Leadership plays a crucial role in business management, and the wrong decisions of a person in charge can significantly harm the whole company’s wellbeing. The case of Ron Johnson’s executing role in J.C.Penney shows how an outside-taken leader who administrates without considering corporate culture and values can destroy a reliable, well-known company (Harbin & Humphrey, 2015). This paper aims to identify the problems caused by the poor leadership performance and find practical solutions that could prevent the business from drowning in financial and management issues.
J.C. Penney is an iconic retailer with more than a century of history being trusted by Americans nationwide. The company had loyalty to the employees and customers, strong values, and policies of providing discounts for various goods 700 times a year (Harbin & Humphrey, 2015). J.C. Penney faced challenges in the 2000s when the competition in retail apparel was enforced by many niche shops’ appearance combined with the rising popularity of buying online (Harbin & Humphrey, 2015). After several years of stagnation, the Board decided that their strategies require a turnaround, and the new leader brought outside can refresh the processes.
Ron Johnson was the J.C. Penney’s hope to make the company a stronger competitor by changing its vision. The newcomer was promoted to the Chief Executive Officer (CEO) role in 2011 by one Board member due to the valuable experience of working as Vice President of Retailing in Apple combined with a great Stanford and MBA educational background (Harbin & Humphrey, 2015). However, the management style he applied in J.C. Penney was not professional, and the turnaround from boring stores into “something cool” did not work well for the brand with solid values and loyal customers (Harbin & Humphrey, 2015). Johnson upgraded the stores’ structure, changed the logo, fired more than 40,000 employees, and got a management team with no previous experience working in retail (Harbin & Humphrey, 2015). These significant shifts inside and outside of J.C. Penney ruined its values and corporate culture, the CEO was not respected by the workers, and the sales continued to fall.
Johnson’s traits and attitudes played against the company’s interests: the CEO was egoistical, too stubborn to change his mind, and unwilling to listen to others’ opinions. J.C. Penney’s culture of loyalty to employees was eliminated, and even senior positions holders were not treated respectfully, while the new executives were making decisions without considering the reality or workers’ abilities. Such a devastating attempt to make a turnout for beat competitors cost the apparel retailer more than $1.38 billion caused to sales loss and the crash of internal corporate values (Harbin & Humphrey, 2015). Johnson was asked to leave his CEO position in 2013, leaving J.C. Penny in a crisis in the middle of the renovating process.
Problems
Johnson’s leadership manner was inadequate because it only focused on changing J.C. Penney’s concept without considering various internal factors that helped the company maintain its greatness for dozens of years. However, the Board’s decision to hire a CEO outside of the company for renovating the structure that seemed to be outdated is what must be regarded as wrong. The Directors allowed a relatively new member Ackman to realize the idea of updating while any evidence-based arguments did not support that J.C. Penny needs such an intervention (Harbin & Humphrey, 2015). The course of action for revolutionary updates instead of re-building the core values caused other problems and losses.
Another problematic issue is Johnson’s lack of understanding of J.C. Penny’s internal values and corporate culture. The CEO performed such actions as cutting off jobs, canceling the salesmen’s bonuses, and refusing to listen to others’ opinions because of an attempt to apply quick-fix decisions (Collins, 2019). If the processes that were already solicited in the company and were crucial for its culture maintained their value, employees would have been more dedicated to improving the situation.
Moreover, the decision-making power problem in the wrong hands became a barrier to the company’s growth. Johnson brought an entirely new management team with no experience working at J.C. Penny and allowed them to treat the other executives disrespectfully. Such circumstances are severe for the corporate administration as they eliminate the option to make thoughtful and evidence-based decisions viewed from multiple companies’ perspectives (Sheikh, 2019). Johnson’s responsibility was to pay attention to the management’s relationship with the seniors and employees, and failure in that action led J.C. Penny to a series of internal conflicts.
Leadership Theory and Practice for The Case
The problems listed above were faced by other companies throughout their business history and examined in many management and leadership studies. The Board’s decision to hire a CEO outside of the company is a risky strategy despite the demand to get a new view of its problems (Collins, 2019). The research of multiple organizations’ life cycles reveals that grasping for quick fixes or renovations without paying much attention to the fundamental processes signals the declining stage of their performance (Collins, 2019). Corporate culture is crucial, thus leaders must establish and praise practices that remind employees of the company’s values and never break them (Groysberg et al., 2018). The executive team with people who know the organization’s processes can generate optimal solutions and better evaluate the risks (Sheikh, 2019). Exploration of other big corporations’ experiences can help the executives choose the proper course of action.
Solutions
Johnson’s decision to change J.C. Penney’s vision and customers’ perception might have been a good one considering the Board’s desire to renovate the company. However, the first solution to the organization’s problems could be the detailed research of its values, strengths, weaknesses, employees’ expectations, and management strategies (Collins, 2019). Suppose Johnson took time to study the company before throwing it into the changes. In that case, the executives could craft a better approach to save J.C. Penney’s internal culture and improve its performance.
Consequently, lacking communication with the J.C. Penney’s employees gave Johnson no chance to understand what was expected from the CEO and what processes required the attention in the first place. For example, the decision to cut off thousands of jobs could indeed be revised if the executive spent time understanding how the company works and why that workforce is needed. Moreover, the demand for a separate management team coming from outside could not appear if Johnson tried to work and listen to the people who have already been in J.C. Penney.
Conclusion
Being the CEO of a company with solid values and culture without working in it or being familiar with the internal processes is tough. J.C. Penney’s road to success depended on achieving the balance between the core values and novel implementations necessary to increase the firm’s competitiveness. A wiser CEO would start by exploring the company and considering all senior employees’ opinions who have been working for a long time. Moreover, J.C. Penney’s attempts to catch a different, younger audience could be replaced with actions dedicated to increasing the loyalty of customers they already had. Johnson’s leadership failed due to the blindness of the corporate culture and willingness to quickly renovate a company that built itself over dozens of years.
References
Collins, J. (2019). Turning the flywheel: A monograph to accompany “Good to great.” Random House.
Groysberg, B., Lee, J., Price, J., & Cheng, J. (2018). The leader’s guide to corporate culture. Harvard Business Review, 1.
Harbin, J., & Humphrey, P. (2015). JC Penney and Ron Johnson: A case of failed leadership: Lessons to be learned. Journal of the International Academy for Case Studies, 21(5), 95.
Sheikh, S. (2019). CEO power and corporate risk: The impact of market competition and corporate governance. Corporate Governance: An International Review, 27(5), 358-377. Web.