The story of the rapid decline of JCPenney under Ron Johnson’s leadership is one of the most shocking business stories of recent years. Bringing in the genius behind Apple’s retail stores seemed like a no-brainer when he first arrived at JCPenney. He came in with a vision and exciting new ideas about how to turn around the struggling retailer. What I’m not sure that he came in with, was a willingness to listen to the smart people around him that had spent their careers at JCPenney.
There seems to be a bias that leaders bring to turn-around jobs like JCPenney, best summarized as the “Outsiders Know Better” bias. It’s understandable why it happens. JCPenney had been struggling for a long time and something needed to change. It’s easy for a new CEO to assume that the people who were working there were not world-class, so the new CEO brings in a lot of people to surround him that he can trust. He’s worked with them before, they share the same experience, and have the same vision. And that’s exactly what Mr. Johnson did at JCPenney.
The problem is, for as much as JCPenney could learn from Mr. Johnson’s and his experience at Apple, he could have learned just as much about the realities of discount retailing from the people who had spent their careers in JCPenney. Perhaps paying more attention to those realities would have prevented the rapid decline that the company has experienced. I’m certain that there were widespread concerns within JCPenney about how the end of coupons, a staple of their business, would cause a dramatic drop in traffic. But it seems like those kinds of concerns, among others, were never dealt with. I think that highlights a key challenge that new leaders face – understanding the difference between 1) managing the risk that they have picked the right strategy, and 2) managing the risk that the organization will successfully execute it. What many leaders don’t realize is that the best way to manage both risks is by listening to the people in the organization they lead and enrolling them in the strategy conversation.
I often use Maslow’s Hierarchy of Needs as a reference when talking to leaders about making change happen. All too often, resistance from the organization is seen as a case of people being stuck in their ways and a sign that some people need to be shown the door. Tough questions about the strategy don’t get asked, and possible pitfalls don’t get identified. People keep their heads down and keep their jobs safe. That attitude can create a massive conflict for people. Do I open my mouth and disagree with the strategy? Or do I stay quiet and go home every night worrying about when things are eventually going to fall apart? In either case, I’m operating at a very low level of the hierarchy of needs and I’m probably not very productive.
I believe that ultimately, most people want to believe in the direction their company is headed and do their best to help make it a success. And to do so, they need to be given the opportunity to understand rather than being asked to simply follow. By allowing their teams to ask questions, leaders can understand what is worrying their people about achieving this new future and learn from it themselves. Not only can a leader gain commitment through this course, but they might unearth some unseen land mines in their strategy in the process which they can work together to solve.
The reason that this back-and-forth doesn’t happen is that many leaders don’t have a good understanding of how to design such a two-way conversation in a positive, constructive way. They are concerned that it will open up more issues than it will resolve. Many worry that this would be seen a sign of weakness instead of a sign of leadership, but it certainly doesn’t need to be when handled correctly.
Would following this kind of approach have resulted in a very-different JCPenney today? Would a more creative and successful strategy been discovered by taking the best of Apple and the best of JCPenney rather than blowing up the business model altogether? While we will never know for sure, it would have provided a forum for important conversations and possibly identified conflicts between the new strategy and the old JCPenney that needed to be resolved in order to be successful. And as we know real innovation most often happens in resolving conflicts, not by simply applying best-practices learned from another company, even one as successful as Apple.
What have been your experiences with living through changes in company strategy?