What’s taking J.C. Penney so long to find a new CEO?
Last August, J.C. Penney’s board was criticized for the time it was taking to find a permanent CEO to replace Mike Ullman, who rejoined the company on an interim basis after Ron Johnson’s disastrous tenure came to an end. At the time, the board issued a statement that it would be "careful and deliberate to ensure we find the right long-term leader." Now that it’s been more than 15 months since Mr. Ullman was made interim CEO, is it fair to ask when the company will hire a permanent replacement?
The Wall Street Journal, citing "people familiar with the situation," reported earlier this week that Penney had spoken with Mindy Grossman, CEO of HSN Inc., about the top job and she had taken a pass. The talks between the parties reached an advanced stage, but an agreement couldn’t be reached.
Representatives for Penney and Ms. Grossman have declined to comment on the Journal report, leaving it to others to speculate as to what may be standing in the way of the department store chain finding a new CEO.
Penney faces numerous challenges, many that were behind its decision to hire Mr. Johnson in the first place. These include an aging and increasingly frugal core customer and increasing competition from online merchants. The company also finds itself in search of a new, dynamic leader at a time when other retailers including American Eagle, Dollar General and Target are doing the same.
In an article on TheStreet, Brian Sozzi, of Belus Capital Advisors, suggests that Ms. Grossman, who is big on disruption, may have been put off by Penney’s unwillingness to shake up its business. She might also feel that she would have been constrained because of Penney’s financial health from testing new initiatives online and in stores.
- HSN Chief Turned Down Job as J.C. Penney – The Wall Street Journal (sub. required)
- J.C. Penney Fails to Tap HSN’s Grossman as CEO and Here’s Why – TheStreet
- What’s Up With J.C. Penney’s Board Fighting in Public? – RetailWire
- Johnson Era is Over: What Will It Take to Fix Penney? – RetailWire
- jcpenney Appoints Myron E. (Mike) Ullman, III Chief Executive Officer, Succeeding Ron Johnson – J.C. Penney Company, Inc.
Discussion Questions
Why do you think it is taking so long for J.C. Penney to find a permanent CEO? What will a new CEO have to do to address the challenges specific to Penney’s business?
I don’t blame J.C. Penney for being careful at this point. I would not want any company to hire a CEO just for the sake of having a CEO in place. I also understand why executives would be hesitant to take the helm at a company that has struggled so severely to “find itself” during the past few years. I think the company leaders are better off waiting until they find the right person to fill those shoes.
I think I wrote this before; there just aren’t that many qualified candidates out there. The death of the regional department store and mass merchant has left us with precious few logical candidates. If you’re a company like Macy’s, which is succeeding, building a succession plan from your existing team is not terribly hard. If you’re a company like JCP which has the well documented problems described above, you will be far more likely to look outside. But there aren’t a lot of choices.
Ms. Grossman doesn’t know a boatload about being CEO of a massive store-based retail operation. Why would she take the risk of taking the JCP job? If you’re going to ‘shake something up’ you have to know exactly what you’re doing, and what the consequences of that shake-up will be. I don’t see her knowing that.
This problem is not going away any time soon. It’s the unintended consequence of endless M&A.
After an unsuccessful choice, the board is rightly concerned about making the next choice. Supporting Ron’s bold moves without success may be making the board reluctant to make future bold moves. However, the board needs to ask how successful the store is now, and whether incremental moves are really the best moves going forward. Without a lot of cash, and with the need to identify a loyal customer base, the need to choose a new direction, the need for remodeling and the need for employee training, the future poses a significant challenge.
Part of the issue, as George points out, is the number of vacant jobs that would appear more attractive than the J.C. Penney position. Target would top the list, but Kohl’s is searching for a lead merchant with a possible shot at succession to the top job. Either of these companies is fundamentally better-positioned than J.C. Penney, despite their current issues.
Beyond the matter of competition, the bigger question is just what the J.C. Penney board wants. If it’s looking for a “transformational” CEO, it’s easy to understand being gun-shy after the Ron Johnson fiasco. On the other hand, the “turn back the clock” strategy of Mike Ullman’s team is not a path to long-term sustainability. It’s hard to sell a top candidate on the job when the mission itself is unclear.
Penney’s is facing a couple of problems when it comes to hiring a new CEO:
Mel makes a good point: that J.C. Penney doesn’t know what they want or need. They are pretty much a lost cause; very Montgomery Ward/Kmart-esque. Maybe hiring a CEO is just throwing away good money, and perhaps being in limbo is safer than putting another messiah at the helm.
Didn’t Johnson push out a lot of J.C. Penney executives when he was there? It sounds as though he took on a “scorched earth” policy.
If so, there wouldn’t be anyone to promote from within, nor a core staff of people who understood what was good in J.C. Penney’s DNA and how to build upon these assets.
Why would any executive with promise take on a job that would likely end up a failure, thus tarnishing their own name and reputation?
Gaining consensus within J.C. Penney’s board has proven difficult when selecting its permanent CEO. There seems to be a lack of conformity on what its key objectives are. Such lack of clarity hasn’t stimulated the available CEO pool to lead a “snake-bitten” company. What will ultimately happen? Who knows, but such conditions could possibly result in hiring Mike Ullman to that “permanent” job.
What must the “permanent” CEO do? Be LUCKY.
Using a sports analogy; there is no team or organization so bad that you can’t find someone to manage the team. But in J.C. Penney’s case, we may be seeing the exception. Of course they will find someone. It will not be the ideal candidate because those the board believed were ideal said no. There is always someone who wants to climb the management ladder who will take on this monumental task. Then he/she will be out like those who came before. This is a no-win situation when you are operating with a board that is unyielding to their beliefs. They better hurry up. The remaining customer base is decreasing by the day.
I don’t find the “other retailers are looking for CxO’s too” excuse very convincing: I’m sure the “rarer than unicorns” claim helps bolster the case for bloated compensation, but a nation of 300 million—heck, let’s include Europe too and make it 500+M—aught to be able to produce four or five such people. But probably no pool is big enough to produce a candidate who can satisfy all the competing demands of the various stakeholders here…one with name recognition, who can guarantee success by never guessing wrong, and compel people to shop where they didn’t shop before (or at least didn’t for a long while). As others noted, they could do worse than a perpetual “interim” CEO…in fact, they already did.
Mindy Grossman was my top pick and the fact that J.C. Penney avoided the usual retail suspects and went after her is a good sign. Unfortunately, Penney is left with slim pickins in the wake of her refusal unless it dares to make the first (inevitable) move toward tapping digital-forward talent. Walmart E-comm, Amazon … Too soon?
Okay, let’s think about this for a moment. Penney’s board has to go one of two ways here: 1) hire a relative unknown and have the board run the company through him/her or 2) hire a heavyweight that will instill some instant confidence. Now name me a heavyweight in the retail clothing industry who is available (other than the Men’s Warehouse guy). Now name one who would take the job after what Ron Johnson did to the company.
Penney’s must fix its board and then find someone who is very good at blocking and tackling to restore some executional integrity to the operation. The single biggest problem that the organization currently faces is a crisis of confidence on all fronts. Managers don’t feel there is any real future, line workers don’t see any spark of life anywhere. Everybody in the organization is looking for a job!
The new CEO is going to have to put a face on Penney’s with the employees, suppliers and creditors. I don’t know how much of the current team is salvageable. Once people make a decision to look elsewhere, it is almost impossible to turn them back.
The consolidation of the department store in America and the loss of regional department stores means there are precious few merchants who could truly lead the company. This is a REAL problem because we are talking about a company with big difficulties still facing it, a very daunting task for the next CEO. Perhaps they need to look outside the US.? The excellence and understanding of the company and its customers brought back by Mr. Ullman has put out the fire—but the train is still wrecked.
Give Johnson credit for one thing, the stores were starting to look much better under him. Even JCP’s newest stores are pretty ugly looking.
The second problem I see is this: Why is the JCP braintrust in Plano? It seems to me to be the wrong city from which to run a retail operation, especially when it comes to landing talent and access to expertise. New York, New Jersey, Atlanta or Columbus seem like far better places to run JCP from.