1 Do you think JC Penney was justified in appointing Mike Ullman, an outsider, as CEO instead of Vanessa Castagna, considering that Castagna was instrumental in turning around JC Penney in the early 2000s? Soon afterwards, Castagna left the company. What are the pros and cons of “bringing in an outsider” and promoting from within”? Discuss too the impact of such decisions on the morale of the employees.
JC Penney is a mid range chain of American department stores, which was first started by James Cash Penney 1902, when he was offered a one third partnership in a new store with Guy Johnson and Thomas Callahan called The Golden Rule. The store was a dry goods and clothing store in Kemmerer, Wyoming and from here the chain spread rapidly throughout the United States changing its name to JC Penney in 1913 when James Penney took a greater ownership of the chain. At about this time several partners met at Salt Lake City to draft “The Penney Idea”, a set of business principles that were to guide the business from then on. Wikipedia.com viewed 9th September 2007.
Over the years the chain of the department stores continued to grow through a system where the managers put equity into their stores giving them more control over what was sold. As a result the merchandising system was decentralised while all its competitors had a more centralised system allowing them to know what was in stock at any one time, what was moving and what was not; and to be able to advertise on a national basis. With the intense competition found in the retail sector in the late 1990s, JC Penney began to find its place in the market was under pressure and profits began to decline. At this stage it made the new appointments of Allen Questrom as the CEO and Vanessa Castagna as the new COO.
Castagna came to JC Penneys with a great deal of merchandising experience gained from other retail chain stores. With this experience she helped Questrom turn around JCP by centralising the buying system, decreasing the number of lines sold, closing down non performing outlets and re-imaging the lines sold to the customers. This plus the selling of a number of the company’s other interests left it in a very good financial position avoiding what looked like possible disaster. These changes brought JCP into line with its competitors and in doing this Castagna showed excellent management skills. The share market also approved, as can been seen with shares rising from about $20 when she joined the company in 1999 to over $40 when she quit in March 2005, as can be seen in Diagram1.
http://investing.businessweek.com/research/stocks/charts/charts.asp?symbol=JCP viewed 9th September 2007.
Even though Castagna showed great management skills she did not necessarily show the vision or leadership skills that were necessary to take JCP the next step further were it could attract, train and keep good staff as well as present a new image that would excite and attract new customers and ensure old customers kept coming back.
Kotter (1996, pg 25) stated,
“Management is a set of processes that can keep a complicated system of people and technology running smoothly. The most important aspects of management include planning, budgeting, organising, staffing, controlling, and problem solving. Leadership is a set of processes that creates organisations in the first place or adapts them to significantly changing circumstances. Leadership defines what the future should look like, aligns people with that vision, and inspires them to make it happen despite the obstacles.”
When Myron E. Ullman joined JC Penney as Chairman and CEO late in 2004 he found that the company had maintained a rigid old world culture that discouraged new recruits and stifled creative thinking. Morale amongst employees was high, but only because the company had just avoided disaster and Ullman felt to increase morale and...