Culture Change Part of Penney’s Plan to Succeed
By George Anderson
Mike Ullman, CEO of J.C. Penney, walked into an extremely formal corporate culture when he joined the department store chain. Employees called managers and executives Mr. or Ms., formal business attire was required and displays of individuality in cubicles were strictly limited.
Mr. Ullman came to the conclusion early on that the code of conduct within the company was leading to high employee turnover rates while discouraging talented individuals from outside the company from joining.
“In retailing today, you have to realize that there is too much property and too much merchandise,” he told The Wall Street Journal. “What there isn’t enough of is talent.”
Losing talent through turnover also hurt company performance. Penney estimates that every employee who leaves costs the company about a third of his or her wages. In 2005, the company estimates, the cost for such departures was $400 million.
Batia Wiesenfeld, professor of management at New York University’s Leonard N. Stern School of Business, said companies such as Penney are looking to adapt corporate cultures as a means to “deliver a competitive advantage.”
In an effort to change the culture at Penney, Mr. Ullman brought in Michael Theilmann, a former executive with Yum Brands Inc., to run the company’s human resources.
One of Mr. Theilmann’s first acts was to launch an internal communications program at corporate headquarters trumpeting the advantages of communicating on a first-name basis with slogans such as, “First names create a friendly place to shop and work.”
The “Just Call Me Mike” program, as it was dubbed, featured photos of headquarters employees, including Messrs. Ullman and Theilmann.
The company also went to business casual attire at headquarters with jeans acceptable for office wear on Fridays. Penney also lifted its restrictions on decorating cubicles.
Mr. Ullman, while cognizant of the company’s history, is adamant that it can not be allowed to bar forward progress.
“The business isn’t just about store managers anymore — it’s more complicated than it used to be, and I need to motivate employees from the entry level to the officers,” he said. “If I had a choice to honor the past and lose, or move forward and win, I pick winning.”
Moderator’s Comment: What role does corporate culture play in company performance? Will the changes instituted at
Penney help it achieve the goal of reducing turnover of existing employees while attracting new talent from outside the company? –
George Anderson – Moderator
Corporate culture is set from the top, and ultimately it’s a key driver for success. Companies that emphasize how their people dress are saying that appearances are more important than achievement. Richard Branson wears blue jeans. The guys at Enron and GM wear nice suits. People at Trader Joe’s wear Hawaiian shirts. Which of those companies is a great place to work with a great record of achievement?
Culture has more to do with levels of participation, partnership, inclusion, authorship, and respect than with blue jeans or cubicle decor. It has more to do with how each employee is involved in the business than with communicating on a first-name basis.
The HR changes at JCP are treating symptoms, not problems. They’re trying to back into a solution. It’s as if they believe that looking successful creates success – kind of a “dress for success” strategy. However, casual wear, first names, and cubicle cactus collections are simply outgrowths of real and genuine cultural changes. They’re putting the cart before the horse.
Culture changes are glacial. Trying to appear to have made quick culture changes by jumping forward to simulate success is a waste of time and energy, and falsely inflates expectations. It’s like trying to leapfrog over the real work, the real task of genuine culture change. First come respect and inclusion, then come first names, nicknames, and March Madness brackets.
I’ll never forget when, as a young rep handling what at the time was considered one of the biggest accounts out there, I walked into J.C. Penney in a really nice pant suit and heels. My male senior buyer looked me up and down and said, “So, going casual today, Carol?” I could have died. He was expecting a skirt, blazer, hose, etc. I suppose! Not much had changed at Penney’s in subsequent years, to everyone’s surprise, and I went on to advise my clients to keep Penney’s culture in mind when they got ready to call on them.
Fast forward to the recently-announced changes . . . Speaking to a few folks at Penney’s corporate, most welcome the change with open arms, however store personnel are a different matter. Several store veterans that I’ve spoken to downright resent the changes and don’t want to be “forced” to call their managers by their first names. Should they have to?
All the commenters seem to be correct: culture matters. How about data to back this up? Our study of over 2100 companies found that culture (and the System that determines culture) has more to do with the success or failure of a company than any other factor, because it determines the critical operational characteristics (for example, strategy and how strategies are implemented). Strong, adaptive cultures perform an average of four times better than those that are not strong and adaptive.
Widespread thinking seems to say that culture, and culture-change, is driven by the top. We have found this is not quite true: 100% of top executives were unaware of at least one business-significant cultural element of their own organizations — elements that they themselves conform to. We have found that all organizations are unable to accurately assess their own cultures; culture is part of an organization’s Master System, and the embarrassing elements of a culture are hidden and ignored and distorted, just as all other High-Intensity Information. We believe our data shows that the System drives change, not the top.
Here is another reason we say the top does not drive change. There is a great deal of strong opinion in the business world about the significance of culture, what an effective culture looks like, and how to bring it about. Yet there are astonishingly few organizations with measurably effective cultures: we have identified less than one eighth of one percent of all organizations. It would seem that the widely-circulated ideas regarding this issue do not actually produce significant results. We have more data that seems to explain why, and what actually does work in this regard, should anyone care to see it.
I think culture is huge. As Mr. Ullman said, there is a shortage of talent in retail. Retailers, like any business, will win or lose based upon the individuals running the company and working with the customer. We’re in a people business. Creating a desirable work place is key to attracting and keeping GREAT people.
There is no doubt that J.C. Penney’s culture of formality, and only promoting from within, had to impact their ability to attract and keep talented individuals. I would also think that these changes will make it easier for outsiders to come in and be more readily acceptable. While I’m sure J.C. Penney did plenty of hiring from outside the company, I’m also sure it was difficult for those new hires to succeed. I’ve seen a lot of companies that make it difficult for outsiders to come in and the result is usually good people leaving.
I liked the fact that “Mike” put a dollar amount to what the current culture and subsequent turnover was costing them. Too often, people think that focusing on the culture is just about the warm and fuzzies. Warm and fuzzies can save a company money as well as improve sales performance. Ultimately the changes that Mr. Ullman is making will also translate to a better customer experience. Happy employees make happy customers. (I just wish more retailers got that.)
Not to mention creativity, empowerment and the energy that comes from feeling your contribution is a part of the success of the company! Corporate culture is all of this! Having spent some time with America’s top DIY, The Home Depot, during the ‘Bernie and Arthur’ days, I experienced first hand the power of corporate culture. Meetings began with a Home Depot cheer and every person was empowered to be a decision maker. Find 2 executive sponsors and THD was willing to try your idea. One of the great ideas that sprung from this was the ‘Load and Go’ truck rental service. I shared a cubicle wall with the person who came up with and made this a reality. The enthusiasm and support of that company not to mention their impact on the Atlanta community all sprang from that corporate culture and I have yet to see the likes of it again.
Everyone agrees that corporate culture is a critical element for success. The real trick is determining what culture is wanted for what kind of results and then to create it. With the amount of change that occurs with any kind of transition and/or new management, employees are often skeptical about proposed changes. Establishing trust, changing a culture, and creating a new business process are not easily compatible goals. A memo describing the new program is not sufficient. In general, companies get what they reward. If the proposed changes are rewarded there is a good chance that that behavior will be adopted. So make sure you are rewarding the behavior you want.
Job satisfaction is not primarily about money. As a matter of fact, money ranks below recognition for a job well done and being comfortable in the environment. It also ranks below doing work that the employee is good at and solving challenging problems. What Mike & Mike seem to be doing, by changing the culture, is increasing the job satisfaction of their employees. And after all, it is top management that determines the company culture. Thus in the long run they should reduce turnover and keep the better people. Maybe the adage, “it’s the small things that count” really do work.
The examples of superior corporate cultures can be seen by reviewing the Best 100 Companies To Work For. And by the way, very profitable; while being flexible to change tactical direction.
My hat’s off to the Penney’s CEO; especially, during a turn-around environment! Top /down and bottom /up approach!
In our Industry, you could also name Publix, Wegmans, Ukrops, the old Dominick’s; Harp’s, Nugget, Gelson’s, and Harmon’s to name a few.
While recently working with a client, a new staffer said that walking into the break room on her first day was like walking into her high school cafeteria on her first day there. Scary, and brings it right home in terms of impact on our abilities to recruit and keep new staffers. We could also ask ourselves, is it that way in our lunch rooms?
Those that will win in this game called retail will embrace change and the energy that comes with it. To allow (and, better yet, foster!) a climate of empowerment, blue-sky thinking and calculated risk-taking will generate a synergistic culture that leads to collective organizational success.
To put it simply: There are no real business problems; there are only cultural issues.
Corporate culture is the air the organism called the “company” breathes. It is the water the company swims in. And it is there, like the air and water, even when those in it don’t see it, recognize it, or understand it. Culture exists, and is the single most powerful force in sustaining excellence within an organization.
Managing culture requires intentionality by as many within it as possible. Cultures should be driven by mission statements, and clarity about the purpose and vision of the organization. Culture answers the questions of “where are we going” and “why do we do this” and “how do we do this.”
Physical manifestations of culture, such as cubicle deco and attire standards are important in that they provide tangible experience of the underlying beliefs and attitudes. As “things” in and of themselves they do not constitute culture. “Openness” is modeled better in management meetings where dissent is encouraged, where senior executive thinking cannot only be challenged, but when challenged, responds with enthusiasm and acceptance.
Too many thoughts, not enough space. Culture is the energy which exists in the interstitial spaces between processes, practices, and people.
Our professionals focus on retail performance improvement with our clients. This is almost always a combination of technology, business process and culture. In general, technology gets a lot of attention, business process gets some attention, and culture is rarely addressed. This is the single biggest opportunity for retailers to improve performance today.