Photo: Astrid Stawiarz/Getty Images
JCPenney may have a glossy new exterior, but inside the 111-year-old retailer, there is a major culture clash.
There’s widespread anxiety, fear, distrust, and resistance to CEO Ron Johnson within the company, according to several JCPenney executives.
rumours have spun out of control, even among the executives at headquarters, and they have trickled down to the front line workers in stores, the execs told us.
We’ve corresponded with dozens of JCPenney employees throughout its transformation over the past year.
Some are executives at the company’s headquarters in Plano, TX. Others are regional coordinators and managers. We’ve also heard from store managers, associates, and stylists who deal directly with customers and receive their marching orders from far above.
The latest numbers also reveal that the company is in a tailspin.
That said, there are signs that JCPenney may survive this transition. CEO Ron Johnson’s vision of reinvigorating the retail experience with his “shop” concept has gone well so far, yielding numbers that dwarf the rest of the department store’s bazaar-like floor space.
Johnson is certainly capable of thinking up brilliant new ideas that have the potential to turn entire industries on their heads, as he did with the Apple Store. It’s his strongest attribute.
But this time, he’s transforming an entire company — not just a retail experience.
Photo: Scott Olsen / Getty Images
To do this, he has to manage a period of rapid change across JCPenney, including its mission, structure, brand, operations, and technology. The types of changes he’s making will have an unavoidable impact on the organisation’s stability, and they must be managed carefully.
The employees, who have all asked to remain anonymous for fear of being reprimanded or fired, have provided a look under JCPenney’s hood.
JCPenney did not respond to a request for comment.
Where communication goes to die
When the new management team was installed at JCPenney, the internal culture became one of opacity — not transparency.
“Corporate culture is very different than it was one year ago,” a current exec who had worked in the previous era explained. “There is no protocol or process in the company anymore. The direction given on product changes very frequently.”
“There are no memos or written directives anymore,” another JCPenney home office executive said. “Last one I saw was almost eight months ago. Everything gets communicated verbally and without too much detail.”
“They do not leave any opportunity for anyone to ask questions,” the exec continued. “While working at home office, we do not get any insight to store operations and changes.”
The murkiness plants the seeds of distrust. Johnson has cagey work habits, according to insiders. It’s likely a symptom from his extended time at Apple, which has a notoriously secretive environment.
Johnson commutes by company jet from his home in Palo Alto, California, to JCPenney’s Plano headquarters. When he’s in town, he reportedly stays in the glitzy Ritz-Carlton hotel in Dallas. Johnson rarely works a full week at the office, according to a report from the NY Post.
“What does [Johnson] do the rest of the time?” one former exec said to the Post. “If he’s doing this huge transformation, why isn’t he there 12 hours a day helping everybody get things done?”
Johnson is surely working around the clock at JCPenney. He’s a professional, and he and his team have made an incredible amount of change in a very short period of time.
Still, it makes him look conspicuously uninvolved and uncommitted. Perception matters and there are real consequences to the apparent disconnect.
Several JCPenney execs we talked to said that they simply did not trust Johnson. If he doesn’t trust his own people, they say, then why should they return the favour?
Photo: Aimee Groth / Business Insider
“Ron doesn’t trust any information to be given except to his inner circle,” said the first exec, who specified that Johnson’s cadre of most-trusted confidants only includes four or five people at the top rungs of management.”For example, no one but Ron and his team can view sales [numbers],” a veteran regional exec noted. “Store Managers can only view their store’s sales and their district. They can’t see how anyone else is doing.”
The never-ending rumour factory
rumours “run rampant” at JCPenney, according to insiders. There seems to be a new one every day.
“There is always a lot of speculation about when the next big change will be,” one of the home office execs told us. “The rumours of more layoffs have been going on for two months.”
Last month, employees at JCPenney’s headquarters were talking about chief merchant Liz Sweeney’s status at the company. The rumour “went viral,” according to an insider. Some heard that she would be fired on the first of the year. Others heard she was merely on the shortlist to go.
There are rumours about entire divisions disappearing, store departments being shut down, positions being eliminated, major strategy shifts, and much more.
Part of the problem is that employees aren’t told about significant firings.
Another round of firings hit JCPenney yesterday, and 300 workers are being sent packing, insiders told us. All information involving the layoffs has been vague and employees have been dreading the beginning of another set of cuts ever since the Post reported that another 10 per cent of JCPenney headquarters staff would be laid off — something employees called the “St. Valentine’s Day Massacre.”
“Every termination is surrounded by a trail of rumours … No official announcement should be expected,” said one of the home office execs.
Worse, nothing is being done to slow down the rumour mill. Johnson himself admitted it on live television.
“There’s a lot of rumours. We have like a rumour a day,” Johnson said in an interview on CNBC. “Today there is a rumour about layoffs at headquarters. I would never talk about that, but you have to separate the fact from the rumour.”
And yet, the only people who would have the ability to separate fact from rumour — Johnson and his team — aren’t saying anything. The rumours fester.
“Ron loves rumours,” the regional exec told us. “JCPenney loves rumours. The belief is, ‘you’ll know when you need to know it.'”
As a result, employees experience constant uncertainty. Then comes the angst and fear. They worry about the company’s health, they worry about their colleagues, and they worry about whether their bosses are doing the right things.
Most importantly, they worry about their own livelihood, explained the execs. There are few ways to destroy employee morale faster than letting them work in constant fear.
In Plano, it’s worst for high-level employees who worked in the previous regime. Johnson forced out the entire c-suite from JCPenney’s old senior team, and the purge crept down to the EVP and VP levels over time.
Photo: Wikimedia Commons
“Everyone is afraid for their jobs,” explained the exec who had also worked under the previous regime. “Much time is wasted on discussing, so not a lot of work gets done.”
JCPenney recently addressed one rumour directly, but it wasn’t necessarily for the benefit of its own employees — it was to clear things up for a different set of stakeholders. After an accusation from bondholders who claimed that the company had defaulted on some of its debt, JCPenney CFO Ken Hannah and Johnson himself firmly denied any wrongdoing in statements, which helped placate investors.
As bad as the communication issues are at the upper management tiers, the problem is worse down in the stores, employees said.
The front lines
Retail workers are generally left in the dark about corporate changes, often to avoid strategic initiatives from being leaked. While this occurs at many major retail companies, it’s particularly true at JCPenney.
“Instructions from top are to ensure nothing gets out,” an insider noted. He added that because of this, he doesn’t blame managers for having “secret” meetings with their workers.
“It seems a lot of misdirection and bad communication that starts with corporate filters its way down to management, and ultimately dumps on us employees at the foot of the hill,” a JCPenney associate told us. “It has become a horrible place to work at, and feeling trapped there is not a good feeling.”
Cutbacks have also become a major problem on the ground level. Mass firings are a necessity for an organisation that’s attempting to trim costs, but with so many of them happening in waves, they have taken a devastating toll on morale. Management hasn’t been able to keep ground-level employees looking forward, or get many of them to buy into the vision.
“I have never seen the company in such disarray,” a 5-year veteran JCPenney associate said. “Sure we had our share of problems during this time but nothing like this … Now all hope seems lost.”
“I hate it. I hate the disorder and I hate having my customers give me that look, that ‘you don’t have any idea what you’re doing and I hate this place and I’m never coming back’ look,” said another associate. “I hate having to explain why there aren’t any more [expletive] coupons, why the stickers to the ‘everyday’ prices are wrong or why a supposed clearance item is not clearance.”
Without the base of the business on board, it’s impossible to get anything done. The good news is that JCPenney does have some store employees working hard to make Johnson’s vision a reality.
“It will be a good step for the future of our salon,” a salon worker told us after the mass elimination of salon receptionists. “Without change there will be no reward. Time will tell!”
But JCPenney needs to do more to get its workers aligned. It’s a key factor as the organisation goes through a period of profound change.
For instance, accessibility is always a hot topic for low-level employees in gigantic corporations. They want to be heard — just look at the recent uproar at the world’s largest retailer, Wal-Mart.
A store employee told us that he recently sent a letter to upper management complaining about various issues at JCPenney and he was quietly reprimanded later. The worker said that he’d never do it again, widening the distance between the everyday worker and the tiers of management up in the clouds.
Do you work at JCPenney (at headquarters or in a store)? Contact me at [email protected].
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.