How long will it be before the JC Penney board fires Ron Johnson?
I’d say it’s getting close.
First, without evidence to support his decision, last December he overhauled the company’s price strategy. Many people would agree that Johnson’s ‘everyday-low-prices’ change sounded reasonable, except for it would seem, customers.
In the first quarter of Penney’s new pricing strategy, sales tanked. As is typical with such leadership failures, rather than admitting a mistake and reversing course, Johnson entrenched himself with his strategy by saying it will take 3-years to see a difference. Good luck with that.
I’ve seen other leaders make the same claim. They usually weren’t around long enough to see if they were right.
As a true measure, if you believed Johnson made the right call, did you buy more stuff at Penney’s because of its new pricing strategy? Why or why not?
I have a characteristic that most CEOs don’t have. I can admit that I don’t know. Johnson’s strategy may have been a good one. But, if I were running the company, I wouldn’t make a wholesale change unless I had strong evidence that it would help.
JC Penney has enough stores that they could change the price strategy in a few and see if it helps or hurts profits. That’s called a randomized market test or field trial.
I believe shareholders pay managers to put their egos aside and use the resources they have to figure out how to make the best decisions for the company, decisions that please the customers and generate more revenue and earnings for shareholders.
Often, however, boards of directors are attracted to the cowboys who throw caution to the wind and make BOLD changes based on their gut instincts. It’s unfortunate that those board members rarely lose their jobs. So goes the woes of corporate governance.
Johnson now has a new idea. Seems right up his alley, coming from Apple. It’s tech related.That’s a typical move from a failed CEO. Move to your strength after you blow it on something else.
But, it’s a red herring. He hopes his cool new idea will take your mind off his previous rotten idea. He wants to use technology to get rid of cashiers. Kind of neat (unless you like your job as a cashier). But, will that cause you to want to spend more money there? I don’t see the case for it.
But, still, Johnson hasn’t learned the most important lesson. It doesn’t appear that he’s testing his change. The article says this will happen. There’s no talk about this change being explored in market testing. Maybe it’ll work, but we don’t know and if he rolls it out without testing it, he’s just creating more risk for shareholders.
Shareholders can’t afford cowboys.
I’m going to give away a valuable secret to success in retailing. It’s so painfully obvious, but also so elusive for so many ego-driven CEOs. Ready? Here it is. Sell what people want.
Often, cowboy CEOs don’t understand this secret. They try to remake the business into something that meets their own personal preferences not realizing that their preferences do not match that of their customers.