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Barbara Farfan

JCPenney Store Closings and 2014 Store Closings List Insignificant Compared to 2014 Store Openings Roundup - JCPenney Leadership Turnaround Strategies (JCP)

By January 21, 2014

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When JCPenney announced that it would be closing 33 stores in 2014, it joined Family Dollar, McDonald's Macy's, Barnes & Noble on the 2014 Store Closing roundup list, but not anywhere near the top of the list. The JCPenney store closings were probably given a lot more media attention than was warranted just because of the timing of the announcement. U.S. retail industry store closing reports each January are looked to as being a key indicator of both the short-term and long-term health of the U.S. economy as a whole.

There is no exception to that in 2014, and the comparison of the complete list of 2014 Store Closings and the 2014 Store Openings roundup surely provides U.S. investors and analysts with confidence about the stability of the U.S. economy in general and the growth of the U.S. retail industry in particular.

The number of store closings that have been announced by the largest U.S. retail chains in 2014 is so small that it is barely newsworthy. The fact that there was so much media buzz generated by the recent announcement of 33 store closings by JCPenney is proof positive that there is not much notable store closing news worth talking about.

It's not insignificant to 2,000 or so displaced JCPenney associates, but it is relatively insignificant that JCPenney is reducing the size of its brick-and-mortar retail chain by only 3%. Certainly more than 3% of JCPenney's retail efforts were filled with trauma and drama over the past couple of years, so 33 store closures is a much smaller negative end result that we all expected.

I think it's much to the credit of the JCPenney leadership team that they were able to keep their wits about them while the media doomsdayers and Wall Street wolves were losing theirs. Knee-jerk store closings in 2013 would have only pacified short-term investors for the shortest of terms. What JCPenney needed - then and still now - is long-term solutions.

So far we don't know much about JCPenney's plans for long-term turnaround solutions. But keeping the 2014 store closing numbers down to 3% indicates that they have some. One of the recent strategies that we do know about is the reinstatement of the commission sales pay for some JCPenney employees that Ron Johnson had done away with.

There's much discussion about whether or not it's a good idea to reinstate commissions for JCPenney associates in the fine jewelry and home furnishing departments. The definitive opinion on that topic would belong to the associates themselves, and hopefully the JCPenney leaders were smart enough to ask them about it. In fact, we can only hope that JCPenney leaders are being smart enough to ask the JCPenney associates about a lot of things.

Seemingly an increase in high margin jewelry and home furnishings sales would help the JCPenney bottom line. But whether or not JCPenney, or any retail chain for that matter, can successfully use commission money as an employee motivation tool is where the debate should be focused.

Employees will tell you they are motivated by money, but in my experience, that's only true when they are making it. And those employees who are genuinely money-motivated are always looking for even more money and an even better offer, which they might not find inside the brick-and-mortar of a JCPenney retail store any time soon.

Let's not forget that the retail chain that leads the world - not just the U.S., but the entire global retail industry - in retail sales per square foot is Apple. And Apple retail store employees are not being motivated to produce those results with commissions because they aren't paid any.

This is not to say that Apple employees shouldn't receive a commission. It's not the point. The point is that the best retail productivity on the entire planet in the history of modern retailing is being created by a non-commissioned hourly retail team. The Apple retail stores chain has got what the JCPenney retail chain literally might not survive without - employee engagement.

It's unfortunate that managers at every level in the JCPenney organization will probably summarily dismiss anything that has a whiff of an Apple aroma just because of the seemingly disastrous change management skills of Ron Johnson. But throwing out the employee engagement baby with Ron Johnson's bathwater would not only be a big mistake, it might be the last mistake that the JCPenney chain ever makes.

With either Ron Johnson's vision last year or Mike Ullman's vision this year, did anybody bother to ask the JCPenney employees what they thought? I've been on both the receiving and driving ends of massive change management projects and there's one definitive predictor of success or failure. That is employee buy-in.

No matter how good or bad, right or wrong, positive or negative Ron Johnson's ideas were or Mike Ullman's ideas will be they need employee buy-in to make them happen. And the interesting thing about human and employee nature is that even if changes are perceived to be positive, they will still get blocked if the employees responsible for implementing them don't feel like they were given any say-so or any choice in the matter.

What JCPenney leaders are trying to buy with a commission paycheck is the quality of ownership, which is something that just can't be bought. The tricky thing about employee ownership is that you have to treat people like they have it before they'll actually demonstrate it.

Instead of incentivizing employees, Ullman and his team should be engaging them. It's time to ask the retail front-line customer-servicing employees for ideas about how to JCPenney can be more relevant and valuable to its customers as if the employees were the shareholding co-owners of the company that they actually are.

Employees on the JCPenney sales floor may or may not have any new insights, but the value of the question is in the asking. In order to be engaged, employees first need to be involved. A systematized and ongoing solicitation of employee ideas is one of the primary employee engagement strategies that the Starbucks corporation has used for years. And while JCPenney is busy closing stores in 2014, Starbucks, which tops the list of 2014 Store Openings, will be busy expanding all over China.

There are plenty of employee studies linking high employee engagement to better than average financial performance and I have to believe that Ullman and the JCPenney management team have read them all. The fact of the matter is that the best efforts of several different JCPenney senior management teams have gotten the company where it is today - closing stores, laying off employees, and paddling hard to stay alive. So perhaps the biggest change that needs to happen at JCPenney is the shift from a top-down to an engagement-up strategy.

Judging from public employee approval ratings, it seems that Mike Ullman doesn't have the highest level of trust, loyalty, and buy-in from his employees. Which is not to suggest that leading a retail company is a popularity contest. But it is to say that leading a massive change management turnaround kinda is. So in the wake of a store closings announcement that was heard around the world, the unsolicited advice to the JCPenney leadership team is this.

Ask not what engaged employees can do for you. Ask instead what employees need from you in order to be engaged. Then give it to them, and watch what they can do for your company and your bottom line in return.

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January 23, 2014 at 3:48 pm
(1) Kevin says:

Who is Pete Ullman? JCPenney’s CEO is Myron “MIke” Ullman.

January 23, 2014 at 7:40 pm
(2) Johnny says:

I was gonna ask the same thing

January 23, 2014 at 7:50 pm
(3) Johnny says:

And no. The upper management has never asked us employees what our opinion is. They seemed to be focused on erasing every single trace that ron Johnson had. From revamping the home dept and making it look boring and drab, to cramming the isles with merchandise it seems the jcp that Ullman was in charge of and led to his dismissal is on a return. I hope they find someone with a updated vision soon to replace him. Or get the input of the associates. Where’s the “warrior team” now?

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