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Ron Johnson and the J.C. Penney Company, Inc. (JCP) Fiasco

Ron Johnson may well have killed a century-old company.

Johnson – who only lasted 17 months as the CEO of J.C. Penney Company, Inc. (NYSE:JCP) – came into his role with a rock-star persona. He built the wildly successful Apple Inc. (NASDAQ:AAPL) store brand for the electronics giant; its stores generated more than a billion dollars in revenue, and broke the sales-per-square foot record with an astounding $4,032 per square foot, by year two.

J.C. Penney Company Inc. (JCP)

Prior to his time at Apple Inc. (NASDAQ:AAPL), Johnson was the vice-president of merchandising at big-box retailer Target Corporation (NYSE:TGT). There, he successfully added more upscale brands to the store’s products and built its reputation as a high-end replacement for Wal-Mart Stores, Inc. (NYSE:WMT) and Sears Holdings Corp (NASDAQ:SHLD). Johnson’s efforts took Target Corporation (NYSE:TGT) from just-another-retailer status to a certain level of cheap-chic glamour.

That said, Johnson seems to have bought his own hype when he came to J.C. Penney Company, Inc. (NYSE:JCP). Any experienced business executive should tell you that each company is different, and not every method will work for every customer. Johnson approached J.C. Penney with a sort of “let’s do this thing” arrogance that assumed its customers would respond like Apple Inc. (NASDAQ:AAPL) customers did.

Good people can make bad choices

Quickly in his tenure, Johnson determined to try to force a new business model on the 111-year-old firm. Customers who did shop at J.C. Penney and knew what to expect found themselves bewildered by the sudden decision to end discounts, sales and marketing mailings.

Despite J.C. Penney having a client base – and reputation – as a discount, home-based retailer, Johnson decided he wanted to produce a new J.C. Penney that would be considered a peer with Bloomingdales or Macy’s. Instead, he got falling sales, declining stock prices, and a self-reinforcing storyline that the media wouldn’t relinquish.

The simple fact is that Johnson was overly confident in his own abilities and arrogantly dismissive of both the company’s institutional knowledge and its culture. By ignoring those things and attempting to impose his own will on an existing, well-established business, Johnson tore out the underpinning of the business without knowing whether his ideas would performed well. There should have been product and image testing – which Johnson largely rebuffed when they were suggested – before these ideas were implemented.  As it is,

A CEO must commit

Johnson replaced most of the senior executives who were in place when he took over J.C. Penney Company, Inc. (NYSE:JCP). Fine — many new leaders want people in place with whom they’re comfortable. The problem was that a lot of the top dogs, and Johnson himself, didn’t commit to J.C. Penney and the Plano, TX headquarters. Choosing instead to commute to Texas, these people never became of a part of the greater community of both Plano and the J.C. Penney corporate headquarters.

Contrast this attitude with that of another controversial new CEO, Marissa Mayer at Yahoo! Inc. (NASDAQ:YHOO). Unlike Johnson, Mayer decided to commit to her new workspace and to require that new executives and existing staff commit, too. Famously, Mayer was back to work quickly following the birth of her baby, and later revoked Yahoo! staff’s permission to telecommute. Her reasoning for the latter move is to promote that sense of workplace community to builds internal commitment and innovation – exactly the things that Johnson didn’t seem to value from his top execs.

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