• Former Executive Brands Inc. • Appointed as • Executive VP • Chief HR • AdministratioMichael Theilmann
• President of Capita Financial Corp. • Ranked 46th on For Annual list of Powe Women. • Appointed as a COCatherineWest
Background The Golden Rules (TGR) were Established in 1902, in Kemmerer, Wyoming in USA. By James Cash Penny, in Partnership with Thomas M. Callahan & William Guy Johnson 1907 Bought stakes of all his Partners 1920 TGR expanded to 312 stores across 26 states. 1924 TGR chain of Stores was Incorporated as The JCPenny Company. By 1930 number of stores Comes to 1,452 From 1907 to 1964 Continuous Growth
1964 the revenue reached to US $ 2 billion which was doubled than Revenue earned in 1951. By late 1990’s the retail scenario in US Changed 1999 Vanessa Castagna Joined as COO. 2000 Allen Questrom joined JCP as Chairman & CEO. 2004 Turnaround achived December 2004 Ullman Joined JCP succeed Questrom March 2005 Castagne Joined Mervyns as Chairwoman June 2005 Micheal Theilmann as Executive VP, Chief HR and Administration officer.
PROBLEMS IN 1990’s Youth Started avoiding JCP Poor Inventory Management Frequent Stock out of High selling Items Pileup of Non selling goods Due to Decentralized System In Late 1990 JCP’s Financials and share prices Plummeted Cut throat competition from Wal-Mart, Dillards and also local discounters.
TURNAROUND Castagna & Questrom appointed. Centralized Buying system were Introduce Number of Products displayed in JCP was halved Fund raised by selling DMS which sold Insurance, Travel & Auto club. Generates $ 1.6 billion. Tied up with branded apparel makers like Bisou Bisou. Eckerd drug store chain sold to CVS corp. in 2004 Generates $ 4.52 Billion. Also 120 underperforming outlets of JCP were closed between 2000 – 04. By the year ending Jan 31, 2005 revenue was $ 1.84 billion.
Role of Ullman“ The Associates are the first Customers we sell to.If it doesn’t ring true to them, it’s impossible tocommunicate and inspire the customer”Objectives was “To take JCP from the Position ofTurnaround to that of a leader in Industry”Accordingly the Long Run Plan Established.
Problems Identified Formal and Rigid organizational culture. Employees are not “Froward Thinking” Work culture in JCP was Intimidating for New Recruits.
VISION TO TAKE JCP TO INDUSTRY LEADERSHIP LEVELWith the help of LONG RANGE PLAN whichconsist of Emotional Connection with Customers Make JCP an Easy and Exciting place to shop Make JCP a Great Place to work in. Make JCP a leader in performance and execution.
WEAKNESS STRENGTHS • Formal & rigid culture• Survival of More than 100 years • No Inflow of new Talent• Good Penetration in terms of Store • Employees negative mind frame number • Rules of HCSC only for Top• Good Number of Employees. Management.• Latest Turnaround in 2004. • People work for people not for Company. SWOT OPPORTUNITIES THREATS• Opportunity to Satisfy Employees • Wal-Mart as Giant retail agent• Harnessing potential of JCP in terms • Mall based “Dillards” of Revenue, Humans Resource etc. • Discount Stores • High End department stores • Not to destroy a century of Corporate Tradition.
NEED FOR CHANGE Formal and Rigid Organisational Culture Personalisation of work environment like Decorating Cubicles was not allowed. “Office – Police” Most new recruits had to start there career behind a cash register. Youngster were intimidated by the rigid culture of JCP Employees mood was not good. High Employee turnover. Cut throat competition.
A BIG CHALLENGE Changing a Century old culture was a Big Challenge The Culture was deep rooted and had been reinforced Decade after Decade. HCSC was applicable to only top level management. A sudden change would be a shock and create distrust among employees and management. Many employees as old as Penney said “This is a phase, and it will pass and we will go back to the way things were.”
INITIATIVE In 2005 Theilmann was appointed as Chief HR First Campaign started “Just Call me Mike” Dress codes were relaxed Office – Police team was disbanded. Various art work on the wall replaced with photos of employees and other art related to the company. New ID Badges were provided with First name. It allow to access the other part of the company. HCSC modified to WTP to suit all Employees. 2006 1st leadership conference for store managers conducted. Fall of 2005 JCP conducts 1st AES….
Training and Development In 2006 JCP started Identifying High potential Employees (Hypos). Hypos were sent to The Retail Academy run by Ken C. Hicks Even Ullman & Theilmann acted as a Faculty members and Devoted around 164 hrs of Teaching. In Feb 2007 many training program were launched like Leading a store, Leading a District, etc. Developed online Training System Early 2007 JCP opted for a new Brand
Every Day Matters“ My goal is to never walk around here looking like Iam upset about something. We have greatopportunities, every day, EVERY DAY MATEERS” -- Ullman -
JCP FIRES NEW COO Dec 2006 JCP Fires its COO Catherine West. No reason was cited initially . Total Tenure of West was 6 months. US $ 10 million was paid as Severance pay. This Hammered home the fact that there was no “Honeymoon Period” for High level executives. Reason cited to the securities and exchange commission JCP said that “ Due to her failure to satisfy performance objectives. ”
RESULTS Within 2 years the changes started to Bear Fruits. 2nd AES had a response of 73% as compared to 67% for 1st. Graduates from Leading Professional school such as the fashion institute of technology, Texas A&M etc.. desired to work in JCP Even Bottom line improved, operating profit for fiscal year 2005 was US $1.6 billion an increase of 22.5%. Opened 18 new stores, highest number of stores opened in a year for a decade.
If not, they are clerks.“We are rebranding the company because of ourservice. We are running nice advertising, but itwasn’t building on its self. They (Employees) needto have the tools and the wherewithal to makedecisions. If not, they are clerks.” -- Ullman -
Question 1Do you think JCPenney was justified in appointingMike Ullman, an outsider, as CEO instead ofVanessa Castagna, considering that Castagna wasinstrumental in turning around JCPenney in theearly 2000, soon afterward Castagna left thecompany?What are the pros and cons of “bringing in anoutsider” and “Promoting from within”?
BRINGING IN OUTSIDERPROS CONS New Talent & Ideas Will Take time to New Strategies understand the Experience from other process Organisation. Training Program No Personal Bias
PROMOTING WITHINORGANISATIONPROS CONS Motivation to Personal Bias employees May use their power No need for training against employees He know the working Other colleagues environment demotivated Attitude of Employees
Question 2Generally, we see companies that are in trouble ornot performing up to expectation opting for a culturechange initiative to invigorate their corporate cultureand bring about a turnaround. In thiscontext, comment on Mike Ullmans decision tochange the century old culture at JCPenney after asuccessful turnaround.
Question 3 What role does corporate culture play in company performance? Will the culture change initiatives instituted at Penney help it achieve the goal of reducing turnover of existing employees while attracting new talent from outside?
Question 4 Some analysts described JCPenney’s shift to a more informal work environment(using first names, etc.) as “putting the cart before the horse”. Comment would this change make you want to work at JCPenney? give reasons for your answer.
Question 5 Some analyst opined that culture changes driven from top, where as, other say that it is the system that drives change, not the top management. Give your comment with reasons.
Question 6 What lesson can we learn from the high profile firing of JCPenney’s COO Catherine west within 6 months of her joining the company Do you think it is worth while recruiting people from other industries in high position? Is switching industries a good option for a professional who is on a growth curve in his/her career in a particular industry?
High Profile executives Exit in 2006Executives Designation Company Exit inAnne Stevens COO Ford Motors Co. 11 monthsCatherine West COO JCPenny 6 months Sears HoldingsCraig monaghan CFO 6 months Corp.Denise Johnston President of Gap adult Gap Inc. 9 months Senior Vice President -Julie Roehm WAL - MART 10 months Marketing President & ChiefLawrence Jackson executive of Global WAL - MART 11 months Procurement Adobe SystemsReandy Furr CFO 6 months Inc. Vice presidentSean Womack Communication WAL - MART 10 months architecture Executive VP of About 1
Question 7 What are the lesson to be learned from the JCPenney culture change initiatives? What do you see as key components in its having achieved its goals, atleast in the near term? How can JCPenney keep the momentum of change rolling in its favor in the future?