February 12, 2007
Penney CEO Fixed What Might Have Broken
When Mike Ullman took over as chairman and chief executive at J.C. Penney in 2005, he was faced with an unusual situation and challenge.
The company under his predecessor, Allen Questrom, had accomplished something that many thought could not happen. It made a turnaround and became successful after many years of heading in the wrong direction.
So what was Mr. Ullman’s problem? Although it had rebounded, the mood inside the company was not forward-thinking. Instead of building on how far Penney had come, it was more just a sense of relief that disaster had been avoided.
Mr. Ullman told The Dallas Morning News, the company needed to change the mindset of its own before it could ever really count on being able to accomplish anything similar with its own employees.
Although he had considerable experience, Mr. Ullman spent a great deal of time at first talking to Penney employees and executives at other companies that had turned businesses around.
“A group of us went to IBM to learn,” Mr. Ullman said. “What we heard was not to celebrate the turnaround too long; you end up pleased that you’re not dead. Their advice was to hit the accelerator. Don’t coast.”
Fred Foulkes, professor and director of the organizational behavior department at Boston University School of Management, said Mr. Ullman had the right approach.
“It’s very difficult to change a culture, and it has to be done at the CEO level and then move it throughout the organization,” he said. “It has to be pervasive.
“CEOs have to signal that this is really different because you will have people in an organization as old as Penney saying, ‘This is a phase, and it will pass and we’ll go back to the way things were.’”
Among the first changes at the corporate headquarters was a more relaxed approach to the business environment. First, restrictions placed on decorating cubicles were removed and the company instituted a casual dress policy.
The company held its first-ever Christmas party for employees and staff at corporate headquarters were told they could take 10 Friday afternoons off a year by working an extra hour Monday through Thursday.
Beyond those feel-good measures, the company began actively looking to promote the company and its workers from within. A new training program was developed and taught strictly by those from within the company. High-potential candidates (hypo in Penney-speak) were invited to join the company’s Retail Academy.
Top executives including Mr. Ullman, company president Ken Hicks and others are all staff instructors. The company CEO taught 164 hours last year. Mr. Hicks conducted 101 hours of classes including two extended off-campus retreat programs.
One of the major advantages coming out of the Academy is that workers get to meet others in the company and discover new ways of working together to take care of opportunities that previously may not have been dealt with.
One example involved Clark McNaught, merchandise manager for men’s clothing and accessories, at a J.C. Penney in Houston. During a training event, he made a contact with a district manager within the company.
Mr. McNaught believed he could sell higher-priced men’s merchandise because the Foley’s department store in the same mall was closing. “There was pushback on the idea because this store didn’t usually get a full selection – there was no history to support the decision,” Mr. McNaught said. “The district manager was in my class, and he called me and we worked it out. When you leave there, you have bonds like you form in a sorority or fraternity.”
Discussion Questions: What lessons are there to be learned from the J.C. Penney’s program to remake its corporate culture? What do you see as key components to it having, at least to this point, achieved its goals?
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“If you can not sell it on the inside you cannot sell it on the outside.”
All of the right moves not just for the sake of making the moves but because management Walked the Talk.
My favorite comparison is Continental Airlines when Gordon Bethune was responsible for turning it around. He did not change the planes. He did not change the employees. He changed the attitude of the employees.
It’s evident from this article that J.C. Penney perceived some morale issues worth addressing, and that the turnaround in performance during the Questrom era apparently didn’t translate to a change in culture. Ullman’s focus is rightly on “best of class” companies, not just retailers, in pushing the J.C. Penney culture in a new direction. Nevertheless, there are some especially forward-thinking retailers out there (Best Buy comes to mind) that are rethinking today’s workplace environment in the context of running a store.
It’s rare for people at the C level (CEO, COO, CFO, CIO, CMO) to sustain significant repeated engagement with people considerably far down the org chart. It’s one thing for the C level folks to spent an hour or two visiting a store from time to time versus teaching a seminar. Management development can be greatly appreciated, and the learning can go 2 ways.
Changing a company’s culture is one of the most difficult challenges for new management. Having worked on a number of bankruptcies, the most common staff comment is once we get out of bankruptcy, these consultants will go away and we will be back to the old ways. Considering these old ways are the the reason they are in bankruptcy just illustrates the challenge. The solution is to first define what the culture should be and then create a plan to achieve it. Culture changes can not be turned on a dime; it takes years. One point missed by most is to identify both the formal and informal leaders in an organization and convert or replace them, otherwise the process only takes longer.
I think a key element to the momentum at J.C. Penney has been the drive to not rest on ‘surviving.’ Change is imperative in retail and it starts at the C level. If the CEO is teaching 100+ hours annually, it shows an organization that this is important…and adds validity to the high performance program. In many companies, those programs are simply lip service; it appears that at Penney’s, they are actually building relationships that allow people to focus on making decisions and to expand people’s thinking outside their area of expertise. Getting collaboration and communication started, to solve business problems is a key element to keep the momentum going.
Similar to Bill Clinton’s campaign team who used the mantra “it’s the economy, stupid” to win the election, Ullman and top management apparently realized that “it’s the people, stupid” to accomplish J.C. Penney’s objective.
Stating the obvious (or maybe not so obvious), paying attention to associates, creating a working environment that supports communication and having active, visible leadership involvement is a recipe for success. As the culture fosters an environment that supports communication and visibly values its people, its people will step up to the plate.
Ullman’s willingness to learn, lead and actively serve as an example by teaching are the key components to having turned the corner. Sustaining this active involvement will be key to supporting a “winning” corporate culture.
The attitude and commitment must come from the top down. The challenge for Mr. Ullman is to sustain this type leadership beyond the quarterly analysts conferences. As noted in George’s essay, the traditionalists within the organization are quick to dismiss this engaging leadership as a ‘phase.’ These are precisely the attitudes you either give the opportunity to change or you must separate from the overall goal. It’s all about the customers and your brand. Your customers are far more critical than even Wall Street.
For the first time in a year, I was in a Penney’s store this past weekend and was impressed by the stream of customers and the upbeat attitude of the employees. From that single recent experience I came away thinking, “Penney’s is a going Jenny.”
The concept and implementation of the Retail Academy reinforces a belief that employees will really help a company succeed if they are taught what, how, when and why things are happening…and that they are a vital part of the success process.
There was something ‘clicking’ at Penney this past holiday season. I am not so sure what ‘it’ was. It wasn’t the same backlog of multiple years of product that they had dragged out once again to try to sell this year. It wasn’t the same styles. It wasn’t the selection or even the merchandising of the years old merchandise that they had dragged out to once again give a whack at pushing out the doors. I am really not sure what ‘it’ was at all. What ever ‘it’ was, it was a good thing.
The bad thing? In spite of what ever was ‘clicking’ and the feeling I had in visits to their stores this holiday season, they had nothing worth purchasing. That’s not to say that others weren’t taking care of my share there. They were. But, maybe a change in offering is step two. Certainly, step one in their case had to be how they delivered their offering no matter how dated it was. I have to constantly remember that it’s really not the offering anyway. Certainly it has to be at a minimum to get you through the doors; beyond that it’s pure retailing. At Starbucks, it’s not the coffee.
I’ll reserve judgment and watch for step two.
When J.C. Penney HR Chief Mike Theilmann and his team visited the University of Arizona program in Retailing and Consumer Science last Spring, the theme was congruent with this article. I came away impressed that the company is serious and committed to cultural change, and to recruiting and advancing the best people it can find. By the end of the session, UA students were lined up with resumes, hoping for a shot at internships and plum trainee positions.
This is a case of enlightened self interest: In an unguarded moment, Theilmann conceded that his company faces an enormous challenge in finding and keeping qualified store managers–especially in smaller cities.
Penney is treating retailing as a profession and its people as professionals. The relaxation of its famously button-down culture is a not just a gimmick–it’s symbolic of a commitment to position the company as the employer of choice in the retail business.
One critical aspect of the JCP turnaround was the retail environment. Taking nothing away from the Questrom years, JCP worked into an opening created by the virtual extinction of the moderate department store. While specialty chains effectively filled the space in many niches, no one was filling the space across gender and age. JCP did that.
Now…an opportunity is never enough. JCP also became fundamentally better at what it did. A culture of accountability and performance were part of the Questrom years, particularly in merchandising and store operations. Ullman has taken all of this to a new level. JCP is now fundamentally sound in product development, branding, marketing, and human relations. Too often we forget that the high performers in almost any industry (talent notwithstanding) are those with rock solid fundamental skill sets.
I have no first hand knowledge of the Retail Academy. A word of warning in the midst of all the accolades. An Academy is only as good as the subject matter and the skills of those teaching. Retail is not a stagnant knowledge domain. A critical concern is the development of insularity. If all that is taught is all that is currently known, where will the new thinking come from to address the new challenges of tomorrow?
Kudos to Mike Ullman who, once again, proved he’s both a great merchant and a great leader. I don’t need to repeat the many positive things he’s done that we can all learn from.
That said, it’s too easy to dismiss the outstanding job accomplished by Alan Questrom and Vanessa Castagna, both outstanding merchants and leaders in their own right. They had a much different mission–organizational survival first, then start down the road towards revival. They both did a sterling job.
As we once said in a former professional life, “when you’re up to your butt in alligators it’s tough to remember that your original objective was to drain the swamp!”
Questrom/Castagna/Ullman have accomplished both and Ullman is taking all the right steps to position the chain for success.
Continuation of top management’s culture change could include having top executives stop in at local stores whenever they are traveling to reinforce the change from the top and to demonstrate that work at the local stores is being noticed at the top. Otherwise, the management teams deserves kudos for what they have done so far.
I’ve had the opportunity to meet Mr. Ullman and personally hear his account of the changes that were made. I believe Mr. Ullman is a new breed of executive, one we should see more of in retail business. His modesty and humility are a potent force in that it allows him to view with clarity what is going on. Too often, executives come into a company, and make sweeping changes based on what they think. He listened and watched his troops, making changes based on what the employees were telling him with their behavior.
I also noted that Mr. Ullman changed the compensation program, so that those who show innovation and inspiration in their work are rewarded more than those who just put their time in. While the previous regime changed the external brand image of J.C. Penney, Mr. Ullman is changing the way it feels to work for the company, and that is critical for long-term success.
Mr. Ullman’s actions speak loud and clear. From training to changing the dress code at corporate to compensating for innovation, everything he does tells employees that they are important, that what they do matters, and that they add value every day. Culture change is tough. But when it starts at the top and continues, employees begin to believe it’s true and act as if it’s true. Then, great things can happen. Mr. Ullman has illustrated the payoff of servant leadership.
I wonder about the ability to successfully motivate workers or cultivate their loyalty in the 21st Century. While the “Penney University” and other efforts mentioned in the article are truly laudable, I think employees know share price is the be-all-end-all for C-level executives.
In the banking-centric, deal-centric, stock market-centric environment we currently live in, employees know they will be sacrificed and perks immediately cut if it means a better quarterly performance. They certainly know that all companies have their price, and could be on the block 10 minutes from now. Where would all the careful culture cultivation go then, under the new ownership? Since employees know all this, the level of worker commitment is severely diminished, a situation that is only ameliorated by efforts like J.C. Penney’s.
Success is not disaster averted! Moving forward in business requires calculated risks which offer organizational growth and challenge while maximizing the return on corporate resources. Managing this change requires top-down change strategies and strategic positioning of the corporation, especially when an acquisition is at hand.
To be successful, companies must first overcome the fear of change, and instead embrace the “new” while discarding the old. Instead of asking, “Why?” companies need to ask, “Why not?” and incorporate this in both their strategic and tactical decision making, for both the short and long term.
Changing the mindset and culture of the employees ALWAYS has to come from the top. And the Penney’s CEO lived this difficult task every day. He showed his direct reports, middle management and store operations how important it was to everyone at J.C. Penney. He showed it by his daily activities, and reinforced it through visual tasks and direction! Bravo for J.C. Penney.
Now, the question is why can’t more CEOs see the light…from fast foods to heavy equipment to grocery, and department stores? Hmmmmmmmmmmmmmmm
Good companies are made up of good people. That was something drilled into my head at an early age. But what was also drilled into me was the saying “a fish stinks from the head down.” If the CEO is positive and upbeat; if the CEO believes in his/her people; if the CEO realizes the importance of the companies people and doesn’t just give it lip service; then the company becomes stocked with good people. All too often, top management talks the talk about the importance of the employees, but doesn’t walk the walk. It shows. And it shows at J.C. Penney. Kudos to Mr. Ullman. I hope he keeps it up.
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“If you can not sell it on the inside you cannot sell it on the outside.”
All of the right moves not just for the sake of making the moves but because management Walked the Talk.
My favorite comparison is Continental Airlines when Gordon Bethune was responsible for turning it around. He did not change the planes. He did not change the employees. He changed the attitude of the employees.
It’s evident from this article that J.C. Penney perceived some morale issues worth addressing, and that the turnaround in performance during the Questrom era apparently didn’t translate to a change in culture. Ullman’s focus is rightly on “best of class” companies, not just retailers, in pushing the J.C. Penney culture in a new direction. Nevertheless, there are some especially forward-thinking retailers out there (Best Buy comes to mind) that are rethinking today’s workplace environment in the context of running a store.
It’s rare for people at the C level (CEO, COO, CFO, CIO, CMO) to sustain significant repeated engagement with people considerably far down the org chart. It’s one thing for the C level folks to spent an hour or two visiting a store from time to time versus teaching a seminar. Management development can be greatly appreciated, and the learning can go 2 ways.
Changing a company’s culture is one of the most difficult challenges for new management. Having worked on a number of bankruptcies, the most common staff comment is once we get out of bankruptcy, these consultants will go away and we will be back to the old ways. Considering these old ways are the the reason they are in bankruptcy just illustrates the challenge. The solution is to first define what the culture should be and then create a plan to achieve it. Culture changes can not be turned on a dime; it takes years. One point missed by most is to identify both the formal and informal leaders in an organization and convert or replace them, otherwise the process only takes longer.
I think a key element to the momentum at J.C. Penney has been the drive to not rest on ‘surviving.’ Change is imperative in retail and it starts at the C level. If the CEO is teaching 100+ hours annually, it shows an organization that this is important…and adds validity to the high performance program. In many companies, those programs are simply lip service; it appears that at Penney’s, they are actually building relationships that allow people to focus on making decisions and to expand people’s thinking outside their area of expertise. Getting collaboration and communication started, to solve business problems is a key element to keep the momentum going.
Similar to Bill Clinton’s campaign team who used the mantra “it’s the economy, stupid” to win the election, Ullman and top management apparently realized that “it’s the people, stupid” to accomplish J.C. Penney’s objective.
Stating the obvious (or maybe not so obvious), paying attention to associates, creating a working environment that supports communication and having active, visible leadership involvement is a recipe for success. As the culture fosters an environment that supports communication and visibly values its people, its people will step up to the plate.
Ullman’s willingness to learn, lead and actively serve as an example by teaching are the key components to having turned the corner. Sustaining this active involvement will be key to supporting a “winning” corporate culture.
The attitude and commitment must come from the top down. The challenge for Mr. Ullman is to sustain this type leadership beyond the quarterly analysts conferences. As noted in George’s essay, the traditionalists within the organization are quick to dismiss this engaging leadership as a ‘phase.’ These are precisely the attitudes you either give the opportunity to change or you must separate from the overall goal. It’s all about the customers and your brand. Your customers are far more critical than even Wall Street.
For the first time in a year, I was in a Penney’s store this past weekend and was impressed by the stream of customers and the upbeat attitude of the employees. From that single recent experience I came away thinking, “Penney’s is a going Jenny.”
The concept and implementation of the Retail Academy reinforces a belief that employees will really help a company succeed if they are taught what, how, when and why things are happening…and that they are a vital part of the success process.
There was something ‘clicking’ at Penney this past holiday season. I am not so sure what ‘it’ was. It wasn’t the same backlog of multiple years of product that they had dragged out once again to try to sell this year. It wasn’t the same styles. It wasn’t the selection or even the merchandising of the years old merchandise that they had dragged out to once again give a whack at pushing out the doors. I am really not sure what ‘it’ was at all. What ever ‘it’ was, it was a good thing.
The bad thing? In spite of what ever was ‘clicking’ and the feeling I had in visits to their stores this holiday season, they had nothing worth purchasing. That’s not to say that others weren’t taking care of my share there. They were. But, maybe a change in offering is step two. Certainly, step one in their case had to be how they delivered their offering no matter how dated it was. I have to constantly remember that it’s really not the offering anyway. Certainly it has to be at a minimum to get you through the doors; beyond that it’s pure retailing. At Starbucks, it’s not the coffee.
I’ll reserve judgment and watch for step two.
When J.C. Penney HR Chief Mike Theilmann and his team visited the University of Arizona program in Retailing and Consumer Science last Spring, the theme was congruent with this article. I came away impressed that the company is serious and committed to cultural change, and to recruiting and advancing the best people it can find. By the end of the session, UA students were lined up with resumes, hoping for a shot at internships and plum trainee positions.
This is a case of enlightened self interest: In an unguarded moment, Theilmann conceded that his company faces an enormous challenge in finding and keeping qualified store managers–especially in smaller cities.
Penney is treating retailing as a profession and its people as professionals. The relaxation of its famously button-down culture is a not just a gimmick–it’s symbolic of a commitment to position the company as the employer of choice in the retail business.
One critical aspect of the JCP turnaround was the retail environment. Taking nothing away from the Questrom years, JCP worked into an opening created by the virtual extinction of the moderate department store. While specialty chains effectively filled the space in many niches, no one was filling the space across gender and age. JCP did that.
Now…an opportunity is never enough. JCP also became fundamentally better at what it did. A culture of accountability and performance were part of the Questrom years, particularly in merchandising and store operations. Ullman has taken all of this to a new level. JCP is now fundamentally sound in product development, branding, marketing, and human relations. Too often we forget that the high performers in almost any industry (talent notwithstanding) are those with rock solid fundamental skill sets.
I have no first hand knowledge of the Retail Academy. A word of warning in the midst of all the accolades. An Academy is only as good as the subject matter and the skills of those teaching. Retail is not a stagnant knowledge domain. A critical concern is the development of insularity. If all that is taught is all that is currently known, where will the new thinking come from to address the new challenges of tomorrow?
Kudos to Mike Ullman who, once again, proved he’s both a great merchant and a great leader. I don’t need to repeat the many positive things he’s done that we can all learn from.
That said, it’s too easy to dismiss the outstanding job accomplished by Alan Questrom and Vanessa Castagna, both outstanding merchants and leaders in their own right. They had a much different mission–organizational survival first, then start down the road towards revival. They both did a sterling job.
As we once said in a former professional life, “when you’re up to your butt in alligators it’s tough to remember that your original objective was to drain the swamp!”
Questrom/Castagna/Ullman have accomplished both and Ullman is taking all the right steps to position the chain for success.
Continuation of top management’s culture change could include having top executives stop in at local stores whenever they are traveling to reinforce the change from the top and to demonstrate that work at the local stores is being noticed at the top. Otherwise, the management teams deserves kudos for what they have done so far.
I’ve had the opportunity to meet Mr. Ullman and personally hear his account of the changes that were made. I believe Mr. Ullman is a new breed of executive, one we should see more of in retail business. His modesty and humility are a potent force in that it allows him to view with clarity what is going on. Too often, executives come into a company, and make sweeping changes based on what they think. He listened and watched his troops, making changes based on what the employees were telling him with their behavior.
I also noted that Mr. Ullman changed the compensation program, so that those who show innovation and inspiration in their work are rewarded more than those who just put their time in. While the previous regime changed the external brand image of J.C. Penney, Mr. Ullman is changing the way it feels to work for the company, and that is critical for long-term success.
Mr. Ullman’s actions speak loud and clear. From training to changing the dress code at corporate to compensating for innovation, everything he does tells employees that they are important, that what they do matters, and that they add value every day. Culture change is tough. But when it starts at the top and continues, employees begin to believe it’s true and act as if it’s true. Then, great things can happen. Mr. Ullman has illustrated the payoff of servant leadership.
I wonder about the ability to successfully motivate workers or cultivate their loyalty in the 21st Century. While the “Penney University” and other efforts mentioned in the article are truly laudable, I think employees know share price is the be-all-end-all for C-level executives.
In the banking-centric, deal-centric, stock market-centric environment we currently live in, employees know they will be sacrificed and perks immediately cut if it means a better quarterly performance. They certainly know that all companies have their price, and could be on the block 10 minutes from now. Where would all the careful culture cultivation go then, under the new ownership? Since employees know all this, the level of worker commitment is severely diminished, a situation that is only ameliorated by efforts like J.C. Penney’s.
Success is not disaster averted! Moving forward in business requires calculated risks which offer organizational growth and challenge while maximizing the return on corporate resources. Managing this change requires top-down change strategies and strategic positioning of the corporation, especially when an acquisition is at hand.
To be successful, companies must first overcome the fear of change, and instead embrace the “new” while discarding the old. Instead of asking, “Why?” companies need to ask, “Why not?” and incorporate this in both their strategic and tactical decision making, for both the short and long term.
Changing the mindset and culture of the employees ALWAYS has to come from the top. And the Penney’s CEO lived this difficult task every day. He showed his direct reports, middle management and store operations how important it was to everyone at J.C. Penney. He showed it by his daily activities, and reinforced it through visual tasks and direction! Bravo for J.C. Penney.
Now, the question is why can’t more CEOs see the light…from fast foods to heavy equipment to grocery, and department stores? Hmmmmmmmmmmmmmmm
Good companies are made up of good people. That was something drilled into my head at an early age. But what was also drilled into me was the saying “a fish stinks from the head down.” If the CEO is positive and upbeat; if the CEO believes in his/her people; if the CEO realizes the importance of the companies people and doesn’t just give it lip service; then the company becomes stocked with good people. All too often, top management talks the talk about the importance of the employees, but doesn’t walk the walk. It shows. And it shows at J.C. Penney. Kudos to Mr. Ullman. I hope he keeps it up.