramatic results are dependent upon dramatic measures.
In the end … who knows what the ‘new JC Penney’ could have achieved after they had survived the change bloodbath.
Someone is gonna send me a note about “you have to survive.’ Well. Let me remind everyone of my ‘how far will you go’ post: http://brucemctague.com/how-far-would-you-go-to-solve-a-problem.
Sometimes organizations need to make dramatic changes to turn themselves around. The longer you permit your organization to go down the slippery slope of irrelevance the more dramatic the change has to be. And sometimes you find a leader with a good vision and the balls to implement the dramatic change.
Unfortunately … in today’s business world … no one seems to have the balls to do it.
What I will tell you is that JC Penney will now go the way of Woolworths & Wanamakers. Or maybe the Dollar Store will buy them.