JC Penney (JCP) is a department store chain founded in the U.S. more than a century ago. After the ill-considered pricing strategy change decisions by Ron Johnson, a former CEO, JCP experienced a financial decline that has not been overcome yet. This paper explores Johnson’s mistakes and their consequences for the company’s decision-making in the past and today with reference to values, attitudes, and lines of authority.
Values and Attitudes and Their Impact on Decision-Making
As a preliminary solution for the ongoing crisis, JCP should devote much attention to the establishment of internal ethical and cultural norms that would be reputationally advantageous. JC Penney (2021) has started advocating for ethically informed decision-making processes at the lower organizational hierarchy levels. Specifically, some new internal conflict of interest policies has been introduced to support the values of honesty and customers’ best interest. External influences on employees’ business judgment are prevented by means of gift acceptance prohibitions, the prohibition of using one’s employment status for anyone’s personal interest, and policies to limit current employees’ labor relationships with JCP’s suppliers and associates (JC Penney, 2021). Other priorities in employee conflict decision-making, such as employee safety, human rights, and professionalism, find support in harassing conduct policies, measures to offer anti-discrimination support on the basis of protected group status, and anti-retaliation guidelines to eliminate adverse consequences for investigating or reporting internal concerns (JC Penney, 2021). Sustainable production is another proclaimed decision-making principle (JC Penney, n.d.). Thus, the company strives to actively support ethical excellence in human resource decisions.
Updated policies and ethical statements probably serve as an attempt to improve the consequences of JCP’s short-sighted decisions of the past that sometimes ran counter to customer-centeredness, employee well-being, and mutually advantageous collaboration with stakeholders. Under Ron Jonhson’s leadership, JCP designed a “fair-and-square” pricing strategy that gave preference to everyday fixed prices rather than promotions, claiming that it would enable customers to “shop on their terms” (Eades et al., 2017, p. 5). Despite critical reviews from external pricing consultants regarding JCP’s insufficient product differentiation and discounts as target customers’ core purchasing decision-making factor, the organization did not give up the new strategy, which resulted in its rapid financial deterioration (Eades et al., 2017). Being guided by financial interest rather than the consumer’s satisfaction, the pricing strategy decision eventually led to a 10% reduction in the workforce and the discontinuation of the dividend to JCP’s stakeholders (Eades et al., 2017). Therefore, JCP has a history of departing from the values of consumer-orientedness and stakeholder engagement.
Additionally, JCP’s currently reinforced honesty, wage-effort proportionality, and non-retaliation principles can be called into question. Specifically, while non-administrative staff members were losing their jobs, Johnson’s chief management officer received $12 million in bonuses for only nine months, even though his contribution did not stop sales declines (Eades et al., 2017). Regarding protections for those raising good-faith concerns, in the past, JCP fired and started legal action against its employee for reporting the organization’s fake sale prices and price information misrepresentation (Bhasin, 2017). With that in mind, unethical decisions affected JCP’s reputation in the past.
Structures/Lines of Authority and Decision-Making
Important decisions at JCP are influenced by the vertical line of authority and, possibly, the lack of structures that would conduct innovation analysis and effectively report these findings. JCP’s most prominent strategic mistakes, such as a new pricing strategy approved by Johnson, could have stemmed from the concentration of power in the CEO’s hands and lower-level leaders’ inability to challenge the CEO’s final decision. A former vice president of retail operations at Apple, Johnson wanted “a period of true innovation” for JCP, which turned out to be limited by counterproductive logo change, pricing model, and coupon cancellation initiatives (Eades et al., 2017, p. 4). Instead of organizing preliminary research and creating an innovation analysis structure, Johnson relied on his authority and professional reputation to accept Apple’s stores as a reference model for JCP (Eades et al., 2017). Thus, the absence of autonomy for lower organizational hierarchy levels and the imbalance of power could have contributed to the situation in which decision approval was not preceded by experiments or consumer surveys at the company’s stores to gain insight into clients’ pricing model preferences.
The key suggestion for improvement includes restructuring the leadership team for an optimal distribution of responsibility and the power to participate in strategy development. As per the systems approach theory of organization, organizations are complete entities with interrelated parts that work together for one common purpose (Teece, 2019). Last year, JCP announced subsequent workforce cuts and leadership team expansion for improved decision-making (“JC Penney announces organizational restructuring,” 2020). These efforts include hiring six new vice presidents to report to the new chief executive and transformation officers (JCPenney Newsroom, 2020). However, whether this potential solution will stop a series of JCP’s financial failures remains an open question.
Finally, based on JCP’s case, decision-making can be influenced by companies’ own financial interests rather than the values of employee protection, mutually advantageous partnerships, and consumer-centeredness. An imbalance of power between the C-level executives and the remaining organizational levels and the absence of effective structures for innovation analysis can also hinder decisions’ success. Some improvement opportunities that JCP has recognized include executive team restructuring and updating ethical policies.
Bhasin, K. (2017). This J.C. Penney worker was fired for telling the truth about its ‘fake’ prices. Huffpost. Web.
Eades, K. M., Glazer, D., & Eyal, S. (2017). J. C. Penney Company. Darden Business Publishing Cases, 1-15. Web.
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JC Penney. (2021). Statement of business ethics 2021: Focus and commit to high standards. Web.
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JCPenney Newsroom. (2020). JCPenney expands leadership team with executive appointments. Web.
Teece, D. J. (2019). A capability theory of the firm: An economics and (strategic) management perspective. New Zealand Economic Papers, 53(1), 1-43. Web.