Ron Johnson's 5 biggest mistakes at J.C. Penney

The former CEO came into a bad situation and made it worse. He was tone-deaf to customer wishes and too bold with big decisions.

By Kim Peterson Apr 10, 2013 11:17AM
File photo of Ron Johnson, former CEO of J.C. Penney, in New York on March 1, 2013 (Andrew Burton/Newscom/Reuters)CEOs are generally given a pretty long leash when they start a new job. But when they start to choke themselves with said leash, companies react quickly.

Such was the case with Ron Johnson of J.C. Penney (JCP), who stepped down Monday after his board turned on him. Johnson was only on the job for about 18 months, and the fact that he lost the gig so quickly means that either the board lost patience unusually fast or that Johnson simply went about it all wrong.

It was probably both.

Johnson had a pretty good plan. But it was the way he executed that plan that seemed to imperil him. With the clearer vision that hindsight usually provides, here's a look at Johnson's five biggest mistakes at J.C. Penney:

1. His price strategy was all wrong. Johnson tried a tiered-pricing structure that confused customers. He moved away from the coupons and discount model of the past, pushing "everyday low prices" that didn't seem all that low. Harvard Business Review states the issue eloquently: "A lesson for all businesses is when selling commodity-like products, unless customers believe you have the lowest prices all of the time, you routinely have to offer deep discounts."

2. He was too confident in his vision.
Testing, schmesting. Johnson wanted a bold and unique retail presence, with stores filled with mini-shops carrying items you couldn't find anywhere else. He didn't test these new concepts -- or the new pricing -- enough before ordering a large-scale makeover.

3. He didn't respect the customers. Johnson forced new advertising on shoppers that they didn't necessarily like. He didn't respond quickly enough when customers resisted his changes. Penney's once-loyal customer base felt abandoned.

4. He didn't seem committed. Previous CEOs worked hard in the office and lived nearby. But Johnson reportedly had J.C. Penney's private jets fly him in each week from his home in Palo Alto, Calif. He reportedly stayed at the Dallas Ritz-Carlton, which has suites for $3,000 to $5,000 per night. He seemed like a drive-by CEO with little commitment to the job.

5. He didn't seem to like J.C. Penney. Johnson spent all of his time turning J.C. Penney into something it was not. Was there anything about the old J.C. Penney that he even liked or respected?

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68Comments
Apr 10, 2013 12:51PM
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He also did not respect his employees. Morale took a huge hit.

 

I am of the firm belief (after spending 30 + years in management and not at Jcpenney) that employees who are treated with respect and who's ideas are sought out, will do everything to "make the boss look good".

 

He also lost the concept of service to the customer. Staff has been so drastically cut that there are not enough employees to assist customers in the stores.

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As a long time Penneys shopper.....I had a problem with this new CEO...Most of my favorite items were no longer available.....so I haven't shopped there in months.....I will play the waiting game and see if it returns to My Penneys of the past......Loved it ....hopefully it isn't lost forever.....

 

Apr 10, 2013 1:59PM
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My last trip to JCP I found, poor quality, less selection and lower prices. I understand what they were trying to do but I don't want to sacrifice quality / selection for prices. You will get what you pay for. Hopefully they tern things around - I've always liked JCP
Apr 10, 2013 1:44PM
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It's all about people.  Top management must realize that their greatest asset are the employees dealing with the money spending public.  Circuit City found that out so too has the remaining top management at JC Penney.  Do you think they are smart enough to realize and accept this basic fact?

 

There are a lot of JC Penney clothes hanging in my closet.  I've stayed away from them for the past 2 years, but, I'll come back if they get their act together!

Apr 10, 2013 2:34PM
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It was his way or the highway, Thank Goodness, they showed him the HIGHWAY!
Apr 10, 2013 3:19PM
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Why do you hire someone to run your clothing company when you know that he doesn't wear anything that you sell ?
Apr 10, 2013 3:46PM
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J.C. Penney forgot who they were. They became a part of every household because of their catalog. My grandmother always had one on her end table.  My mother always had one on her kitchen table.  As a young mother and wife I used to flip through the catalog at least weekly and plan what I would buy when I saved enough money.  They decided to discontinue the catalog in favor of the stores. They would have been better off discontinuing the stores in favor of the catalog! They would have done away with the cost of bricks and mortar and would have done away with the need for most advertising.  Who needs commercials when you have a catalog laying around your house. The sale catalogs were the BEST!  I furnished my entire house from them. I bought all my curtains, sheets, comforters, towels, kitchen ware, and everything else from those catalogs.  Everyone I knew did the same. I bought all of my kids Christmas from the Christmas catalog.  They would spend hours looking through the catalog and circle what they wanted.  It made it so easy to finish my shopping. I havent stepped foot in one of their stores in years.  WOW, I miss J.C. Pennys. 
Apr 10, 2013 3:42PM
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The first thing that was changed was the dress code. You didn't know was an employee or who was a customer. The men need to wear a shirt and tie and the women something presentable.  Now they wear whatever.   I have been a Penney's shopper for over 50 years and do not like any of the new brands in the store.  Lets get back to the old brands.  I understand that there are plans to install food presentations on the weekends.  These belong in grocery stores not in a department store. This is ridiculous a waste of money and how much food will be destroyed plus you have to deal with the health department.  He kept cutting so many positions in the stores that you can never find any help when you need it..  They need to go back to their old sale ideas and coupons.  Get rid of the flashy ads in the newspaper that nobody reads.  The JCP logo needs to go and go back to JC Penney.  I still shop in the local store but I wouldn't say I am a very happy shopper.
Apr 10, 2013 2:31PM
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Our little town has a JC Penny, a Sears, a Nordstrom and a Kohls.  When you go into any of the first three stores, the first thing you note is there are no customers strolling the isles.  When you go to Kohls the first thing you note is that it is packed with customers.  I don't know about the Kohls stores in other towns but the one in our town sells great merchandise at very reasonable prices, plus they give some pretty hefty discounts. 

 

This situation really befuddles me.  Why can't the management of Penny's, Sears, or Nordstorm develop a business plan similar to Kohls????  It seems to be such a simple idea.  Hey upper management, take some time out from the golfing to walk the isles of Kohls, see whats going on, go back to your store and modify your current and unsuccessful plan so it parallels that of a succesful plan.  Use that business degree you got for something other than a door mat.

Apr 10, 2013 2:39PM
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Glad he's gone, I am a JC Penny Customer, after Robinson-May left I went to JCP. loved everything about JCP, until this nut was hired. it's taken some time for me to go back to shop, I have found some good deals but have to admit Not a real BIG Buyer like I used to be. I hope that JCP will recover from all this man did, I would HATE to see JCP leave.  whether this dummy step down or let go, I AM GLAD HE'S GONE!!!!!!!!!!!!!!!!!!!!!!! GET SOMEONE LIKE A REAL PEOPLE PERSON!!!!!!!!!!!! AND THEN WE WILL ALL BE THERE TO SHOP LIKE WE USED TOO. LOOK FORWARD TO SHOPPING WITH YOU IN THE NEAR FUTURE.
Apr 10, 2013 1:44PM
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Having been exposed to quite a few major corporations through the last 40 years I can attest to the fact that what happened here is merely a sign of the times.  Nardelli still seems to be the poster boy for rewarding failed efforts but too many boards are comprised of little more than status figures and stockholders are focused on the short-term.  Rarely does a transfer from one industry to another prove wise.  Fifty years ago there was focus and dedication.  Now we're in the 'I want it all and I want it now' era.  A sense of entitlement is not just for those who want to brand Social Security with the term.  Reach a point where someone thinks you're worth millions a year and soon you start to believe it.  Mr. Johnson is simply a product of the times.  Let's hope his replacement, even if just temporarily, can get JCP back where it belonged.
Apr 10, 2013 2:17PM
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Judging by the number of comments, not a lot of people care.  For what it's worth, reason 4 is huge - I assume that the company was footing the bill for the hotel.  Had he been committed, he would have seen that his strategy wasn't working and corrected it.  It also appears he was trying to set Penny's apart from Kohls and its strategy of sales and discounts.  But instead of doing the opposite, he would have been better advised to copy them instead.  His ego, in the end is what did him in.
Apr 10, 2013 2:55PM
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It was clear from the start that he was just there for the money, so the result is not surprising.
Apr 10, 2013 4:18PM
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  I know people who work there and they were made to feel that they were not inportant to the company.  They were treated very poor the last year or so.  I hope they change and RESPECT there employees.  I agree with Old ref's comments

Apr 10, 2013 2:12PM
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JCP has always had great products at great prices. Last month I bought online with store delivery. They called when it arrived. I went to the store and a very nice woman got my order and I was out in less than 10 minutes.  I also did a home delivery on some drapery last month (great price) and it arrived on time and fit perfectly. It seems JCP can't figure out its positioning strategy. Are they competing with Target, Khols or Macy's. When they figure that out then they shuld merchandise the way their competition does because that is what customers expect. Better yet, ask JCP customers what they want. Do in store surveys. Your current customes are most loyal customers. I am available for a consulting gig.
Apr 10, 2013 4:20PM
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Overall, they changed the concept of their customer, I realize they were targeting the pre-teen to college age consumer, because of the spendable cash available to them, however, this is the most competitve $ in the marketplace. It doesn't mean a business needs to cater exclusively to the adults in society, but face it, we are more likely to have brand loyalty. There is no such thing in the modern instant gratification twitter world. Adults look for quality products to complete their homes, linens, dishware, bedding. window coverings... grownups looking for well made clothing that is a little trendy but classic enough to wear a couple of seasons, young families look for infant and toddler items.

 How many t-shirts and jeans can a store survive on ? But the biggest mistake in JCP, is failing to train their associates in the fine art of customer service. RECOGNIZE a good employee and reward accordingly. Place incentives for associates to be better at customer service and for pitys' sake don't make a customer walk all over the damn store to hunt down someone to take they money !

Apr 10, 2013 3:22PM
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He's just a greedy idiot like most CEOs of large companies.  Brought little or no value and has a big ego.  Some other big company will hire him and expect different results. 
Apr 10, 2013 5:47PM
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I was appalled when I went into J.C. Penney's in my home town of Texarkana, Texas and found that many of the employees that I had dealt with over the years had been let go.  When you have valuable and loyal employees they are an asset to your company and should be treated as such. I know that I am not the only one in our town that feels that way either. When I pass by the parking lot in and around J.C. Penney's it is empty even on the weekends. The new employees hired have definitely not been trained on customer service.  They make no eye contact and no effort to help you find a thing. The clothes I have looked at in Penney's are not the same quality that I was use to seeing in there stores either.  I could always find something I liked while shopping and now it seems like that is a thing of the past as well.  I am also smart enough to know that you cannot blame all of this on one man.  You know that he had to answer to someone higher up than him and they are just as accountable for the stores unfortunate mistakes in my book.  I use to really love shopping at JCP and I truly hope they can turn it around.

 

 

Apr 10, 2013 4:28PM
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In the end, I think he ended up the winner if he got a big payout to leave. That's why he wasn't committed; he knew if he got the boot that he would get $$$ either way.

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