Change in Organizational culture - JCPENNY

1. Remaking JCPenney’s
Organizational Culture

2. TEAM
Nakul Patel 11BSP1828
Saurabh Sahu 11BSP1973
Saurabh Singh 11BSP1866
Ishani Wakhlu 11BSP1991
Nachiket Patil 11BSP1960
Umesh Bharambe 11BSP1934
Ruby Gabra 11BSP1852
Deepa Balwani 11BSP1936
Sagar Tuniya 11BSP1906
Tushar Shah 11BSP1872

3. Major characters in the case
J. C. Penney

4. • Rich Domestic
International E
in the retail ind
• Effectively lead
• Macy’s
• LVMH
• DFS Grou
Myron E. Ullman ( Mike
)

5. • Merchandis
• Target
• TJX Co
• Wal-Ma
Vanessa
Castagna

6. • Was know for
at
• Barney’s
• Federated
• Neiman-m
Allen Questrom

7. • President A
Merchandisin
at JCP
Ken C.
Hicks

8. • Former Executive
Brands Inc.
• Appointed as
• Executive VP
• Chief HR
• Administratio
Michael Theilmann

9. • President of Capita
Financial Corp.
• Ranked 46th on For
Annual list of Powe
Women.
• Appointed as a CO
Catherine
West

10. 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

11.  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.

12. 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.

13. 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.

14. Role of Ullman
“ The Associates are the first Customers we sell to.
If it doesn’t ring true to them, it’s impossible to
communicate and inspire the customer”
Objectives was “To take JCP from the Position of
Turnaround to that of a leader in Industry”
Accordingly the Long Run Plan Established.

15. Problems Identified
 Formal and Rigid organizational culture.
 Employees are not “Froward Thinking”
 Work culture in JCP was Intimidating for New
Recruits.

16. VISION
 TO TAKE JCP TO INDUSTRY LEADERSHIP
LEVEL
With the help of LONG RANGE PLAN which
consist 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.

17. 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.

18. 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.

19. 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.”

20. 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….

21. 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

22. Every Day Matters
“ My goal is to never walk around here looking like I
am upset about something. We have great
opportunities, every day, EVERY DAY MATEERS”
-- Ullman -

23. 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. ”

24. 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.

25. If not, they are clerks.
“We are rebranding the company because of our
service. We are running nice advertising, but it
wasn’t building on its self. They (Employees) need
to have the tools and the wherewithal to make
decisions. If not, they are clerks.”
-- Ullman -

26. Questions to be Answered

27. Question 1
Do you think JCPenney was justified in appointing
Mike Ullman, an outsider, as CEO instead of
Vanessa Castagna, considering that Castagna was
instrumental in turning around JCPenney in the
early 2000, soon afterward Castagna left the
company?
What are the pros and cons of “bringing in an
outsider” and “Promoting from within”?

28. BRINGING IN OUTSIDER
PROS CONS
 New Talent & Ideas  Will Take time to
 New Strategies understand the
 Experience from other
process
Organisation.  Training Program
 No Personal Bias

29. PROMOTING WITHIN
ORGANISATION
PROS 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

30. Question 2
Generally, we see companies that are in trouble or
not performing up to expectation opting for a culture
change initiative to invigorate their corporate culture
and bring about a turnaround. In this
context, comment on Mike Ullmans decision to
change the century old culture at JCPenney after a
successful turnaround.

31. 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?

32. 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.

33. 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.

34. 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?

35. High Profile executive's Exit in 2006
Executives Designation Company Exit in
Anne Stevens COO Ford Motors Co. 11 months
Catherine West COO JCPenny 6 months
Sears Holdings
Craig 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 & Chief
Lawrence Jackson executive of Global WAL - MART 11 months
Procurement
Adobe Systems
Reandy Furr CFO 6 months
Inc.
Vice president
Sean Womack Communication WAL - MART 10 months
architecture
Executive VP of
About 1

36. 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?

37. Interview!!

38. CONCLUSION

39. THANK YOU