26 May 2013

Ron Johnson's Quick Trip as JC Penney's CEO - A Reminder About the Limits of Money

Ron Johnson was briefly head of JC Penney. Hired in November 2011, he was fired in April of 2013. Less than a year and a half. 

Now regular readers would likely expect me to make some point about how much money he made in that time (about $55 million) or the fact that his pay was outrageous in comparison to the typical JC Penney employee (his 2011 pay of $53.3 million was 1,795 times more than his average worker's $29,688 salary). I won't. I won't even mention that.

Instead, I'll criticize the board and major investors for thinking that money was a substitute for time. It is hard to imagine that people in charge of so much money are actually that naive. It could be that Ron Johnson would have been a bust but who could know after 17 months?

Ron Johnson was hired away from Apple. He'd been in charge of the stores. And Apple stores are a retail phenom. For instance, Apple's Stores had the highest sales per square foot of any retail stores. Johnson knew the formula for magic and could obviously bring that into JC Penney. Or so the board must have thought.

But if there is a formula for business success, surely time and inspiration are more important inputs than money.

Steve Jobs had secretly built a prototype Apple store near the Cupertino headquarters and would spend time in the place re-thinking the retail experience. He would get insights and send the architects and builders scurrying. As he had with the design of the iPod and iPhone, he was hands on, giving input and obsessing over details. He described design as having to hold 5,000 pieces of information in your mind and find ways to fit them together, information about the behavior of customers, plastic, and electronics and how they play together for instance. (Which, it seems to me, is a wonderful way to describe systems thinking.) This secret process of Steve Jobs (which did include Ron Johnson about one year) took about 2 years.

So let's review the numbers.

Steve Jobs was CEO about 4 years before opening his first Apple Store and had spent at least 2 years - probably all four years - finding time to redefine the retail experience for Apple consumers. So Jobs took about 24 to 48 months to change the retail experience.

JC Penney was founded in 1902, about 111 years before they fired Ron Johnson. JC Penney has been operating about 1,332 months

Ron Johnson was given 17 months as CEO. 17 months to turn around this company of 1,332 months.

Yeah. That will work.

There is an old cliche in project management about paying 9 women to have a baby in one month. Sometimes, you just can't pay your way out of a problem. The board at Penney's tried and cost their stockholders about 50% of the stock value.

1 comment:

David said...

But you can spend your way out of a problem can't you? According to Krugman that is.